The Centers for Medicare and Medicaid Services' proposal to expand a policy governing post-acute patient transfers drew rapid fire from the hospital lobby, which would like to scrap the policy altogether.
Under the 5-year-old and perpetually controversial policy, hospitals that refer certain patients to post-acute facilities sooner than the full time allowed under the DRG are reimbursed by Medicare on a per diem basis instead of getting the full DRG rate, a phenomenon that often reduces their payments.
Earlier this month, the CMS proposed expanding the policy to 29 total DRGs, up from the 10 DRGs now subject to the policy, a move that would save Medicare some $160 million in 2004. The American Hospital Association and other provider groups argued that the transfer policy is misguided and should be trashed.
"If a hospital discharges a patient before the average length of stay, they lose money. If they keep a patient longer they lose money," said Carmela Coyle, senior vice president of policy at the AHA. "Hospitals should have an incentive to treat the patient in the right place at the right time."
Not everyone, however, sees eliminating the policy as the only solution.
The transfer policy represents a problem of matching the real cost of providing care with Medicare payments, according to Larry Goldberg, director of the national healthcare practice at Deloitte & Touche.
Refining and significantly expanding the list of 540 DRGs, Goldberg said, could create better-defined DRG categories that would more accurately assess patients' length of stay and result in more appropriate Medicare reimbursement.
Updating the DRG system "would mitigate the impact of the current transfer policy (and) remove the gaming suspicion CMS has," Goldberg said.
That potential solution, however, has not attracted the support of many hospital lobbyists, who view abolishing the transfer policy as the only way to address the payment shortfalls it can create.
"Expanding the DRGs is not relevant," said Chip Kahn, president of the Federation of American Hospitals, which represents for-profit facilities. "Within any DRG you're going to have some people who get better faster and are in a position to be moved to a different setting. Even if you had more DRGs, you cannot run away from the issue that there are varying lengths of stay."
The fact that hospitals may receive more or less from Medicare than the true cost of treating a patient is inherent in the DRG system, Kahn said, adding, "At the end of the day, the deal between the government and hospitals is that we'll pay you for a given DRG and within it we understand some people will have longer and shorter lengths of stay."
A CMS spokeswoman declined to address the chances that the transfer policy will be expanded after what is likely to be a raucous 60-day public comment period. "Hospitals need to raise their objections in the comment period" that began May 9, the spokeswoman said.
The proposed transfer policy rule, which would add 19 new DRGs to the transfer policy effective Oct. 1, is scheduled to be published in the Federal Register on May 19.
"When we do our comments, we will comment on an array of technical issues, but in terms of major policies, the transfer policy is one that we feel very strongly is totally misguided and inappropriate," Kahn said.
The post-acute transfer policy became the source of most of the objections raised by hospitals when the CMS proposed new payment policies earlier this month (May 12, p. 3). Other potentially thorny issues surfaced as well, including a proposal to increase hospital inpatient rates by 3.5% next year.
While that updates payments to keep up with inflation, the per-case payment increase in 2004 would be only 2.5% as a result of "interactive effects among the various factors comprising the payment system," according to the CMS' analysis of its own regulation.
Congress is free at any time to legislate changes that would adjust the CMS' proposed rates and policy changes. Many lobbyists and analysts expect Congress to reduce rather than increase the proposed rates.
"Before any congressional action, hospitals are already behind the eight ball for 2004," said the AHA's Coyle. "Hospitals are already losing money treating Medicare patients."