MedPAC proposes DRGs for short-stay hospital admissions

Admitting that payment policies regarding short-term hospital stays are "ambiguous and open to interpretation" and could place a large financial burden on patients, the Medicare Payment Advisory Commission (MedPAC) has suggested creating specific diagnosis related groups (DRGs) that would focus on one-day admissions to inpatient care facilities. MedPAC made the proposal last week at its November public meeting.

Short patient stays have been a sore point for hospitals. Hospitals have complained that such stays are an overt focus of recovery audit contractors, or RACs. MedPAC has observed that the large number of appeals by hospitals of short-stay payment clawbacks has overwhemled the system. And patients held in observation care who are transferred to a skilled nursing facility (SNF) are not covered by Medicare for their nursing home stay. About 11,000 patients a year who were transferred to SNFs do not qualify for Medicare coverage, MedPAC said.

The use of a DRG for a one-day patient stay would reduce the payment differentials between a hospital inpatient stay and similar observation stay, but also create a significant financial differential between one-day and two-day stays, according to MedPAC. The top 10 percent of hospitals in terms of short stays account for 26 percent of all one-day patient stays, a variable that likely would make a useful target for RACs, MedPAC concluded.

MedPAC ran a simulation of a one-day DRG and concluded that hospitals with a large number of short stays would see a reduction in payments, while those with smaller numbers of short stays would mostly be unaffected. Altogether, the average payment differential between observation care and a one-day stay with the DRG in place would be $910, while the differential between a one-day and a stay of two days or more would be $3,210.

Additionally, MedPAC is mulling whether to count a portion of an observation stay toward the Medicare SNF benefit.

There is no timeline for the implementation of such changes. MedPAC would solicit public comments on the changes.

To learn more:
- here's the MedPAC presentation (.pdf)