HHS proposes transfer pays in place of DRGs
Reg will have 'tremendous impact'
A new regulation proposed in May and now in its public comment period may change the way discharges to postacute care are paid. Beginning Oct. 1, hospitals will be paid transfer payments rather than full DRGs for patients who receive postacute care services for 10 specific DRGs. Discharges from any hospital to a post-acute care provider will be considered a transfer. A final rule governing the matter will be issued shortly.
Currently, a discharge from a prospective payment system (PPS) hospital is paid at the full DRG rate unless the patient is transferred to another PPS hospital, which results in a lower payment rate. Preceding the new regulation, authorized under the Balanced Budget Act (BBA) of 1997, Congress mandated that the Department of Health and Human Services (HHS) identify 10 DRGs to be included in the new regulation. According to the Federal Register, the 10 are 14, 113, 209, 210, 211, 236, 263, 264, 429, and 483, which include amputations for circulatory system disorders, hip and pelvis fractures, and certain skin grafts. The specified DRGs all have a high volume of discharges to postacute care and an exceptionally high use of post-discharge services. According to the proposal, all cases from these DRGs discharged directly to either a PPS-excluded hospital or unit, a skilled nursing facility, or to home health services will be paid as a transfer.
"If this regulation goes through, it will have tremendous impact on utilization review/case management activities," says Patrice Spath, ART, consulting editor for Hospital Peer Review and a health care quality consultant in Forest Grove, OR. "The financial incentive of timely discharge may disappear for patients in these 10 DRGs."
The flip side of the proposed reg is that more than 5,000 acute care hospitals would receive an increase in their Medicare payments in 1999. Most will receive a 0.7% increase to their base payment rates; an estimated 360 will receive a 1% increase.
"The Balanced Budget Act has guaranteed a decade of solvency for the Medicare hospital insurance trust fund," said HHS Secretary Donna E. Shalala in a statement. "These proposed increases recognize the significant contribution that hospitals made to those savings."
The BBA froze hospital payments in 1998 and allowed for an increase in 1999 of 1.9% less than the projected growth in the inflation rate on prices for goods and services purchased by hospitals. The 1999 inflation rate is estimated to be 2.6% for PPS hospitals, sole community hospitals, and Medicare-dependent rural hospitals. So, according to the formula included in the BBA, payments will increase by 0.7%.
Nancy-Ann Min DeParle, administrator of the Health Care Financing Administration in Baltimore, said in a statement that reforms enacted last year are working to preserve Medicare. "Not only are the savings improving the status of the Trust Fund," she said, "they also are financing more preventive benefits for Medicare beneficiaries."
The proposed rule also includes a limit on capital payments when new hospitals merge with existing hospitals, and a reclassification of DRGs for burn cases.
The BBA can be viewed at http://www.hcfa.gov/init/bba/bbaintro.htm on the Internet. Further information on the proposed regulation is at http://www.hcfa.gov/regs/budget97.htm. Look for "Certain Hospital Discharges to Post Acute Care" (Section 4407), excerpted here:
Provisions - Redefines the movement of patients from PPS facilities to post acute care providers (skilled nursing facilities, PPS-exempt hospitals, and home health) as "transfers" as opposed to "discharges" for 10 DRGs, to be specified in regulation. The payment for these post-acute transfers cannot exceed the sum of 50% of the regular transfer payment and 50% of the regular DRG payment. In order for the "transfer" to apply to home health, the home health care must be for the same condition for which a person had an inpatient stay and be delivered within an appropriate time period, as defined by the Secretary. Permits the Secretary to increase the number of DRGs and post-acute settings beginning with FY 2001. Effective Date - Effective for transfers of specified DRGs occurring on or after Oct. 1, 1998.
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