Impact of the Medicare Short Stay Transfer Policy on patients undergoing major orthopedic surgery.

Since the implementation in 1983 of the acute care prospective payment system, hospitals have had a strong financial pressure to reduce costs. These cost reductions have been achieved primarily through reduced length of stay (LOS) (Meyers et al. 1996; Metz and Freiberg 1998; Healy et al. 2002) and a greater reliance on postacute care (PAC) (Kenney and Holahan 1991; Manton et al. 1993; Prospective Payment Assessment Commission 1996; Forrest, Roque, and Dawodu 1999; Huusko et al. 1999). The initial substitution of PAC for longer LOS was first seen as an efficient transfer of care from the more expensive inpatient care setting to less expensive PAC settings. However, as the growth in PAC outpaced reductions in LOS, Congress became concerned that PAC was no longer cost saving (MEDPAC: Medicare Payment Advisory Commission 2000). Therefore, to reduce the financial incentive to discharge patients “early” and thus reduce the utilization of potentially unnecessary PAC, in 1998 the Centers for Medicare and Medicaid Services (CMS) targeted 10 diagnosis-related groupings (DRGs) with the highest rate of PAC utilization for modifications to the DRG reimbursement system (Prospective Payment Assessment Commission 1997). At that time, these 10 DRGs represented 8.8 percent of all hospital discharges (Medicare Payment Advisory Commission 1999). By defining the relative odds of PAC use among short versus long hospitalizations, Cromwell, Donoghue, and Gilman (2002) demonstrated that these 10 DRGs were well chosen. On October 1, 1998, Congress implemented the Short Stay Transfer Policy (SSTP) as part of the Balanced Budget Act of 1997 (One-hundred-fifth Congress of the United States of America 1997). Under this policy, hospital payments for these 10 DRGs were discounted for patients discharged “early” to a PAC setting. “Early” discharge was defined as any patient transferred to a PAC facility before the national geometric mean LOS for the related DRG. Qualifying PAC stays include transfer to skilled nursing facility or rehabilitation hospital or discharge to home with home health care beginning within 3 days of discharge. Despite well-documented regional variation in LOS (Chassin et al. 1986; Chassin et al. 1987) CMS purposefully selected a national geometric LOS rather than regional means as “national standardized [DRG payment] amounts … reflect costs across all regions” and “one of the reasons for this variation [in LOS] is the greater reliance on postacute care earlier in the stay in those areas with lower average lengths of stay” (Health Care Financing Administration 1998). In October 2003, CMS expanded this policy to include a total of 29 DRGs, bringing the proportion of all discharges subject to the transfer policy to 34 percent (Centers for Medicare and Medicaid Statistics 2004). By discouraging “early” discharge to PAC with discounted payments, CMS had hoped to realize further cost savings through an increase in “late” discharge without PAC (substituting inpatient for postacute care; Health Care Financing Administration 1998; see Figure 1 for conceptual discharge decision model). Figure 1 Conceptual Model for Nested Logistic Statistical Design A preferential increase in patients discharged “early” without PAC would suggest that hospitals were discouraging access to PAC. As authors have suggested beneficial effects of PAC and the rehabilitative care (Kane et al. 1996; Intrator and Berg 1998; Munin et al. 1998), reduction in PAC could have a potential harmful impact on patient care. Alternatively, hospitals could simply keep patients in hospital longer without change in PAC utilization. Slowing the trend in shorter LOS could potentially improve patient care as some researchers have raised the concern that patients may be discharged too early after joint replacement (Mauerhan et al. 1998). MEDPAC reported to Congress that the crude mean LOS for the 10 SSTP DRGs continued to fall between 1997 and 1999, but at a slower rate than non-SSTP DRGS (MEDPAC: Medicare Payment Advisory Commission 2000). However, during this same timeframe, Medicare implemented policy changes that affected skilled nursing and home health care markets potentially restricting access to PAC (One-hundred-fifth Congress of the United States of America 1997), which in turn could affect hospital LOS and use of early PAC. To examine the impact of the SSTP and discern its effects from other concurrent policies, we selected a 100 percent sample of select Medicare fee-for-service claims between January 1, 1996 and December 31, 2000 for an interrupted time-series analysis so that month-to-month change in practice patterns could be correlated with the date of SSTP implementation. We hypothesized that implementation of the SSTP would attenuate or perhaps even reverse the historical trend for shorter hospital LOS, resulting in a smaller proportion of patients discharged “early” to PAC. We also tested for differential effects of the policy by patient, hospital, and regional characteristics.