Department of Health and Human Services 

OFFICE OF 

INSPECTOR GENERAL 

MEDICARE HOSPITAL 

DISCHARGE PLANNING 

JUNE GIBBS BROWN 

Inspector General 

DECEMBER 1997 

OEI-02-94-00320 
OFFICE OF INSPECTOR GENERAL 

The mission of the Office of Inspector General (OIG), as mandated by Public Law 

95-452, is to protect the integrity of the Department of Health and Human Services 

programs as well as the health and welfare of beneficiaries served by them. This statutory 

mission is carried out through a nationwide program of audits, investigations, inspections, 

sanctions, and fraud alerts. The Inspector General informs the Secretary of program and 

management problems and recommends legislative, regulatory, and operational approaches 

to correct them. 

Office of Evaluation and Inspections 

The Office of Evaluation and Inspections (OEI) is one of several components of the Office 

of Inspector General. It conducts short-term management and program evaluations (called 

inspections) that focus on issues of concern to the Department, the Congress, and the 

public. The inspection reports provide findings and recommendations on the efficiency, 

vulnerability, and effectiveness of departmental programs. 

The OEI’s New York Regional Office prepared this report under the direction of John I. 

Molnar, Regional Inspector General. Principal OEI staff included: 

Region Headquarters 

Renee Dunn, Project Leader Linda Moscoe 

Ellen Vinkey, Lead Analyst Barbara Tedesco 

Panayiotis Beloyeannis, Intern Stuart Wright 

Thomas Bollyky 

Daniel Ginsberg 

To obtain a copy of this report, call the New York Regional Office at 212-264-1998 or 

fax a request to 212-264-1026. 
EXECUTIVE SUMMARY 

PURPOSE 

To determine how and to what extent hospital ownership of home health agencies or nursing 

homes impacts hospital discharge planning for Medicare beneficiaries. 

BACKGROUND 

Hospital discharge planning is a process where a plan is developed for a patient to receive 

appropriate post-hospital placement and services. 

A significant reduction in the average length of stay for acute care hospital patients created a 

greater need for post-hospital services such as home health and nursing home care. These 

reductions are widely believed to be associated with advances in medical technology as well 

as the implementation of the Medicare prospective payment system. As the average hospital 

stay decreases, the role of the hospital discharge planning process has become more critical. 

This study focuses on discharge planning for patients who are referred to home health 

agencies or nursing homes owned by their discharging hospitals. We based our results on: 

utilization data for the hospital and post-hospital stays for a stratified random sample of 

Medicare beneficiaries who had been discharged from a hospital 

health agency or a nursing home; mail questionnaires sent these 

questionnaires sent to discharge planners from the beneficiaries’ 

review of materials related to the discharge planning process that 

discharge planners. 

FINDINGS 

and went to either a home 

Medicare beneficiaries; mail 

discharging hospitals; and a 

were submitted to us by the 

Hospital ownership seems to have little influence on which nursing homes patients are 

referred to 

We analyzed the discharge process experienced by beneficiaries in our sample who went to a 

nursing home. Regardless of whether the nursing home was owned by the discharging 

hospital, nursing home beneficiaries report having input in the referral process. Only 13 

percent of them say, “the hospital just told me where to go. ” Only a quarter of beneficiaries 

report “no say” in the decision about which nursing home to choose. Many beneficiaries 

report that the decision to go to a particular nursing home was made by a relative. Of 

nursing home patients who were discharged from a hospital that owned a nursing home, only 

40 percent went to the one owned by the discharging hospital. 

However, it does influence the length of stay in both the hospital and the nursing home 

There has been concern and some evidence that hospitals which own nursing homes 

discharge patients sooner to their own facilities and those patients stay in the facilities longer. 

i 
This raises the question of whether hospitals are lowering their costs for patients for whom 

they are receiving a lump sum prospective payment from Medicare and discharging those 

same patients to post-hospital services for which they are being paid on a cost basis. This 

cost shifting would result in increased Medicare reimbursement for the hospital. 

When we analyzed relevant data for beneficiaries who got services from hospital-owned 

nursing homes, we found additional evidence supporting this concern. We found a 

statistically significant difference in the length of hospital stays; beneficiaries discharged to 

the hospital-owned nursing homes had average hospital stays of 6.8 days, as compared to 8.9 

days for those beneficiaries who went to a nursing home independent of their hospital. In 

addition, we found a statistically significant difference in the length of nursing home stays; 

beneficiaries who went to the hospital owned nursing home averaged a 37 day nursing home 

stay while those who went to a nursing home independent of their hospital averaged a 29 day 

nursing home stay. This supports the concern that hospitals are shifting patients from acute 

care, reimbursed under a lump sum prospective payment, to post-acute care in nursing 

homes, which is reimbursed on a cost basis, thus maximizing Medicare reimbursement. 

Hospital ownership does seem to have influence on which home health agencies patients 

are referred to 

Many beneficiaries report not having full choice in selecting a home health agency. 

In contrast to nursing home beneficiaries, 38 percent of home health agency beneficiaries 

who went to hospital-owned agencies report that the hospital “just sent home care people to 

them. ” Again, in contrast to nursing home beneficiaries, focusing only on home health 

patients who were discharged from a hospital that owned a home health agency, we found 

that fully 62 percent of them went to the agency owned by the discharging hospital. 

Discharge planners from hospitals which own home health agencies report that hospital 

ownership is a factor in their referral process to home health agencies: 19 percent report 

that, unless patients or families object, they refer all patients to their hospital-owned agency 

and almost 10 percent believe that someone from the hospital puts pressure on patients to 

choose a particular home health agency. Finally, hospitals owning home health agencies are 

more likely to have referral procedures than those which do not own agencies. 

Hospital ownership also influences the duration of home health agency services 

There was a statistically significant difference with regard to the length of home health 

agency services; those beneficiaries that received services from a home health agency owned 

by the hospital they were discharged from averaged 49 days of service while those receiving 

care from a home health agency independent of their hospital averaged 37 days of service. 

However, no statistically significant difference in the length of the hospital stay was found 

when comparing hospital stays for beneficiaries who received care from a home health 

agency owned by their discharging hospital to stays for those beneficiaries who received care 

from an agency independent of their discharging hospital. 

ii 
Beneficiaries who go to hospital-owned nursing homes and home health agencies report 

better continuity of care 

One goal of the discharge planning process is to promote a strong connection between the 

care provided in the hospital and the care given by the home health agency or nursing home. 

It is generally assumed that if discussions are held with patients regarding their post-hospital 

needs and how they can be addressed, the likelihood that these needs will be met is 

improved. It is also assumed that the earlier discussions are held and the more comfortable 

beneficiaries are with the timing of their hospital discharge, the better the continuity of their 

care will be. 

Beneficiaries who went to hospital-owned home health agencies are more likely than those 

who got independent services to report: having been discharged at the right time (89 versus 

77 percent); knowing what healthcare services they are supposed to get after leaving the 

hospital (92 versus 83 percent); and, that the connection between their care providers was 

very good (88 versus 43 percent). Those who went to hospital-owned nursing homes were 

more likely to report: having been talked to early; having been talked to about the posthospital services they thought they would need (95 versus 61 percent); having been 

discharged at the right time; and, that their overall health improved (77 versus 43 percent). 

Hospital ownership does not impact beneficiaries’ level of satisfaction 

Both home health agency and nursing home beneficiaries report high levels of satisfaction 

with the discharge planning process. Their satisfaction does not differ based on ownership. 

RECOMMENDATIONS 

Our findings suggest that hospital ownership of nursing homes plays a significant role with 

regard to the nursing home beneficiary utilization patterns. The hospital stay is shorter and 

the nursing home stay longer thus the hospital may be shifting cost from a prospective 

payment system to a cost-based system, maximizing Medicare reimbursement. Therefore, 

we recommend the following: 

b The HCFA should develop statistical methods to target for special review providers 

who may be maximizing their Medicare reimbursement in this way. The records of 

these providers should be reviewed by the Peer Review Organizations, as in the past, 

or through some other suitable mechanism. Providers who are found to be 

inappropriately discharging beneficiaries to their own nursing homes should be subject 

to payment adjustments and appropriate fines or penalties. 

Our findings also suggest that hospital ownership plays a significant role in home health 

agency referral discussions and some role, albeit a lesser one, in nursing home referral 

discussions. In addition, we found that many Medicare beneficiaries do not have full choice 

in selecting a home health agency or nursing home. Therefore, we recommend the 

following: 

. . . 111 
b The HCFA should assure that hospitals disclose ownership of home health agencies 

and nursing homes in a systematic way. 

�  Hospitals which own home health agencies and nursing homes should be 

required to disclose the names of the home health agencies and nursing homes 

which they own to all beneficiaries who are possible candidates for these posthospital services. 

a Hospitals which own home health agencies and nursing homes should be 

required to disclose this information to HCFA. 

b The HCFA should take additional measures to assure that when beneficiaries are 

being discharged from the hospital they are given a choice in selecting a home health 

agency or nursing home from which to receive care. 

0 Hospitals should be required to inform patients (or their families) that they are 

free to choose among home health agency providers and nursing homes. This 

information should be provided as early as possible. 

0 Hospitals should maintain a file of Medicare participating home health 

agencies and nursing homes in the area and provide beneficiaries (or their 

families) with a list of alternatives which are appropriate for the level of care 

they need. 

w Since our findings support the need for additional Medicare beneficiary information 

related to post-hospital services and choice, we recommend that HCFA prepare 

information for beneficiaries addressing this issue and circulate it widely. 

1997 BALANCED BUDGET ACT 

The 1997 Balanced Budget Act includes a provision which addresses the concern that some 

hospitals are shifting costs from a prospective payment system to a cost-based system, thus 

maximizing Medicare reimbursement. Section 4407 of this recently enacted law redefines 

beneficiaries with certain diagnoses who are discharged from hospitals to nursing homes and 

home health agencies (as well as other prospective payment exempt settings) as “transfers.” 

This law limits payments to hospitals for these cases. 

