In-hospital subacute reimbursements under fire

Gaming the system, or giving superior care?

Quality management directors and staff should be aware of a controversy brewing over in-hospital subacute care units. You may be called upon to stomp on a few smoldering embers before they turn into conflagrations. There will be more scrutiny to deal with in this area, and the bottom line may affect quality of care.

In short, some hospitals are finding ways to circumvent DRGs by routinely shepherding patients to in-hospital subacute facilities. It works this way: An elderly patient receives care for a requisite number of days in a regular room; the patient then is transferred to an in-hospital skilled-nursing facility (SNF); and the Medicare billing clock is restarted. Some term this "double-dipping." Others prefer to characterize the practice as making more efficient use of Medicare dollars. Still others see in-hospital subacute care units as a necessary part of patient care.

Often patients are judged ready to go home by length-of-stay limits, but they have such intense home-care needs that home health companies don’t feel comfortable taking them on. To meet that need, nursing homes set up subacute units offering such skilled services as specialized physical therapy and enteral feeding. In addition, hospitals in some states, encouraged by newly liberalized licensing rules, entered the postacute market.

Medicare covers subacute skilled nursing for eligible patients if these conditions are met:

• The patient requires skilled nursing or rehabilitation services pursuant to a physician’s orders.

• The services are required on a daily basis.

• The services can be provided only on an inpatient basis.

• The services require the skilled care of qualified technical or professional health personnel such as registered nurses, licensed practical nurses, physical therapists, occupational therapists, and speech pathologists.

• The services must be provided directly or under the general supervision of skilled nursing or rehabilitation personnel to assure the safety of the patient and achieve medically desired results.

HCFA takes a stance

Last summer, Bruce C. Vladeck, administrator of the Health Care Financing Administration (HCFA), testified before the House Ways and Means Committee Subcommittee on Health and asked for changes in Medicare reimbursements for in-hospital subacute care. Vladeck pointed out that now, a hospital can inappropriately transfer a recovering Medicare patient to an in-hospital skilled-nursing facility and collect the full DRG payment, as well as an additional per diem reimbursement for the SNF. Effectively, says Vladeck, Medicare ends up paying for care twice — once for the initial hospitalization and once for the subacute care. He would like to set up comprehensive case rates for subacute care, perhaps combining acute and postacute care costs into one fee.

Currently, hospitals can piggyback subacute overhead charges onto their subacute rate base for the first three years of a unit’s existence. Proposals for new subacute payment scales abound. The Prospective Payment Advisory Commission (ProPAC), a panel that advises Congress on Medicare, favors revision, as does the Clinton administration. In addition to working for change there, Vladeck wants to set up comprehensive case rates for subacute care — another form of DRG. Providing for in-hospital subacute care is an ongoing process. The government may have to set new standards for the subacute care offered by hospitals.

Proponents of in-hospital subacute care include physicians and patients alike. They say such units offer better care, and that elderly patients especially relish the extra care proffered by the inhospital SNFs. But not all parties involved feel comfortable about the tactic. In-hospital SNFs have grown by 59% in five years and now account for 28% of skilled nursing stays. Not surprisingly, Medicare is in its sixth consecutive year of double-digit escalation. The agency’s spending on skilled nursing has more than tripled since 1991. And while SNF use has increased dramatically, hospital length of stay has declined an average of 5% per year during the same period.

Quality of care is affected

Hospital Peer Review asked Cynthia Pringle, RN, director of quality improvement and utilization management at Columbia-Douglas Medical Center in Roseburg, OR, what effect a regulation change would have on her hospital.

"We have a swing-bed program rather than a separate subacute care unit," Pringle says. "The patient stays in the same bed, but there is a paperwork change. Nevertheless, we would be affected. If HCFA requirements were changed regarding inhospital subacute care, our lengths of stay would increase and our reimbursement rate would decrease. We would have to make adjustments in how we handle those patients."

Being sent to a nursing home decreases the quality of care. "It would be sad for HCFA to start messing with programs that decrease a patient’s length of stay in an acute care setting," Pringle says.

Management and consulting firms are eager to help hospitals stretch their Medicare billing by setting up subacute facilities. The Whitman Group of Huntingdon Valley, PA, has advised many hospitals nationwide on how to set up subacute units. Following a feasibility study including an estimate of bed demand, the consultants analyze the pertinent federal and state regulations and associated problems. They then develop financial estimates and provide architectural and engineering plans. They dispute the assertion that hospitals are gaming the system when they discharge early into an SNF.

The most acute, intensive, and costly services are performed on the front end of the hospital stay. The expensive diagnostic testing and corrective procedures typically occur during the first 3 to 4 days. "I’m not saying one or two bad apples may not be tainting the rest of the batch," says Janice Crocker, RRA, a health care consultant with Crowe Chizek and Company in South Bend, IN, "but for the most part, subacute care facilities are an attempt by hospitals to save money in the long run. Elderly patients whose recuperative powers are minimal typically don’t require the facilities required for acute care toward the end of their stay. They can be moved to a subacute facility.

"Do I think it’s fair that subacute care bills $500 to $600 per day?" continues Crocker. "Probably not. But do I think it’s fair that those patients are getting much better care and attention in a subacute portion of a hospital when they need that care? Absolutely. Even though the patients are in a different area of the building, a hospital mentality is still there: ‘Watch for infection. Make sure the IV is running correctly. Be sure the patient is rolled a certain way. Be sure she’s receiving her Coumadin, if appropriate.’"

No quick fix in sight

A director of health information management in a Midwestern hospital who asked not to be identified puts it this way: "Subacute beds serve a valuable purpose in a hospital: They fill the gap between the hospital and the nursing home. For some people, that’s all they need before they go home. Why transfer patients to a nursing home for only two days? The answer to the in-hospital subacute question is probably somewhere in between what we’ve been hearing. There probably should be a recommendation that you have to exceed the DRG discharge limit before you can go into a subacute bed. I’ve heard rumors that HCFA may propose a limitation that says the hospital will only be paid a limited amount if a patient is transferred directly from the acute care portion to the subacute."

Indeed, the Clinton administration and ProPAC are entertaining proposals that would set new subacute payment scales. In his testimony before Congress, Vladeck said, "Expenditures for post-acute care services are among the fastest-growing components of Part A and total Medicare spending. HCFA has been working to revise the existing salary equivalency guidelines for physical and respiratory therapy, and to develop such guidelines for occupational therapy and speech language pathology. The GAO [General Accounting Office] has concluded that these guidelines are necessary to prevent abusive billing practices." HCFA also has enlisted the help of physicians in curtailing the inappropriate practice of targeting a facility’s entire patient population for subacute care, without regard to medical need for the services.