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Medicare Payment for Post-Acute Care Transfers
Expansion of Medicare's post-acute care (PAC) transfer payment policy to additional DRG codes is still under consideration by the Centers for Medicare and Medicaid Services. Our study helps inform that debate by providing objective analyses that highlight the perspective of rural hospitals. Specifically, we answer the following questions:
- How did the initial PAC payment change affect hospitals behavior? Did the impact differ by type of hospital? By pilot DRG?
- How did the payment change affect Medicare revenues for different types of hospitals?
- How would an expansion to additional DRGs affect different types of hospitals?
- How would an expansion to swing bed discharges affect rural hospitals?
We use FY98-FY01 MedPAR hospital discharge data, giving us one year of baseline data
and a three-year post-implementation period. In addition, we use cost report data to construct financial vulnerability measures that consider each hospital s income, financial reserves, and liquidity. We examine four-year trends in inpatient length-of-stay and patterns of discharge to the various PAC settings for each of the 10 DRGs, for short- vs. long-stay transfers, and for various categories of hospitals. Hospitals are grouped according to their rural/urban location, size, ownership of a PAC provider, and financial vulnerability. In addition, we simulate payments under the current system and payments if the transfer policy is extended.
Publications
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Exploring the Impact of Medicare's Post-Acute Care Transfer Payment Policy on Rural Hospitals
Author(s): Julie A. Schoenman
Report Number: Policy Analysis Brief W Series No. 5
Date: 07 / 2004
Describes a change in Medicare post-acute transfer payment policy and its impact on rural and urban hospitals. Includes data on the financial impact and hospital discharge behavior before and after the change. A full report is also available.
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Rural Implications of Medicare's Post-Acute Care Transfer Payment Policy
Author(s): Julie A. Schoenman
Date: 06 / 2004
Beginning in October 1998, Medicare began to pay acute-care hospital cases in 10 DRGs as transfers instead of discharges when the patient is discharged to a targeted post-acute care (PAC) provider after a short inpatient stay. This study examines the behavioral and financial impacts of the initial 10-DRG policy, and projects the likely financial impact of extending the policy to cover additional DRGs or discharges to swing beds. Key findings: 1) Hospitals' discharge behavior did not change significantly in ways that would suggest a strategic response to the PAC transfer payment policy; 2) Based on simulation, less than 5 percent of all cases discharged from the additional DRGs would receive the PAC transfer payment instead of the full DRG payment. Medicare revenue earned by rural hospitals would fall by more than $1,100 for each transfer case.; and 3) Expanding the transfer policy to cover swing beds would result in a relatively small financial impact. A policy brief is also available.
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Rural Implications of Medicare's Post-Acute-Care Transfer Payment Policy
Author(s): Julie A. Schoenman, Curt D. Mueller
Citation: Journal of Rural Health, 21(2), 122-130
Date: 2005
Examines how the initial policy change affected rural and urban hospitals and investigates the likely impact of the FY2004 expansion and other possible future expansions. The authors conclude that rural hospitals are not disproportionately harmed by the post-acute-care transfer policy. An expanded policy may even benefit rural hospitals by recognizing their lower use of post-acute-care and readjusting DRG weights so that they are paid more appropriately when providing the full course of inpatient care.
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