This recently enacted law addresses the concern disclosing hospital ownership information 

and Medicare that beneficiaries are informed of their freedom to choose the home health 

agency or nursing home to which they will be referred. Section 4321 of the 1997 Balance 

Budget Act requires hospitals referring patients to home health agencies (HHA) and other 

post-hospital providers to: 

0 not specify or otherwise limit beneficiaries in terms of which post-hospital service 

provider they receive services from; 

iv 
provide beneficiaries with information on HHAs and other post-hospital providers 

which serve the area; 

disclose to the beneficiary any financial interest which the hospital may have in an 

HHA or other post-hospital provider to which they are referred; and, 

disclose to HCFA the nature of any financial interest which the hospital has in a home 

health agency or other post-hospital service provider, as well as related referral rate 

information. 

The HCFA is in the process of implementing both of these new provisions. 

COMMENTS 

We received comments on the draft report from the Health Care Financing Administration, 

the Assistant Secretary for Planning and Evaluation (ASPE) and the Assistant Secretary for 

Management and Budget. They generally concur with our recommendations. The actual 

comments received are in Appendix E. 

The HCFA stated it hopes to use experience gained in implementing the new transfer policy 

authorized by the Balanced Budget Act to develop techniques that can be applied to a broader 

set of DRGs. The HCFA also expressed concern that the publication referenced in a draft 

report recommendation does not target the intended audience. To accommodate this concern 

we have modified our recommendation. 

The ASPE provided suggestions for changes in wording and clarifications of the text which 

we have for the most part incorporated into the final report. They suggest that the report 

provide additional detail to the discussion about Federal requirements for discharge planning 

and the referral processes used by hospitals when discharging patients to nursing homes and 

home health agencies. Specifically, the ASPE recommended including a discussion of the 

criteria used by hospitals in selecting the post-acute provider type to which beneficiaries were 

referred. In an effort to better understand what factors are considered in making these posthospital placement decisions, we asked discharge planners “When you determine that 

Medicare patients need post-hospital services, how do you decide whether they need home 

health agency services or they need to go to a nursing home?” Most respondents indicated 

that the following criteria were among the factors used to make this determination: the 

patients’s medical needs, the degree of support available to the patient in their home, the 

preference of the patient and family, and the patient’s ability to function safely at home. No 

one criterium was cited as being more important than the others. 

V 
TABLE OF CONTENTS 

PAGE 

EXECUTIVE SUMMARY 

INTRODUCTION . . . . . . . . . . . s . . . . . a ~ . . . . . s . . . . . . . . . . . . . . . . 1 

FINDINGS . . . . . . . e . . . . . . n .............................. 9 

Referrals to Nursing Homes . . . .............................. 9 

Nursing Home and Hospital Stays .............................. 10 

Referrals to Home Health Agencies .............................. 11 

Home Health Agency Stays . . . . .............................. 14 

Continuity of Care ......................................... 15 

Beneficiary Satisfaction ...................................... 16 

RECOMMENDATIONS .................................... 17 

APPENDICES 

A: Discharge Planning Checklist ................................ A-l 

B: Utilization Data ........................................ B-l 

C: Chi-Square Values ...................................... C-l 

D: Non-Respondent Analysis .................................. D-l 

E: Comments ........................................... E-l 

vi 
INTRODUCTION 

PURPOSE 

To determine how and to what extent hospital ownership of home health agencies or nursing 

homes impacts hospital discharge planning for Medicare beneficiaries. 

BACKGROUND 

Post Hospital Care 

A significant reduction in the average length of stay for acute care hospital patients created a 

greater need for post-hospital services such as home health and nursing home care. These 

reductions are widely believed to be associated with medical technology advances as well as 

the implementation of the Medicare prospective payment system. As the average hospital 

stay decreases, the role of the hospital discharge planning process has become more critical. 

Rapid growth of managed care organizations, with their emphasis on cost containment and 

efficiency, has also promoted discharging patients from hospitals as quickly as possible, and 

arranging for lower cost post-acute services. 

According to the Prospective Payment Assessment Commission, the average length of a 

hospital stay for Medicare patients fell 13 percent between 1991 and 1994. During a similar 

period, the Commission found that, of all Medicare facility payments, the share going to 

post-hospital care providers increased from 6.9 percent to 22.4 percent. Facility payments 

include those made by the Medicare program and co-insurance companies, as well as 

beneficiary co-payments. As one example, while Medicare payments for home health care 

totalled an estimated $14.4 billion in 1995, home care spending is projected by the 

Congressional Budget Office to grow to $26 billion by the year 2000. As the average 

hospital stay decreases, the role of the hospital discharge planning process has become more 

critical. 

Hospital Discharge Planning 

There appears to be no single recommended model for a hospital discharge planning process. 

Definitions of what discharge planning involves and the organizational structures of the 

departments and professional credentials of the discharge planning staff vary from hospital to 

hospital. The social work or nursing department often has the primary responsibility for 

discharge planning, generally with input from other healthcare team members. The 

responsibility is sometimes in the case management or utilization review department. 

Effective discharge planning identifies the patient’s post-hospital needs early to ensure 

discharge to a safe environment with the appropriate level of services. A typical scenario 

might look like this: within 24 hours of entering the hospital, the admission record would be 

screened to identify a high risk patient who requires discharge planning. Typical high risk 

criteria might include: age 65 and older, living alone with no immediate social supports; 

1 
stroke, heart attack, chronic obstructive pulmonary disease, congestive heart failure, 

emphysema, dementia, Alzheimers, AIDS, or other possibly life threatening illnesses; 

admission from a residential care home; homelessness; and no insurance. 

Once a determination has been made that a patient needs discharge planning, the discharge 

planner conducts a psycho-social assessment and meets with utilization review staff, the 

patient’s nurses and physicians, or other relevant interdisciplinary team members, to discuss 

the patient’s care plan. Early on, the discharge planner solicits the patient’s preferences and 

concerns, and reaches out to the family or other potential care givers to get their input and 

cooperation. As the discharge planner gains a clearer understanding of the level of care that 

the patient needs after discharge, he/she analyzes the patient’s insurance coverage in an effort 

to match the patient’s needs for services with those for which they are eligible. 

Patients may be discharged to a variety of settings. These include a patient’s home with or 

without services from a home health agency or a nursing home. One recent national study 

on post-acute care’ found that two-thirds of discharged patients received post-acute care 

services, with 29 percent going to nursing homes and 25 percent going home with care from 

home health agencies (another 8 percent were discharged to rehabilitative homes). 

Regulations Affecting Hospital Discharge Planning 

Each hospital is required to have a discharge planning process in place. These requirements 

are addressed in a number of places, including Federal laws and regulations, State licensing 

requirements, and the Joint Commission on Accreditation of Healthcare Organizations’ 

accreditation standards. Federal policies related to financial arrangements between hospitals 

and post-hospital services can be found in the Federal anti-kickback regulations. 

Medicare Conditions of Participation 

Federal regulations2 require that hospitals have in place a discharge planning process. This 

process must apply not only to Medicare and Medicaid patients but to all patients served by 

the hospital who need discharge planning. The rules include requirements that: 

(1) Patients in need of evaluation be identified on a timely basis; 

(2) a discharge planning evaluation be completed for patients identified during the 

initial screening, including an evaluation of the patient’s capacity for self-care and the 

possibility of this patient being cared for in the environment from which he/she 

entered the hospital; 

‘Kane, R.L., M.D., Principal Investigator. A Study of Post-Acute Care. Institute For 

Health Services Research (HCFA #17-C98891) May 1994. 

2 42 CFR Section 482.43, effective January 12, 1995 

2 
(3) discharge plans be developed by qualified personnel, patients be counseled as 

needed to prepare them for post-hospital care and the initial implementation of the 

patient’s discharge plan be done by the hospital; 

(4) the hospital must transfer or refer patients, along with necessary medical 

information, to appropriate facilities for follow-up care; and 

(5) the hospital must reassess its discharge planning process on an on-going basis to 

ensure that it is responsive to the discharge needs of their patients. 

JCAHO Requirements 

When hospitals are accredited by the Joint Commission on Accreditation of Healthcare 

Organizations, HCFA does not independently review the hospital. The JCAHO’s continuum 

of care standards address discharge planning. They specifically address the hospital’s need 

to provide for: referral, transfer, or discharge of the patient to another level of care based on 

the patient’s assessed needs; a discharge process which results in continuing care which is 

appropriate; exchange of patient care and clinical information when patients are discharged; 

and the establishment of a procedure to resolve denial-of-care conflicts over care, services, 

or payment in the hospital. 

Utilization Review 

Federal regulations3 discuss utilization review, a process which seeks to assure that each 

patient is discharged from the hospital at the appropriate time. These regulations state that 

the hospital must have in effect a utilization review plan that provides for review of services 

furnished by the institution and members of their medical staff to patients entitled to 

Medicare and Medicaid. 

Patient Freedom to Choose 

Section 1802 of the Social Security Act seeks to ensure that free choice is guaranteed to all 

Medicare patients. It states: “Any individual entitled to insurance benefits under this title 

may obtain health services from any institution, agency, or person qualified to participate 

under this title if such institution, agency, or person undertakes to provide him such 

services. ” This gives patients freedom to choose who they want as their provider of posthospital services. Some within the home health industry interpret it even further to say that 

patients must be provided with choices whenever a discharge planner refers them for posthospital services4. 

Additionally, Medicare requires all hospitals that participate in the Medicare program to 

3 42 CFR Section 482.30 Conditions of Participation 

4 See 1997 Balanced Budget Act section on page x. 

3 
provide patients with “An Important Message From Medicare” at the time of admission. 

This message provides information on discharge from the hospital, including a description of 

the patient’s right to appeal to the Peer Review Organization if they think they are being 

asked to leave the hospital too soon. 

Anti-Kickback Laws 

The Federal anti-kickback statute5 is also pertinent to the discharge planning process. 

Aimed at stemming fraud and abuse, this statute places some limitations on the referral of 

Medicare and Medicaid patients to services. It makes it illegal to offer or pay anything of 

value to induce a person to order any item for which payment may be made under the 

Medicare or Medicaid programs. 

