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Transcript for audio podcast: Expanding the DRG Window

From the Office of Inspector General of Department of Health and Human Services

[Ann Maxwell] I'm Ann Maxwell, the Regional Inspector General in Chicago for our Office of Evaluation and Inspections, speaking with team leader Lisa Minich. Let's talk about your recently released evaluation of the DRG Window. First, what is a DRG?

[Lisa Minich] The DRG is a set amount of money that Medicare pays a hospital to cover both the costs of a hospital stay and the pre-admission outpatient services related to that stay. These outpatient services might include things like a patient getting blood work in an outpatient clinic before surgery to make sure they are healthy enough for the surgery.

[Ann Maxwell] What is the DRG window?

[Lisa Minich] The DRG Window is the 3 days before a Medicare beneficiary is admitted to a hospital. During this 3-day window, Medicare does not pay separately for outpatient services related to the hospital stay. Remember, the costs of outpatient services related to a hospital stay are already factored in to Medicare's DRG payment to the hospital.

[Ann Maxwell] So Medicare does not pay for any services related to a hospital stay performed within 3 days of going into a hospital. Is that correct?

[Lisa Minich] Almost. The DRG Window applies only when the related service is provided by the same hospital admitting the patient-or another entity owned by that hospital. The DRG window does not apply to some very common types of hospital ownership arrangements, like a group of hospitals that are owned by the same corporation.

[Ann Maxwell] I see. Now, why is the DRG window 3 days?

[Lisa Minich] Good question. Congress set the 3 days. However, research shows that many people get services more than 3 days before they're admitted to the hospital. We wanted to find out how many related outpatient services were performed more than 3 days prior to a hospital stay.

[Ann Maxwell] Did you find related services that were performed more than 3 days before a hospital stay?

[Lisa Minich] Yes, we did! We found that more than 4 million related outpatient services were performed at the admitting hospital's outpatient department between 4 and 14 days prior to the hospital stay. Additionally, 900,000 related services were performed during the 2 weeks right before the hospital stay at hospitals that shared a corporate owner with the admitting hospitals.

[Ann Maxwell] What would happen if the DRG window was expanded to include related services performed more than 3 days before the hospital stay?

[Lisa Minich] Medicare would save a lot of money. Again, the hospital's DRG payment covers pre-admission outpatient services related to that hospital stay. With the current 3 day window, if you had a related service two days before your hospital stay, that service is included in the DRG payment. If you got that same service 4 days prior to the hospital stay, or in a different hospital, Medicare would pay a separate payment for that service. In essence, Medicare would pay twice for the same service. Expanding the DRG window would reduce these duplicate payments.

[Ann Maxwell] Exactly how much could Medicare and beneficiaries save if the DRG Window were expanded?

[Lisa Minich] If the DRG Window had been expanded to 14 days back in 2011, and applied to hospitals that shared a corporate owner, Medicare and beneficiaries could have saved 318 million dollars. In fact, OIG has a body of work, spanning over 20 years, that documents potential savings for Medicare if the DRG window were expanded beyond 3 days.

[Ann Maxwell] Medicare could save millions of dollars. So what do you recommend?

[Lisa Minich] We recommend that the Centers for Medicare and Medicaid Services, or CMS, expand the DRG Window in two different ways-one, to include more days, and two, to apply it to other hospital ownership arrangements, like groups of hospitals that are owned by the same corporations. Because Congress set the 3-day window in law, CMS would need new legal authority to expand it. We recommend that CMS seek that authority.

[Ann Maxwell] Is CMS going to make the changes you recommended?

[Lisa Minich] CMS did not agree with our recommendations. Interestingly, CMS agreed with an earlier recommendation in 2003 to seek authority to expand the DRG Window. However, that clearly hasn't happened yet. This report shows that Medicare can attain significant cost savings by working with Congress to address this issue.

[Ann Maxwell] Thank you, Lisa, for sharing this important work on the DRG Window.

[Lisa Minich] Thank you, Ann.


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