What is the Medicare
Post-Acute Transfer Rule?
The Centers for Medicare and Medicaid Services (CMS) ‘one way edit’ protocol identifies overpayments to providers.
Any underpayments are the responsibility of hospitals that are liable for researching their own claims, identifying any underpayments,
and correcting claims accordingly. Unbeknownst to hospitals; since 2004, when the edit rule was enacted, Prospective Payment
System hospitals may have been underpaid for transfer DRGs. CMS regulations contain a payment policy referred to as the “Post-acute Care
Transfer Rule.” CMS significantly expanded the Rule from 30 DRGs in FFY 2005 to 182 DRGs for FFY 2006, then to 190 DRGs for FFY 2007 and
to 273 MS-DRGs for FFY 2008. Under the Rule, DRG payments can be reduced based on length of stay and discharge disposition. The rationale
behind the Rule is that hospitals should not receive full DRG payments for Medicare patients discharged to designated post-acute care settings
in that a portion of the care is rendered by a provider other than the acute care facility. When the Transfer Rule is implicated, the
DRG payment methodology incorporates the calculation of a hospital-specific per diem for each affected DRG based upon the Geometric
Mean Length of Stay (GMLOS) for the particular DRG.
The payment methodology entails paying hospitals twice the calculated per diem on the first day plus the per diem for each additional day of inpatient care. The total payment is not to exceed the full DRG payment amount. Therefore, the hospital is paid less than the full DRG amount for those cases where the patient’s length of stay is less than the GMLOS. Under the Rule, CMS defines a “transfer” as a discharge of a Medicare eligible hospital inpatient to one of the following settings:
- Hospital or distinct part unit hospital excluded from the IPPS
- Skilled Nursing Facility (SNF)
- Home under a written health care plan for Home Health Services beginning within three days of discharge
- Long-term care hospital
CMS has instituted measures to identify cases where the Transfer Rule was not applied to specific acute care discharges but, based on the clinical care provided after discharge, should have been. In these cases, CMS processes a claim adjustment, where appropriate, to adjust the payment to be consistent with the Transfer Rule. Medicare, however, does not identify cases where the Transfer Rule was applied, but should not have been, and results in underpayments to the hospital. 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-post-acute 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 the 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 post-acute care transfer payment policy on hospital treatment patterns and Medicare expenditures.