A separate statute6 prohibits a physician with “a significant ownership interest in or a 

significant financial or contractual relationship with a home health agency” from preparing 

plans for care or certifying or recertifying to the need for care. Finally, another statute7 

generally prohibits Medicare or Medicaid payment where physicians refer patients to 11 

kinds of healthcare facilities or services, such as home health agencies, in which they have 

an ownership interest. 

State Licensing 

Depending on the State, the State hospital licensing requirements may or may not have 

discharge planning criteria. In New York State, these requirements are considered by 

discharge planners to be more stringent than Federal or JCAHO rules. However, it should 

be noted that New York is not necessarily representative of the country. 

Home Health Fraud Alert 

In June 1995, the Office of Inspector General issued a Home Health Fraud Alert which 

included information pertinent to the hospital discharge planning process. It discussed 

providers paying or receiving kickbacks in exchange for Medicare or Medicaid referrals. 

Specifically, providers were warned that, “Providing hospitals with discharge planners, home 

health coordinators, or home care liaisons in order to induce referrals can constitute a 

kickback. ” 

5 Section 1128B [42 U.S.C. Section 1320a-76(b)] 

6 Section 1814(a) 

7 Section 1877 

4 
Health Care Financing Administration Activities 

Oversight of Home Health Agency Reimbursement 

As the number of hospitals with on-site home care coordinators grows, so does the potential 

for inappropriate solicitation and increased reimbursement. The HCFA continues to oversee 

the process by which the intermediaries audit home health agencies’ reimbursement claims 

for home health agency coordination costs. The Health Insurance Manual8 specifies which 

home health agency coordination costs are allowable. While specifying that some costs for 

activities performed at the hospital are reimbursable, it emphasizes that a careful evaluation 

is needed to ensure that no payment is made for: patient solicitation; activities duplicative of 

the hospital’s discharge planning; and/or visits by home health agency staff to patients not yet 

referred. 

The manual also addresses reimbursement rules for home health coordination in hospitalbased home health agencies. In these instances, reasonable costs of hospital discharge 

planning services performed by personnel assigned to the home health agency are allowable, 

provided that the costs are classified as costs of the hospital and do not represent a 

duplication of costs performed by other personnel. 

Uniform Needs Assessment Instrument 

As the result of a legislative mandate, HCFA developed and has begun testing a Uniform 

Needs Assessment Instrument to evaluate a patient’s requirements for post-acute care. 

Recent Studies 

An Office of Inspector General report entitled “Financial Arrangements Between Physicians 

and Health Care Businesses,” mandated by Congress in June of 1988 and published May 

1989, analyzed the extent and impact of financial arrangements between physicians and other 

service providers. The major finding was that many physicians had financial relationships 

with health care businesses to which they referred patients. A September 1993 report 

entitled “Medicare Home Infusion Therapy” found that physician ownership of home infusion 

companies (and other financial arrangements) were common. 

A recent study, “Understanding Hospital Referrals to Home Health Agencies,” by Kathryn 

H. Dansky, RN, PhD et al. studied 1990 discharge data from 61 Pennsylvania hospitals. 

They found that patients who were discharged from hospitals that own a home health agency 

are 21 percent more likely to receive a referral for home care services than those who are 

discharged from hospitals that do not own an agency. This increased referral rate was 

greater for urban than it was for rural hospitals. 

The previously referenced HCFA funded research project, “A Study of Post-Acute Care,” 

’ (HIM) #2113 

5 
included an analysis of whether hospital ownership of a post-acute facility was a good 

predictor of the place to which patients would be discharged. The fact that a hospital owned 

a post-acute facility was not found to be a consistent predictor of whether or not a patient 

received post-acute services, or of whether the post-acute provider was hospital-owned. 

Other relevant work includes research done by the Prospective Payment Assessment 

Commission which sought, among other things, to analyze whether hospital ownership of a 

post-acute unit affected the average length of stay in the hospital. The Commission found 

that the average length of hospital stay was lower in hospitals which owned post-acute care 

units than in hospitals which did not own such a unit. In their view, this finding is 

significant because it raises the question of whether hospitals are lowering their costs for 

patients for whom they are receiving a lump sum payment from Medicare and discharging 

those same patients to post-acute care for which they are being paid on a cost basis. 

Operation Restore Trust 

This inspection is being conducted as part of the Department of Health and Human Services 

anti-fraud initiative called Operation Restore Trust (ORT). This is a joint effort by the 

Office of Inspector General, HCFA, and the Administration on Aging designed to coordinate 

Federal and State resources to combat fraud, waste, and abuse related to home health 

agencies, nursing homes, and medical equipment and supplies. This initiative is focused on 

5 States (California, Florida, Illinois, New York, and Texas) which together account for 40 

percent of Medicare beneficiaries and expenditures. 

METHODOLOGY 

Samnle Selection 

A stratified random sample of 1,000 Medicare beneficiaries was selected from the 1 percent 

1995 inpatient Common Working File. We used this file even though it contained only 89 

percent of 1995 claims because we needed the most up-to-date information we could get to 

survey Medicare beneficiaries about their hospital and post-hospital experience. We selected 

all claims where the discharge date was between September 1, 1995 and December 3 1, 1995 

and the discharge indicator showed the patient was sent to a skilled nursing home, 

intermediate care nursing home or home health agency. For purposes of this report, we 

grouped skilled and intermediate care facilities together and refer to them as nursing homes. 

The result of this extract was 6,915 claims for 6,136 beneficiaries. The Medicare numbers 

for these 6,136 beneficiaries were matched to the Enrollment Database to find out which 

beneficiaries were alive. A total of 1,3 16 beneficiaries had died, leaving 4,820 claims. 

These 4,820 claims were divided into two strata: the five Operation Restore Trust States and 

all other States. There were 1,572 inpatient claims for the five ORT States and 3,248 for all 

others. We then randomly selected a total of 1,000 beneficiaries; 750 from the ORT strata 

and 250 from all others. Unless otherwise noted, there were no significant differences in 

respondents’ answers based on whether they were in the ORT or non-ORT strata. Since 

managed care data is not included in the Common Working File and there is no itemization 

6 
of services, managed care beneficiaries were not included in our sample for this study. 

The hospital provider number was then selected from each beneficiary inpatient claim. This 

number was subsequently found in the Online Survey and Certification Reports data, as well 

as in the Hospital Cost Report Information System and used to identify which hospitals 

owned nursing homes or home health agencies. The hospital-based designation was utilized 

as a surrogate for ownership. These files were also used to identify the nursing home or 

home health agency (HHA) provider number. 

The Common Working File was divided between the nursing home and home health agency 

stay records for sample beneficiaries. The provider numbers were compared to the hospitalowned provider numbers to determine hospital ownership. This enabled us to identify those 

beneficiaries in our sample who were discharged from hospitals to a post-hospital service 

owned by their discharging hospital, as well as those discharged to services that were not 

owned by their hospital. 

For the purposes of this study, we use the term “post-hospital services” to refer to care by 

either a nursing home or a home health agency. Post-hospital services which are not owned 

by the discharging hospital are referred to as “independent. ” 

Utilization Data 

We obtained data for each beneficiary in the sample for the period during hospitalization and 

the 6 months subsequent to discharge from the hospital. This data included: the beneficiary’s 

diagnosis related group; the hospital length of stay; the hospital charges; the type and 

duration of the post-hospital service; the post-hospital diagnoses; the post-hospital charges 

and, whether and how often the beneficiary was re-admitted to the hospital during the 6 

month period following discharge from the hospital. This information was analyzed to 

compare those beneficiaries who went to their hospital-owned post-hospital facilities with 

those who did not. 

Beneficiary Ouestionnaire 

Since previous Office of Inspector General studies have demonstrated the value of data 

obtained from beneficiaries in understanding important issues, we used a mail survey to 

contact beneficiaries about their hospital discharge planning experience and determine their 

level of satisfaction with the process and its outcome. 

From the sample, we identified the name and address of the beneficiary, and sent a mail 

questionnaire to each of the 1,000 beneficiaries in our sample to be answered by either the 

beneficiary or his/her surrogate. We asked questions about: the hospital discharge planning 

that was done for them; how they thought nursing homes or home health agencies were 

chosen; whether they were given choices for their post-hospital care; how satisfied they were 

with the post-hospital service selection process, as well as with the service itself; changes in 

their activities of daily living and in their overall health; and, whether or not the posthospital service they received helped in their recovery. We received responses from 650 (65 

7 
percent) of the 1,000 surveys. After excluding beneficiaries whose data records were 

incomplete, 561 beneficiaries remained--362 who received home health services and 199 who 

went to nursing homes upon discharge. We then compared the answers of those beneficiaries 

who received services from providers owned by their discharging hospital to those who 

received services from providers not owned by their discharging hospital. 

Hospital Discharge Planner Questionnaire 

We sent mail questionnaires to the discharge planning departments of our sample 

beneficiaries’ discharging hospitals. We asked discharge planners questions about: their 

experiences as a hospital discharge planner; directives their hospital had given them 

regarding their responsibility in the discharge planning process; how the choice of posthospital service for our sample beneficiary was made; any concerns they have in the area of 

discharge planning; and other questions about the discharge planning process when patients 

go to home health agencies and nursing homes. The discharge planners were also asked to 

send copies of relevant documents including: the screening criteria they use to determine 

which patients receive discharge planning services; a checklist of discharge-related discussion 

points to cover with patients and their families; and, written procedures on determining 

which home health agency or nursing home to which Medicare patients will be referred. We 

then compared the answers of those discharge planners from hospitals that owned a nursing 

home or home health agency to those that did not. 

Since our unit of analysis was a beneficiary and there were instances where multiple 

beneficiaries went to a particular hospital, we duplicated pertinent records and counted those 

discharge planners’ responses more than once. Discharge planner questionnaires were 

received for 630 (63 percent) of the sample beneficiaries; the number of unique discharge 

planner responses received was 466. 

All differences reported between subgroups are statistically significant at the 90 percent level 

unless otherwise noted. 

This inspection was conducted in accordance with the Quality Standards for Inspections 

issued by the President’s Council on Integrity and Efficiency. 

