Impact of Expanding the Hospital Transfer Payment Policy for Early Discharges to Postacute Care

We will determine how the hospital transfer policy for early discharges to postacute care (PAC) would financially affect Medicare and hospitals if it were expanded to include all Medicare Severity Diagnosis-Related Groups (MS-DRGs). The transfer payment policy for discharges from hospitals to PAC facilities, such as a skilled nursing facility, applies to certain specified MS-DRGs. Analysis of Medicare claims data demonstrates significant occurrences of early discharges from hospitals to PAC facilities for MS-DRGs that are not currently subject to the PAC transfer payment policy. Medicare pays a full prospective payment system (PPS) rate to hospitals for these early discharges. In contrast, Medicare pays hospitals a reduced payment for shorter lengths of stay for certain MS-DRGs when beneficiaries are transferred to PAC settings (42 CFR § 412.4(f)). Our proposed audit would provide CMS with a more updated analysis of the financial impact that an expanded hospital-to-PAC transfer payment policy (i.e., all MS-DRGs) would have on Medicare and hospitals.

Announced or Revised	Agency	Title	Component	Report Number(s)	Expected Issue Date (FY)
Completed	Centers for Medicare and Medicaid Services	Impact of Expanding the Hospital Transfer Payment Policy for Early Discharges to Postacute Care	Office of Audit Services	W-00-21-35871; A-01-21-00504	2024