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Purpose and Policy Background of Report The primary purpose of this report is to evaluate the impact of the postacute care transfer payment policy under the inpatient prospective payment system (PPS) on hospital treatment decisions and Medicare expenditures. The US Congress required HCFA through the Balanced Budget Act of 1997 to begin applying the payment methodology historically used to reimburse sending PPS hospitals for acute-to-acute care transfers to ten pilot DRGs for acute-to-postacute care transfers. The transfer payment methodology entails calculating a hospital-specific per diem for each DRG and paying hospitals twice the per diem on the first day plus the per diem for each additional day of inpatient care not to exceed the full DRG amount. For three DRGs for which this payment methodology failed to cover average costs, HCFA reimburses hospitals the per diem plus half the full DRG amount on the first day and half the per diem for each additional day up to the full DRG amount. Given the way in which the per diem payment amount is calculated, DRG payment amounts are reached at lengths of stay one day less than the national geometric mean length of stay for each DRG. Section 4407 of Public Law 105-33 mandated that HCFA include in the proposed rule published for fiscal year 2001 a description of the effect of the postacute care transfer payment policy on hospital treatment patterns and Medicare expenditures. This report was prepared and submitted in fulfillment of that congressional mandate. More information is contained in Chapter 1 located in the Downloads section below. Organization of Report The remainder of the report is organized as follows. Chapter 2 discusses the changes in the provision of health care services over the past decade that led to concern that HCFA was overpaying PPS hospitals for services that were increasingly being provided in postacute care facilities and units. Chapter 2 also provides a brief review of the main features of the new postacute care payment policy. The construction of the acute-to-postacute care episode level file used to conduct the analysis is described in Chapter 3. Included in this chapter is an assessment of the 1-8 accuracy of the discharge destination codes on the PPS hospital claims that are now being used to determine the payment methodology. The main analytic results of the study are presented in Chapters 4 and 5. Chapter 4 examines the impact of the policy reform on treatment and discharge policy. It explores pre-post differences in transfer rates, PPS lengths of stay and costs, postacute care lengths of stay and number of visits, and the time interval prior to the initiation of postacute follow-up care. Chapter 5 examines the impact of the payment reform on Medicare expenditures. The change in total expenditures is decomposed into a .price. effect (e.g., the change in per case payment holding treatment decisions constant) and a .volume. or behavioral effect (e.g., the change in the volume of postacute care transfers and the intensity of services provided to such cases). Chapter 6 provides a discussion of the pros and cons of extending the postacute care transfer policy to other DRGs, and offers several suggestions for how such an extension might be implemented. Summary analytic tables are presented in each chapter. The full analytic results are provided separately in the appendices. All chapters and appendices are located in the Downloads section below.
Page Last Modified: 12/14/2005 7:35:00 AM
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