8 
FINDINGS 

HOSPITAL OWNERSHIP SEEMS TO HAVE LITTLE INFLUENCE ON WHICH 

NURSING HOME PATIENTS ARE REFERRED TO 

Regardless of whether the nursing home was owned by the discharging hospital, nursing 

home beneficiaries report having input in the referral process 

We analyzed the discharge process experienced by beneficiaries in our sample who went to 

nursing homes. Regardless of whether the nursing home was owned by the discharging 

hospital, only 13 percent of beneficiaries say, “the hospital just told me where to go.” Only 

a quarter of them report “no say” in the decision about which nursing home to choose. 

Beneficiaries who went to hospital-owned nursing homes are likely to report that someone 

from the hospital talked to them about which nursing home they wished to be referred to (73 

percent). 

Seventy-nine percent of all beneficiaries who were referred to a nursing home report that 

they felt “no pressure” in their choice of a particular nursing home. There was no 

significant difference in the responses of those who did and those who did not go to the 

hospital-owned nursing home. In addition, many beneficiaries report that the decision to go 

to a particular nursing home was made by a relative. 

There appears to be a correlation between the amount of input a beneficiary believes he/she 

has in the referral process and his/her satisfaction with the process and its outcome. With 

regard to nursing homes, those who indicate that they had no say in their referral to a 

particular nursing home were less likely (47 percent) than beneficiaries who had all of the 

say (93 percent) to report that they were satisfied with how the referral to the nursing home 

was made. 

The majority of Medicare patients who were in a nursing home prior to admission to the 

hospital returned to the same service provider after hospitalization. The beneficiaries that 

went to a different nursing home generally attribute the switch to a change in their health 

care needs after discharge. 

Regardless of ownership, discharge planners report that hospital ownership is not a major 

factor in the nursing home referral process 

Just 5 percent of the discharge planners from hospitals that own nursing homes report that 

they refer patients to the hospital-owned nursing home unless patients and families object. 

None of the discharge planners from hospitals that own nursing homes report that it is 

generally understood that they should send all their patients to the hospital-owned nursing 

home. 

Fourteen percent of discharge planners, when asked which things were important in choosing 

the nursing home that a Medicare patient would go to, answered, “the nursing home is 

9 
owned by the hospital. ” None of those discharge planners cited it as the main reason. 

Hospitals are not likely to have procedures for referral to nursing homes 

Two-thirds of discharge planners from hospitals which own nursing homes report not having 

instructions on nursing home referral. 

Forty-three discharge planners submitted attachments regarding their nursing home referral 

policies. The policies outlined in these attachments were generally dictated by bed 

availability. The typical procedure was that a patient would select three to five nursing 

homes in a 50 mile radius. The beneficiary would go to the first nursing home to accept 

them. 

In the attachments we received on this issue, hospital ownership of a nursing home did not 

seem to have a strong affect on the discharge policy. Of the 23 attachments received from 

hospitals which owned a nursing home, only four mentioned their nursing home. An 

example is that patients would be sent to the hospital-owned nursing home only if the patient, 

his or her family and doctor had no preference. All of the attachments seemed to indicate 

that the patient was to be given input into the process of choosing their nursing home. 

Forty percent of patients discharged from hospitals that owned nursing homes were referred 

to the nursing home owned by their discharging hospital 

Focusing only on nursing home patients who were discharged from a hospital that owned a 

nursing home, we found that only 40 percent of them went to the hospital-owned nursing 

home. The nursing home referral process is a complex one with many factors at work. 

These include limited service and bed availability, as well as the proximity of the nursing 

home to relatives or friends. 

HOSPITAL OWNERSHIP DOES INFLUENCE THE LENGTH OF STAY IN BOTH 

THE HOSPITAL AND THE NURSING HOME 

Hospital ownership results in both shorter hospital stays and nursing home use of longer 

duration 

As discussed in the background section, there has been concern and some evidence that 

hospitals which own nursing homes discharge patients sooner to their own facilities and those 

patients stay in the facilities longer and are readmitted to the hospital more frequently. This 

raises the question of whether hospitals are lowering their costs for patients for whom they 

are receiving a lump sum prospective payment from Medicare and discharging those same 

patients to post-hospital services for which they are being paid on a cost basis. This cost 

shifting would result in increased Medicare reimbursement for the hospital. When we 

analyzed relevant data for beneficiaries who got services from hospital-owned nursing homes, 

we found additional evidence supporting this concern. 

We found that the patients discharged to the hospital-owned nursing homes had significantly 

10 
shorter hospital stays. The average number of days that beneficiaries were in the hospital 

prior to going to a nursing home owned by their discharging hospital was 6.8, as compared 

to 8.9 days for those beneficiaries who went to a nursing home independent of their hospital. 

This result is statistically significant. (See Appendix B.) 

Those beneficiaries who went to a nursing home owned by the hospital they were discharged 

from also averaged a longer stay in the nursing home. Beneficiaries who went to the owned 

facility averaged a 37 day nursing home stay while those who went to a nursing home 

independent of their hospital averaged a 29 day nursing home stay. This is also a statistically 

significant difference. (See Appendix B.) This supports the concern that hospitals are 

shifting patients from acute care, reimbursed under a lump sum prospective payment, to postacute care in nursing homes, which is reimbursed on a cost basis, thus maximizing Medicare 

reimbursement. 

There was, however, no significant difference in the number or hospital readmissions based 

on ownership. Also, our sample selection did not allow for analysis of specific diagnosis 

related groups or sub-components of care providers such as skilled nursing facility distinct 

units. 

HOSPITAL OWNERSHIP INFLUENCES REFERRALS TO HOME HEALTH 

AGENCIES MORE THAN IT DOES FOR NURSING HOMES 

Many beneficiaries do not have full choice in selecting a home health agency 

In contrast to nursing home beneficiaries, beneficiaries who went to hospital-owned home 

health agencies were more likely than those who went to agencies not owned by their 

hospital to report that the hospital “just sent home care people to them.” Thirty-eight percent 

of beneficiaries who went to hospital-owned home health agencies report that “the hospital 

just sent home care people” to them. In contrast, only 24 percent of the recipients of home 

health services which were independent of their discharging hospital reported this. 

Additionally, recipients of hospital-owned services were less likely to indicate that they had 

some form of input into the choice of a home care agency. These recipients were less likely 

to report one of the following: 

“the hospital advised me but I made my own decision;” 

0 “I made the decision on my own without any advice from the hospital;” 

0 “I asked for advice, and took the hospital’s recommendation;” 

0 “the hospital gave me a list of home care agencies and I picked one.” 

Because of the relatively small sample size, we cannot demonstrate that the differences 

discussed above are statistically significant. However, the trend they point to is consistent 

with a number of other related survey respondent trends. 

When Medicare beneficiaries were asked whether someone from their discharging hospital 

suggested the name of a home health agency or they thought of the agency themselves, 

beneficiaries who got HHA services from providers which were owned by their discharging 

11 

0 
hospital were less likely to report that they thought of the home care agency themselves. 

While a quarter of nursing home beneficiaries report “no say” in the decision about which 

nursing home to go to, more beneficiaries who got home health services (one-third) report 

having “no say, ” regardless of ownership. There appears to be a correlation between the 

amount of input a beneficiary believed he/she had in the referral process and his/her 

satisfaction with the process. Those who indicate that they had no say in their referral to a 

particular home health agency were less likely (85 percent) than beneficiaries who had all of 

the say (98 percent) to report that they were satisfied with how the referral to the home care 

agency was made. 

100 

90 

so 

c 70 

!x 

s 

b 40 a 

30 

20 

10 

0 

Relationship Between Beneficiary Input and 

Satisfaction with the Referral Process 

Lsamd 

AllofIhesay 

No Say 

Nunring Hm HHA 

The majority of Medicare patients who had home health agency services before entering the 

hospital, used the same service provider after their hospitalization. This is true regardless of 

whether or not a patient was in a hospital which owns an HHA. When patients who report 

not using the same home care agency after their hospitalization were asked why they 

switched home care agencies after their hospitalization, most of them say that they did not 

like their original agency. No beneficiaries report changing agencies because the hospital 

indicated they should use the hospital-owned agency. 

Sixty-two percent of patients discharged from hospitals that owned a home health agency 

were referred to an agency owned by the hospital 

In contrast to nursing home beneficiaries, focusing only on home health patients who were 

discharged from a hospital that owned a home health agency, we found that fully 62 percent 

of them went to agency owned by the discharging hospital. 

12 
Discharge planners report that hospital ownership is a factor in their referral process to 

home health agencies 

Nineteen percent of discharge planners from hospitals that own home health agencies report 

that it is generally understood that they refer all their patients who need home health care to 

their hospital-owned agency or that, unless patients or families object, they refer all patients 

to their hospital-owned agency. 

When discharge planners were asked which things were important in choosing a home health 

agency for a Medicare beneficiary, 25 percent of those from hospitals that own a home 

health agency responded, “the home health agency is owned” by the hospital. Seven percent 

of them give it as the main reason. 

Almost 10 percent of the discharge planners from hospitals that own home health agencies 

believe that someone from the hospital puts pressure on patients to choose a particular home 

health agency compared to 6 percent when there is no ownership. Because of the relatively 

small sample size, we cannot demonstrate that this last difference is statistically significant. 

However, this trend is consistent with other related survey responses. 

Hospitals owning home health agencies are somewhat more likely to have written or verbal 

referral procedures than those without ownership 

Fifty-three percent of discharge planners from hospitals that own home health agencies 

reported having written procedures or verbal instructions for determining to which home 

health agency a patient is to be referred. Forty-one percent of discharge planners from 

hospitals that do not own agencies report having similar instructions. 

Of the 121 discharge planners that reported having written procedures, almost half (58) of 

them submitted attachments in response to our request for procedural information on the 

home health care referral process. Of these, the majority (33) cited patient choice as the 

dominant factor in their discharge process. When patient choice is cited, the patient is 

usually presented with a list of options from which to choose. 

