Medicare Payment for Post-Acute Care Transfers

Research center:
Lead researcher:
Project completed:
August 2003
Expansion of Medicare's post-acute care (PAC) transfer payment policy to additional diagnosis-related group (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.