OIG Reports on Expansion of DRG Window

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The OIG recently posted a report in which it recommended expanding the Diagnosis Related Group (DRG) payment window.  In the February 2014 report (OEI-05-12-00480) (the “Report”), available here, the OIG analyzed both inpatient and outpatient claims and Medicare cost reports from 2011 and concluded that the Medicare program and its beneficiaries could save hundreds of millions of dollars per year if the current 3-day DRG payment window were expanded to include services provided in affiliated hospitals and/or to encompass a preadmission period of longer than 3 days. 

Under CMS’s current DRG payment window policy, Medicare generally does not pay separately for outpatient services that are provided within the 3 days prior to an inpatient acute care hospital admission, related to the inpatient admission, and provided in a setting wholly owned or operated by the inpatient hospital.  Medicare payment for such services is considered to be included in the DRG payment for the acute care admission. 

In the Report, OIG analyzed both inpatient and outpatient claims and Medicare cost reports from 2011 to determine how much money Medicare and Medicare beneficiaries would save if the 3-day window were expanded beyond 3 days and the setting were expanded also to include hospitals affiliated with the admitting hospital.  The OIG found that Medicare and its beneficiaries paid approximately $263 million for services at outpatient settings owned by admitting hospitals during the 11 days prior to the current DRG window, although OIG also noted that the highest cost savings would likely come during the 4 days prior to the current DRG window.  The OIG also found that if the current 3-day window were expanded to include services provided in hospitals affiliated with the admitting hospital, Medicare and its beneficiaries could save approximately $45 million for roughly 777,000 outpatient services related to the inpatient admission.  The Report found that most of these 777,000 services were provided on the day before or the day of the inpatient admission.  Finally, OIG concluded that the Medicare program and its beneficiaries would save even more if the DRG payment window were expanded beyond 3 days and to include affiliated hospitals of admitting hospitals.

Accordingly, OIG recommended that CMS seek legislative authority to expand the DRG payment window by both capturing additional days before an inpatient admission and “to include additional hospital ownership arrangements, such as affiliated hospital groups.”  CMS did not concur with either recommendation.

Reporter, Kate Stern, Atlanta, +1 404 572 4661, kstern@kslaw.com.

Topics:  Healthcare, Healthcare Reform, Medicare, OIG

Published In: Health Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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