Fourteen of the planners who submitted attachments indicated that patients without a 

preference were directed to their hospital-owned home health agency. A typical example of 

this policy would be that “It is the policy of the case management department to refer 

patients to X home health agency if the patient lives in the area and does not express a 

preference for another care provider. ” Seven of the discharge planners submitted 

attachments which cited the discharge planning team or physician’s preference as the 

deciding factor in referring patients to a particular home health agency. In this case, a policy 

would not mention patient choice but would state that “the physician may recommend that a 

specific vendor be used. ” 

Only four attachments contained language which strongly encouraged the promotion of 

hospital-owned HHAs in the discharge process. One of these even included a hospital policy 

that says, “Referrals leaving the [hospital-owned] system = $$$ leaving the system. ” 

13 
Discharge planners report giving adequate choice 

Almost all discharge planners say that there is meaningful beneficiary involvement in the 

discharge planning process. Regardless of ownership, 84 percent of all discharge planners 

report that beneficiaries have all of the say or quite a bit of say in the choice of a home 

health agency or nursing home to go to and less than 10 percent report that beneficiaries 

have no say or just a little say. 

Discharge planners rank a patient’s diagnosis and home support as the most important factors 

in determining the patient’s need for post-hospital services. Similarly, in deciding whether to 

refer a patient to a home health agency or a nursing home, discharge planners cite the 

patient’s medical needs, the need for 24 hour supervision and home support as the dominant 

considerations. 

Most discharge planners list lack of patient/family commitment and availability of appropriate 

services as the greatest obstacles to effective discharge planning (81 percent and 67 percent, 

respectively). Five percent of the respondents cite hospital pressure to discharge patients to 

inappropriate post-hospital services as a problem in discharge planning. 

While 72 percent of the discharge planners report having no checklist of discharge related 

discussion points, the majority of those without a checklist believe that one would be helpful 

to them. See Appendix A for a sample checklist based on common factors from selected 

checklists submitted by the discharge planners. 

HOSPITAL OWNERSHIP INFLUENCES THE DURATION OF HOME HEALTH 

AGENCY SERVICES 

Hospital ownership results in home health agency use of longer duration 

As with nursing homes, there has been some evidence that hospitals which own home health 

agencies discharge patients sooner to their own facilities and those patients stay in the 

facilities longer. We found some evidence supporting this concern. 

Those beneficiaries that received services from a home health agency owned by the hospital 

they were discharged from averaged 49 days of service while those receiving care from a 

home health agency independent of their hospital averaged 37 days of service. This is a 

statistically significant difference. (See Appendix B.) 

The average number of days that beneficiaries were in the hospital prior to receiving care 

from a home health agency owned by their discharging hospital was 7.3 days. For those 

beneficiaries who received care from an agency independent of their discharging hospital the 

average was 8.3 days. This one day difference was not satistically significant. 

The number of hospital readmissions during the 6 month period after hospital discharge to a 

home health agency showed no significant differences based on ownership. 

14 
BENEFICIARIES WHO GO TO HOSPITAL-OWNED NURSING HOMES AND 

HOME HEALTH AGENCIES REPORT BETTER CONTINUITY OF CARE 

One goal of the discharge planning process is to promote a strong connection between the 

care provided in the hospital and the care given by the home health agency or nursing home. 

It is generally assumed that if discussions are held with patients regarding their post-hospital 

needs and how they can be addressed, the likelihood that these needs will be met is 

improved. It is also assumed that the earlier discussions are held and the more comfortable 

beneficiaries feel with the timing of their hospital discharge, the better the continuity of their 

care will be. 

Beneficiaries who went to hospital-owned nursing homes are more likely to report having 

been talked to early and having been discharged at the right time 

Beneficiaries who received services from hospital-owned nursing homes are much more 

likely to report having been consulted in the beginning or middle of their stay about the 

services they might need after their discharge. Those who received services from a nursing 

home which was not owned by their hospital are more likely to report having been talked to 

just before they left the hospital or not at all. 

Ninety-five percent of the beneficiaries who went to a hospital-owned nursing home say that 

someone from the hospital spoke to them (or their families) about the services they thought 

they would need after discharge. In contrast, only 61 percent of those beneficiaries who did 

not go to a hospital-owned nursing home reported having a similar conversation. 

Furthermore, the beneficiaries who went to the hospital-owned nursing home were twice as 

likely to report that the information hospital staff gave them about the post-discharge services 

they would need was helpful. Finally, beneficiaries who received services from hospitalowned nursing homes are more likely to report believing that they were discharged from the 

hospital at the right time rather than too soon. 

Beneficiaries who went to the nursing home owned by their hospital are more likely to 

report that the connection between their care providers is very good 

Beneficiaries who received services from the hospital-owned nursing home are also more 

likely to report that they received the services they were told they would get (100 percent 

versus 64 percent). In addition, a greater proportion of this group said that the connection 

between the care they got in the hospital and the care they received from the nursing home 

was very good (88 percent versus 43 percent). 

In addition, a higher percentage of beneficiaries who went to their hospital-owned nursing 

home report that their overall health improved in the nursing home (77 percent versus 43 

percent). 

15 
Beneficiaries who went to hospital-owned home health agencies are more likely to report 

having been discharged at the right time 

Beneficiaries who received services from hospital-owned agencies are more likely to report 

believing that they had been discharged from the hospital at the right time (89 percent versus 

77 percent) rather than too soon (8 percent versus 15 percent). In addition, beneficiaries 

who got services from the hospital-owned home health agency are more likely than those 

who received independent services to know what health care services they were supposed to 

get after leaving the hospital. 

Beneficiaries who went to hospital-owned home health agencies are more likely to report 

that the connection between their care providers was very good 

Beneficiaries who received services from the hospital-owned home health agency are also 

more likely to report that they received the home health agency services they were told they 

would get (92 percent versus 83 percent). In addition, a greater proportion of this group said 

that the connection between the care they got in the hospital and the care they received from 

the home health agency was very good. Because of the relatively small sample size, we 

cannot demonstrate that the difference reported with regard to the connection between care 

providers was statistically significant. However, the trend which the responses point to is 

consistent with a number of other related survey responses. 

HOSPITAL OWNERSHIP DOES NOT IMPACT BENEFICIARIES’ REPORTED 

LEVEL OF SATISFACTION 

Beneficiaries report high levels of satisfaction with the discharge planning process 

Over 80 percent of beneficiaries report being satisfied with: how much of a say they had in 

the kind of services they would get after leaving the hospital; how well the hospital planned 

for their post-hospital services; as well as, how the home health referral decision was made. 

This was true regardless of whether or not the Medicare patient went to a home health 

agency owned by their discharging hospital. 

Beneficiary satisfaction with nursing home or home health agency services does not differ 

based on hospital ownership 

We asked beneficiaries about their level of satisfaction with: the care they got in the nursing 

home; how long each visit by a nursing home person lasted; how well the nursing home 

people worked together; and how well the nursing home people responded to their needs. 

Over 85 percent of beneficiaries reported being satisfied in all of these areas. This pattern 

held true when beneficiaries were asked about their overall level of satisfaction as well. 

We asked beneficiaries about their level of satisfaction with: the number of home health 

agency visits; how long each visit was; how well the staff worked together; and, how well 

staff responded to their needs. Almost all (90 percent) beneficiaries reported being satisfied 

in all of these areas. This pattern held true when beneficiaries were asked about their overall 

level of satisfaction as well. 

16 
RECOMMENDATIONS 

Our findings suggest that hospital ownership of nursing homes plays a significant role with 

regard to the nursing home beneficiary utilization patterns. The hospital stay is shorter and 

the nursing home stay longer thus the hospital may be shifting cost from a prospective 

payment system to a cost-based system, maximizing Medicare reimbursement. Therefore, 

we recommend the following: 

b The HCFA should develop statistical methods to target for special review providers 

who may be maximizing their Medicare reimbursement in this way. The records of 

these providers should be reviewed by the Peer Review Organizations, as in the past, 

or through some other suitable mechanism. Providers who are found to be 

inappropriately discharging beneficiaries to their own nursing homes should be subject 

to payment adjustments and appropriate fines or penalties. 

Our findings also suggest that hospital ownership plays a significant role in home health 

agency referral discussions and some role, albeit a lesser one, in nursing home referral 

discussions. In addition, we found that many Medicare beneficiaries do not have full choice 

in selecting a home health agency or nursing home. Therefore, we recommend the 

following: 

b The HCFA should assure that hospitals disclose ownership of home health agencies 

and nursing homes in a systematic way. 

0 Hospitals which own home health agencies and nursing homes should be 

required to disclose the names of the home health agencies and nursing homes 

which they own to all beneficiaries who are possible candidates for these posthospital services. 

�  Hospitals which own home health agencies and nursing homes should be 

required to disclose this information to HCFA. 

b The HCFA should take additional measures to assure that when beneficiaries are 

being discharged from the hospital they are given a choice in selecting a home health 

agency or nursing home from which to receive care. 

0 Hospitals should be required to inform patients (or their families) that they are 

free to choose among home health agency providers and nursing homes. This 

information should be provided as early as possible. 

�  Hospitals should maintain a file of Medicare participating home health 

agencies and nursing homes in the area and provide beneficiaries (or their 

families) with a list of alternatives which are appropriate for the level of care 

they need. 

17 
b Since our findings support the need for additional Medicare beneficiary information 

related to post-hospital services and choice, we recommend that HCFA prepare 

information for beneficiaries addressing this issue and circulate it widely. 

1997 BALANCED BUDGET ACT 

The 1997 Balanced Budget Act includes a provision which addresses the concern that some 

hospitals are shifting costs from a prospective payment system to a cost-based system, thus 

maximizing Medicare reimbursement. Section 4407 of this recently enacted law redefines 

beneficiaries with certain diagnoses who are discharged from hospitals to nursing homes and 

home health agencies (as well as other prospective payment exempt settings) as “transfers.” 

This limits payments to hospitals for these cases. 

This recently enacted law also addresses the concern that hospitals disclose ownership 

information and that Medicare beneficiaries are informed of their freedom to choose the 

home health agency or nursing home to which they will be referred. Section 4321 of the 

1997 Balance Budget Act requires hospitals referring patients to home health agencies (HHA) 

and other post-hospital providers to: 

0 not specify or otherwise limit beneficiaries in terms of which post-hospital service 

provider they receive services from; 

�  provide beneficiaries with information on HHAs and other post-hospital providers 

which serve the area; 

�  disclose to the beneficiary any financial interest which the hospital may have in an 

HHA or other post-hospital provider to which they are referred; and, 

�  disclose to HCFA the nature of any financial interest which the hospital has in a home 

health agency or other post-hospital service provider, as well as related referral rate 

information. 

The HCFA is in the process of implementing both of these new provisions. 

COMMENTS 

We received comments on the draft report from the Health Care Financing Administration, 

the Assistant Secretary for Planning and Evaluation (ASPE) and the Assistant Secretary for 

Management and Budget. They generally concur with our recommendations. The actual 

comments received are in Appendix E. 

The HCFA stated it hopes to use experience gained in implementing the new transfer policy 

authorized by the Balanced Budget Act to develop techniques that can be applied to a broader 

set of DRGs. The HCFA also expressed concern that the publication referenced in a draft 

18 
report recommendation does not target the intended audience. To accommodate this concern 

we have modified our recommendation. 

The ASPE provided suggestions for changes in wording and clarifications of the text which 

we have for the most part incorporated into the final report. They suggest that the report 

provide additional detail to the discussion about Federal requirements for discharge planning 

and the referral processes used by hospitals when discharging patients to nursing homes and 

home health agencies. Specifically, the ASPE recommended including a discussion of the 

criteria used by hospitals in selecting the post-acute provider type to which beneficiaries were 

referred. In an effort to better understand what factors are considered in making these posthospital placement decisions, we asked discharge planners “When you determine that 

Medicare patients need post-hospital services, how do you decide whether they need home 

health agency services or they need to go to a nursing home?” Most respondents indicated 

that the following criteria were among the factors used to make this determination: the 

patients’s medical needs, the degree of support available to the patient in their home, the 

preference of the patient and family, and the patient’s ability to function safely at home. No 

one criterium was cited as being more important than the others. 

19 
APPENDIX A 

PROPOSED DISCHARGE PLANNING CHECKLIST 

Of the 121 discharge planners that report having checklists, 53 submitted them for our 

review. 

The documents submitted varied greatly in length and content. We identified a number of 

check lists which had a relatively simple, clear and user-friendly format and analyzed them. 

They also had a relatively comprehensive set of items. Our working definition of 

comprehensive was that the checklist included at least some items which fell into each of the 

following three types: pre-admission factors; pre-discharge factors; and patient and family 

involvement in discharge planning. 

On the basis of our analysis of the documents and discharge related discussions with patients 

and families we developed the sample checklist below: 

Hospital Discharge Planning Checklist 

Patient ID 

Admitting Dx 

1. Living arrangements 

7. Special Circumstances 

2. Physical (ADL) function 

3. Mental function 

4. Social supports 

5. DME used 

6. Services received 

(DESCRIBE EACH BELOW): 

(A Proposed Model) 

Admission Date 

Planned Rx 

I. PRE-ADMISSION STATUS 

1 
II. PRE-DISCHARGE FACTORS 

1. Understanding of medical condition by patient 

2. Understanding of medical condition by family/SO 

3. Physical (ADL) function 

4. Mental function 

5. Financial resources 

6. Social supports available after discharge 

7. Special circumstances 

(DESCRIBE EACH BELOW): 

III. DISCHARGE PLAN 

1. Services needed after discharge 

2. Type of Placement preferred by patient 

3. Type of Placement preferred by family/SO 

4. Type of Placement recommended by hospital 

5. Type of Placement agreed to by patient/family 

6. Specific agency/home recommended by hospital 

7. Specific agency/home agreed to by patient/family 

8. Pre-discharge counseling recommended 

9. Special circumstances 

(DESCRIBE EACH BELOW): 

IV. SUMMARY 

1. Nature and outcome of patient and family involvement in discharge planning process: 

2. Anticipated problems in implementing post discharge plans: 

3. Further hospital action contemplated: 

A-2 
APPENDIX B 

ANALYSIS OF BENEFICIARY UTILIZATION DATA 

Two separate files were created (one for nursing homes and one for HHAs) since it was 

hypothesized that these two types of discharges might be different. The analysis involved 

comparisons of the following data: (1) beneficiaries who went to a HHA (or nursing home) 

owned by their discharging hospital, (2) beneficiaries who went to a HHA (or nursing 

home) not owned by their discharging hospital even though their discharging hospital 

did own a HHA (or nursing home), and (3) beneficiaries who where discharged from a 

hospital which did not own a HHA (or nursing home) and went to an HHA (or nursing 

home) which was independent of their hospital. Categories 2 and 3 were combined for this 

analysis. 

The analysis was a series of t-tests or chi-square tests depending on whether the variable was 

continuous or categorical. A separate analysis was performed for the HHA and nursing 

home files. The continuous variables analyzed included the following: 

1) the number of days of the original hospitalization; 

2) the number of HHA or nursing home covered days; and, 

The categorical variables analyzed were: 

1) the DRG of the original hospitalization (coded for the top 35% of the DRGs); 

2) the primary diagnosis for the HHA (or nursing home) service (coded for the top 35% 

of diagnoses); and, 

3) the number of hospital readmissions during a six month period after the original 

hospital discharge. 

Continuous Variables-nursing home file 

Of the continuous variables analyzed by the two categories of ownership described above 

within the nursing home file, both the DAYS variable and the HOSPCOVD variable showed 

a significant difference by type of ownership as a result of the weighted analysis. The 

DAYS variable refers to the number of nursing home covered days and the HOSPCOVD 

variable refers to the number of days of the original hospitalization. The difference appeared 

in each of the two strata, ORT vs. non-ORT States, individually and when the strata were 

combined. The table below shows the difference combined. 

B-l 
Comparison of Number of nursing home covered days-Overall Sample 

Type of Ownership Average Days Standard Error of Mean 

1 37.41 3.32 

2 29.54 2.17 

*t = 1.98- significant at the 95 % confidence level 

Comparison of Number of Days of Original Hospitalization 

Type of Ownership Average Days Standard Error of Mean 

.55 

.45 

1 6.83 

2 8.89 

*t = -2.89- significant at the 99 % confidence level 

Continuous Variables-HHA File 

Of the continuous variables analyzed by the two categories of ownership described above 

within the HHA file, the only one which showed up significant as a result of the t-test was 

the number of HHA covered days. It showed up higher for the cases where the beneficiary 

was discharged to a home health agency owned by the beneficiary’s discharging hospital. 

The difference appeared in each of the two strata, ORT vs. non-ORT States, individually and 

when the strata were combined. The table below shows the difference combined. 

Comparison of Number of HHA covered days- Overall Sample 

Type of Ownership Average Days Standard Error of Mean 

3.23 

2.13 

hospital-owned 49.33 

independent 37.25 

*t =3.12 - significant at the 99% confidence level 

Categorical Variables-HHA and nursing home File 

Of the three categorical variables analyzed within the HHA and nursing home file, no 

relationships were significant when the chi-square test was performed by the two types of 

ownership for the overall sample. There was a problem with the analysis of the two 

variables dealing with DRG and diagnosis code. Due to the many codes that exist for DRGs, 

categories of the DRGs and diagnoses were very small when the sample was analyzed. Since 

the sample was not designed for the specific purpose of comparing DRGs or diagnoses, this 

B-2 
made a significant difference less likely to appear. The sample size for the number of 

readmissions was not a problem, however, the value of the chi-square statistic (1.359) was 

not significant. 

CONFIDENCE INTERVALS FOR PERCENTAGE OF PATIENTS DISCHARGED TO 

A HOME HEALTH AGENCY OR NURSING HOME OWNED BY THEIR 

DISCHARGING HOSPITAL 

The computation of confidence intervals for the percentage of nursing home or home health 

agency patients who were discharged from a hospital which owned a nursing home or a 

home health agency is as follows: 

Nursing Home 

Forty percent (rounded from 39.8 percent) of patients were referred to the nursing home 

owned by the discharging hospital when the hospital owned a nursing home. The 95 percent 

confidence interval for the estimate is: 

40% +I- 8.9% 

Home Health Agency 

Sixty-two percent (rounded from 61.6 percent) of patients were referred to the home health 

agency owned by the discharging hospital when the hospital owned a home health agency. 

The 95 percent confidence interval for the estimate is: 

62% +I- 8.33% 

B-3 
APPENDIX C 

CHI-SQUARE VALUES 

We computed Chi-square values for survey response differences based on whether or not the 

hospital owned a home health agency or nursing home. These values were computed for a 

number of key questions for which such differences are reported in our findings. Differences 

reported in the text of the report are significant at the 90% confidence level unless otherwise 

noted. 

Table C 

CHI-SQUARE Values for Testing Significance of Differences 

Based on Ownership for Key Survey Questions 

Survey Question D Chi- P Confidence 

F Square Value Level @ 

* Value Which 

Difference Is 

Significant 

Do you believe the hospital ever puts pressure 

on Medicare patients to choose a particular 1 1.66 .20 80% 

home health agency? 

Were you given written procedures or verbal 

instructions from your hospital on how to 1 3.06 .08 92% 

determine which home health agency to refer 

Medicare patients to? 

Which of the following best describes how the 

decision was made about which home care 1 2.09 .14 86% 

agency you would get care from after leaving 

the hospital? 

Which of the following best describes the 

amount of say you had about which home care 

agency to use? 

How satisfied you were with how the decision 4.08 .04 96% 

was made on which home care agency you 

would get services from? 

C-l 
Which of the following best describes the 

amount of say you had about which nursing 

home to go to? 1 3.35 .07 93% 

How satisfied you were with how the decision 

was made on which nursing home you would go 

to after leaving the hospital? 

Did you feel that you were discharged at the 

right time, too soon or later than necessary? 

(HHA patients) 

How good was the connection between the care 

you got in the hospital and the care you got at 

home? 

About how soon after you were admitted to the 

hospital did someone from the hospital first talk 

to you or your family about health care services 

you might need after you left the hospital? 

Did you feel that you were discharged at the 

right time, too soon or later than necessary? 

(NH patients) 

How good was the connection between the care 

you got in the hospital and the care you got in 

the nursing home? 

* Degrees of Freedom 

1 2.53 .ll 89% 

1 1.20 .27 73% 

1 2.91 .09 91% 

1 3.43 .06 94% 

1 3.77 .05 95% 

c-2 
APPENDIX D 

NON-RESPONDENT ANALYSIS 

When surveys are used to collect data, the results may be biased if non-respondents differ 

from respondents. For this inspection, a beneficiary for whom a beneficiary survey was not 

received is a non-respondent. Additionally, a discharge planner for whom a discharge 

planner survey was not received is a non-respondent. To test for the presence of any bias, 

we first obtained information from HCFA’s 1995 1 percent Common Working File for all 

1000 beneficiaries who were sent a mail questionnaire. Information was also obtained on the 

hospitals from which sample beneficiaries were discharged. (These were the hospitals to 

which discharge planner surveys were sent.) 

Beneficiarv Non-ResDondent Analvsis 

A total of 651 beneficiary surveys were returned, for a response rate of 65 percent. To test 

for the presence of any non-response bias, we analyzed the variables which might influence 

whether an individual would respond to the survey or that might affect his or her responses. 

For the 1000 beneficiaries in our survey we looked at: whether the beneficiary went to a 

home health agency owned by their discharging hospital; whether the beneficiary went to a 

nursing home owned by their discharging hospital; sex; and, whether the beneficiary resided 

in a ORT or non-ORT State. These categorical variables were tested using Chi-square with 

the appropriate degrees of freedom. 

The results of this analysis are presented in tables D( l-4). The Chi-square values given in 

the tables provide a test of the difference between the distribution of the respondents and that 

of the non-respondents for the variable of interest. Also provided in the tables are the 

response rates by the different values of the variables. The differences between the response 

rates for the variables tested are not statistically significant. 

D-l 
Table D (1 - 4) 

CHI-SQUARE Values for Testing Significance of Differences 

Between Respondents and Non-Respondents For 

(1) Hospital Ownership of HHA (2) Hospital Ownership of Nursing Home 

(3) Sex and (4) ORT or non-ORT State 

(1) HOME HEALTH AGENCY OWNERSHIP 

Respondents Non- Total Percent 

respondents 

Beneficiary went to the 100 (28%) 41 (28%) 141 71% 

HHA owned by the 

discharging hospital 

Beneficiary did not go to 262 (72%) 105 (72%) 367 72% 

the HHA owned by the 

discharging hospital 

IITotal I 362 I 146 508 71% 

CHI-SQ = .Oll 

Degrees of Freedom = 1 

(2) NURSING HOME OWNERSHIP 

Respondents Non- Total Percent 

respondents 

Beneficiary went to the 13 (6%) 21 (11%) 34 38% 

nursing home owned by the 

discharging hospital 

Beneficiary did not go to 187 (94%) 179 (89%) 366 51% 

the nursing home owned 

by the discharging hospital 

Total 200 200 400 50% 

CHI-SQ=2.057 

Degrees of Freedom = 1 

D-2 
(3) SEX 

Respondents Non-respondents Total Percent 

Male 221 (34%) 105 (30%) 326 

Female 430 (66%) 244 (70%) 674 

Total 651 349 1000 

CHI-SQ = 1.542 

Degrees of Freedom = 1 

(4) ORT or non-ORT STATE 

Respondents Non-respondents Total 

68% 

64% 

65% 

Percent 

66% 

62% 

65% 

ORT State 497 (76%) 

Non-ORT State 154 (24%) 

Total 651 

CHI-SQ = 1.797 

Degrees of Freedom = 1 

253 (72%) 750 

96 (28%) 250 

349 1000 

D-3 
Dischawe Planner Non-Respondent Analvsis 

A total of 625 discharge planner surveys were returned, for a response rate of 63 percent. 

Because there was no data for 74 of the 1000 hospital records obtained, this analysis is based 

on 926 records rather than the full sample size. 

To test for the presence of any non-response bias, we analyzed the variables that might 

influence whether a hospital discharge planner would respond to the survey or that might 

affect his or her responses. For the 926 discharge planners in our sample, we looked at: 

whether or not their hospital owned a home health agency; whether or not their hospital 

owned a nursing home; and, whether their hospital was in an ORT or non-ORT State. These 

categorical variables were tested using Chi-square with the appropriate degrees of freedom. 

Tables D-5 and D-6 show no statistically significant differences between respondents and 

non-respondents for the variables tested. 

Table D-7 shows a statistically significant difference between respondents and nonrespondents with respect to whether or not the discharge planner’s hospital was in an ORT or 

non-ORT State. In order to test whether this difference introduced any bias, we analyzed 

answers to a couple of key survey questions given by discharge planners from ORT and nonORT States. The two questions we looked at were: whether any home health agencies ever 

help make decisions about whether patients are in need of home health services and what the 

main reason was to send patients to the home health agency which the hospital owns. In 

both instances, the distribution of answers provided by ORT and non-ORT respondents were 

within 5 percentage points of each other. This difference was not statistically significant. 

Given the results of this analysis, we believe that the inspection findings fairly represent the 

experience and opinions of beneficiaries and discharge planners to whom the questionnaires 

were sent. We therefore believe that our survey results can be generalized to the universe of 

Medicare beneficiaries who were discharged to a home health agency or nursing home during 

the last four months of 1995, as well as the discharge planners who assisted them. 

D-4 
Respondents Non- Total Response 

respondents Rate 

Hospital Owns 298 (48%) 130 (43%) 428 70% 

HHA 

Hospital Does Not 327 (52%) 171 (57%) 66% 

Own HHA 

Total 625 301 926 67% 

CHI-SQ = 1.648 

Degrees of Freedom = 1 

Tables D(57) 

CHI-SQUARE Values for Testing Significance of Differences 

Between Respondents and Non-Respondents For 

(5) Hospital Ownership of HHA (6) Hospital Ownership of Nursing Home and 

(7) ORT or non-ORT State 

(5) HOSPITAL OWNERSHIP OF HOME HEALTH AGENCY 

Respondents Non- Total Response 

respondents Rate 

Hospital Owns 298 (48%) 130 (43%) 428 70% 

HHA 

Hospital Does Not 327 (52%) 171 (57%) 498 66% 

Own HHA 

Total I 625 I 301 1 926 1 67% 

CHI-SQ = 1.648 

Degrees of Freedom = 1 

(6) HOSPITAL OWNERSHIP OF NURSING HOME 

Hospital Owns NH 

Hospital Does Not 

Own NH 

Total 

CHI-SQ=0.004 

Degrees of Freedom = 1 

Respondents Non- Total Response 

respondents Rate 

252 (40%) 122 (40%) 374 67% 

373 (60%) 179 (59%) 552 68% 

625 301 926 67% 

D-5 
(7) ORT OR non-ORT STATE 

ORT State 

non-ORT State 

Total 

CHI-SQ= 12.352 

Degrees of Freedom 

Respondents Non- Total Response 

respondents Rate 

446 (71%) 247 (82%) 693 64% 

179 (29%) 54 (18%) 233 77% 

625 301 926 67% 

= 1 

D-6 
APPENDIX E 

COMMENTS ON THE DRAFI’ REPORT 

In this appendix, we present in full the comments from the Health Care -Financing 

Administration, the Assistant Secretary for Planning and Evaluation and Assistant 

Secretary for Management and Budget. 

E-l 
DEPARTMENT OF HEALTH & HUMAN SERVICES Health Care Financing Administration 

The Administrator 

Washington, D.C. 20201 

NOV I7 1997 

EIG 

Eoa 

DATE: DIG-AS 

DIG-EC 

DIG-H 

TO: June Gibbs Brown DIG-G1 

DIG-MP 

OGUIG 

ExccseC 

FROM: Nancy-Arm Min DeParle VW DateSent 

Administrator 

Inspector General AIG-LC 

SUBJECT: Office of Inspector General (OIG) Draft Report: “Medicare Hospital 

Discharge Planning,” (OEI-02-94-00320) 

We reviewed’the above-referenced report that examines how and to what extent hospital 

ownership of home health agencies (HHAs) or nursing homes impacts hospital discharge 

planning for Medicare beneficiaries. 

A significant reduction in the average length of stay for acute care hospital patients 

created a greater need for post-hospital services such as home health and nursing home 

care. These reductions are widely believed to be associated with advances in medical 

technology as well as the implementation of the Medicare prospective payment system. 

As the average hospital stay decreases, the role of the hospital discharge planning process 

becomes more critical. 

The report raises concerns of whether hospitals are lowering their costs for patients for 

whom they are receiving a lump sum prospective payment from Medicare and 

discharging those same patients to post-hospital services for which they are being paid on 

a cost basis. This cost shifting would result in increased Medicare reimbursement for the 

hospital. 

The Health Care Financing Administration (HCFA) concurs with OIG recommendations 

one through five. We do not concur with recommendation six. Our detailed comments 

are as follows: 

OIG Recmon #l. 

HCFA should develop statistical methods to target special review providers who may be 

maximking their Medicare reimbursement in this way. The records of these providers 

should be reviewed by the peer review organizations (PROS), as in the past, or through 
2 

some other suitable mechanism. Providers that are fou.nd.to be inappropriately 

discharging beneficiaries to their own nursing homes should be subject to payment 

adjustments and appropriate fmes or penalties. 

HCFA Respmsc 

We concur with the intent of the recommendation that inappropriate discharges should be 

eliminated. However, we do not believe these discharge patterns only occur in the 

context of hospitals discharging to their own post-acute facilities. Rather, the recent 

increases in system integration and coordination between hospitals and post-acute 

facilities have changed discharge patterns across a wide range of hospitals. We are 

currently evaluating projects to be undertaken by the PROS concerning hospital 

admissions and discharges. 

We believe a more positive approach to these changes is the post-acute transfer policy 

that was recently enacted in the Balanced Budget Act of 1997 (BBA). Beginning in fiscal 

year 1999, the Secretary will be allowed to implement a limited, post-acute transfer 

policy. Under this policy, if a hospital transfers a patient under 1 of 10 diagnosis-related 

groups (DRGs) designated by the Secretary to a post-acute facility, the case will be paid 

as a transfer, not as a discharge. The transfer payment is based on a per diem 

methodology, capped at the level of the full DRG payment. In fiscal year 2001, the 

Secretary has the option of expanding this policy to other DRGs. We believe this 

incremental approach will give us the time and experience to create a post-acute transfer 

policy that addresses the concerns of this report. We are currently working with the 

PROS to identify pilot projects to address these issues. 

OIG Recmon #2 

HCFA should ensure that hospitals disclose ownership of HHAs and nursing homes in a 

systematic way. 

Hospitals should inform beneficiaries who are possible candidates for these post-hospital 

services of the names of the HHAs and nursing homes they own. 

HCFA lbsgonse 

We concur. This issue is addressed by section 4321(a) of BBA that HCFA will 

implement by issuing regulations and, as needed, instructions. 
3 

OIG Rmation #3 

Hospitals should be required to disclose to HCFA the names of HHAs and nursing homes 

that they own. 

We concur. Fiscal intermediaries process cost reports for all entities owned by the 

hospital so they do know ownership information. This issue is addressed by 

section 4321(b) of BBA that HCFA will implement by issuing regulations and, as needed, 

instructions. 

. 

DIG Recommendation #4 

HCFA should take additional measures to ensure that when beneficiaries are being 

discharged from the hospital they are given a choice in selecting a HHA or nursing home 

from which to receive care. 

Hospitals should be required to inform patients (or their families) that they are free to 

choose between home health agency providers and nursing homes. This information 

should be provided as early as possible. 

We concur. This issue is addressed by section 4321(a) of BBA that HCFA will 

implement by issuing regulations and, as needed, instructions. 

. GIG Recm 

Hospitals should maintain a file of Medicare participating HHAs and nursing homes in 

the area and provide beneficiaries (or their families) with a list of alternatives appropriate 

for the level of care they need. 

HCFA. 

We concur. This issue is addressed by section 4321(a) of BBA that HCFA will 

implement by issuing regulations and, as needed, instructions. 
OIG Rd #6 

The report findings support the need for additional Medicare beneficiary information 

related to post-hospital services and choice. Therefore, a wide circulation of the next 

released HCFA publication entitled “Healthcare Choice--A Consumer Guide for Planning 

Ahead” is recommended. 

A Resm 

While we recognize the need identified in this recommendation, we do not concur at this 

time because there is no publication that is soon to be released. The draft publication 

referenced in your recommendation does not target the intended audience. Also, the 

information in the draft does not meet the needs described in the recommendation. With 

the recent reorganization within HCFA, we are currently undertaking, through a contract, 

an extensive examin ation of the way we distribute all Medicare informational materials, 

and options for changing the way we provide printed and audiovisual materials. HCFA 

recently received the draft report that details the number and types of informational 

materials produced in its central and regional offices and by HCFA’s partners. A survey 

revealed a large number of publications by partners, many of which appear to be 

duplicative, have inaccuracies, and are without HCFA-wide coordination. The survey 

demonstrates the opportunity for improved customer service through consolidation of 

current infbrmation dissemination functions. 

The next publications report will include a set of design options for accomplishing 

consolidation, including a centralized electronic publications clearinghouse. Any of the 

suggested designs is expected to incorporate principles of efficient dissemination, be 

tailored to individual beneficiary needs, eliminate duplication, and use a consistent 

message. The target date for the final report is December 22. Once we have the survey 

results as well as other needs assessment information, we will determine the need for the 

referenced publication. 
-- 

DEPARTMENT OF HEALTH & HUMAN SERVICES Office of the Secretary 

Washington, D.C. 20201 

TO: DIG-01 

Inspector General 

FROM: David F. Garrison 

Principal Deputy Assistant Secre 

for Planning and Evaluation 

SUBJECT: OIG Draft Report: “Medicare Hospital Discharge Planning” Conditional 

Concurrence o&7- 02-74~0320 

The OIG proposes to issue a report on hospital discharge planning for Medicare beneficiaries 

discharged to nursing homes (NHs) or home health agencies (HHAs). The OIG was particularly 

interested in understanding the impact of hospital ownership on patterns of care and discharge 

processes for beneficiaries discharged to NHs and HHAs. I concur on the condition that the 

report be rewritten to reflect the enactment of the Balanced Budget Act of 1997, and more 

completely reflect ProPac’s discussion about possible explanations for observed differences in 

hospital and nursing home lengths of stays for persons referred to hospital-owned facilities. In 

addition, I have made other minor and technical comments on the report, including areas that the 

OIG may wqt to consider for fkther study. 

OIG Recommendations and the Balanced Budget Act. Several recommendations proposed by 

the OIG were recently exkted in the Balanced Budget Act (BBA) of 1997. Specifically: 

. The OIG reco~encls, due to concerns about cost shifting between the hospital and NH, 

that HCFA conduct targeted provider reviews by organizations such as the PROS and 

recommends that hospitals found to inappropriately discharge beneficiaries to their own 

NHs be subject to payment adjustments and fines. 

Section 4407 of the BBA limits payment to acute care hospitals for cases defined as 

“transfer cases,” i.e., beneficiaries with certain diagnoses who are discharged fkom acute 

care hospitals to PPS-exempt settings (including home health and skilled nursing 

facilities). The law limits payments to hospitals for these cases. 

. . The OIG recommends that hospitals inform beneficiaries of their freedom of choice of 

providers, maintain a list of NHs and HHAs in the area, and that hospital-ownership of 

NHs and HHAs be disclosed to HCFA and beneficiaries who may use these services. 
. 

-- 

-- 

Page 2 - June Gibbs Brown 

Section 4321 of the BBA requires that hospitals disclose to the Secretary the financial 

relationships between the hospital and post-hospital providers to which beneficiaries are referred 

and the percentage of patients referred to post-hospital settings in which the hospital has a 

financial interest. The BBA requires the Secretary to disclose this information to the public. In 

addition, the la<-&so prohibits hospitals from limiting the home health providers that may 

provide post-hospital services. 

I recommend that the report and the recommendations be rewritten to reflect the enactment of 

these provisions in the BBA. 

Imnact of Ownershin on Hosnital and Nursing Home Length of Stav. The OIG reported finding 

that beneficiaries referred to hospital-owned NHs had shorter lengths of hospital stays and longer 

NH stays compared with beneficiaries referred to NHs not owned by the hospital. As the OIG 

notes, this finding is consistent with earlier work by ProPac. However, the OIG states that this 

finding may indicate cost shifting from a prospective payment system to a cost-based 

reimbursement system. While I do not disagree that this could simply be an effort to maximize 

Medicare reimbursement, I also believe that this could reflect efforts by hospitals and hospitalbased facilities to more effectively coordinate care across settings for certain types of 

beneficiaries. I note that ProPac also suggested that the observed impact on hospital and nursing 

home lengths of stays could be due to coordination and case mix. I recommend the OIG report 

be more balanced when attributing causes to differences in length of stay and more completely 

discuss the ProPac findings. 

Other Issues 

The OIG report references should work on the Uniform Needs Assessment Instrument. This 

discussion should be strengthened to include information on the purpose and potential use of this . instrument. 

The report should indicate how the sampled nursing homes and home health agencies were 

divided into hospital-owned and not hospital-owned providers. 

The report should clarify the source of supporting evidence that beneficiaries who are discharged 

to hospital-owned home health agencies have more frequent hospital readmissions (i.e., p. 14 

first paragraph under the heading, “‘Hospitalownership results in home health use of longer 

- duration ‘3. In addition, I recommend that the second sentence of this paragraph clarify that 

while the OIG found some evidence supporting this fmding,.this evidence was not statistically 

significant. 

The OIG recommends wide circulation of a publication entitled, “Health care Choices A 

Consumer Guide for Planning Ahead.” I recommend the report provide the reader with more 

information about this guide. 
Page 3 - June Gibbs Brown 

Next Steps 

The OIG report includes a discussion about Federal requirements for discharge planning and the 

referral processes used by hospitals when discharging patients to nursing homes and home health 

agencies. The deport does not discuss the criteria used by hospitals in selecting the post-acute 

provider type to which beneficiaries were referred. Given that there is at least some overlap in 

the types of patients served by the various post-acute care providers, I believe it is important to 

understand what factors are considered in making post-hospital placement recommendations and 

decisions. If possible, I recommend the OIG include a discussion about the criteria used by 

hospitals in referring patients to home health agencies or nursing home providers. If the OIG did 

not gather this information as part of this study, the OIG may wish to identify this as an area in 

which further study is needed. 

On a related note, the OIG points out that there is no single model of hospital discharge planning 

(e.g., definitions of discharge planning, organizational structures, and staff qualifications vary 

across hospitals). An additional area that would benefit from further work is the development of 

a typology of discharge planning. I recommend that the OIG consider identifying this as area in 

need of development. 
-- 

DEPARTMENT OF HEALTH & HUMAN SERVICES 

AUG 2 9 1997 

Office of the Secretary 

Washington, D.C. 20201 

MEMORANDUM TO: June Gibbs Brown 

Inspector General 1 

FROM : 4. John J. Callaha 

Assistant Secret 

SUBJECT : Concur with Comment OIG Draft Report: “Medicare 

Hospital Discharge Planning” &/-62- ?r/- wL3 

The Balanced Budget Act of 1997 includes a provision that will change hospital 

discharge policy in certain situations. Under the new policy, certain hospital DRGs 

selected by the Secretary will be treated as “transfers” rather than “discharges.” The 

change addresses to some extent the problem of hospitals discharging patients quicker 

in order to maximize their Medicare reimbursement. 

As this policy change will likely affect discharge planning procedures in some hospitals, 

we recommend that OIG include a paragraph in the introduction section explaining the 

new law. 

EIG 

ii% 

DIGAS 

DIG-EC 

DIG-U 

DIG-01 

DIG-b%’ 

AIG4.C 

OGCnG 

itszlt