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Hospice Discharges Added to PACT Policy

Published on 

Tuesday, March 19, 2019

 | Billing 
 | Coding 

In keeping with March being National Social Work Month, this article focuses on CMS’s Transfer Policy. Medicare’s Transfer policy applies to transfers from an IPPS hospital to another hospital. It also applies to transfers from an IPPS hospital to specific post-acute care settings for specific MS-DRGs, which is known as the Post-Acute Care Transfer (PACT) Policy. This article focuses on the PACT policy, the addition of two new discharge dispositions to the policy and the potential financial implication for hospitals. 


CMS’s PACT Policy was implemented to prevent Medicare from paying for the same care twice. This policy reduces reimbursement to a hospital when:

  • A hospitalization codes to an MS-DRG designated as a Transfer MS-DRG,
  • The patient’s length of stay (LOS) is at least 1 day less than the geometric mean LOS (GMLOS) for the MS-DRG, and
  • The patient is discharged to one of the “qualified discharges” in the following table.
Post-Acute Care SettingDischarge Disposition Code
Inpatient Rehabilitation Facilities & Units62
Long Term Care Hospitals63
Psychiatric Hospitals & Units65
Children’s Hospital or Designated Cancer Center05
Skilled Nursing Facility (SNF)03
Home with Home Health within 3 days of discharge06
Discharged/Transferred to Hospice – Home (New for CMS FY 2019)50
Discharged/Transferred to Hospice, General Inpatient Care or Inpatient Respite (New for CMS FY 2019)51

Annually, CMS publishes a list of MS-DRGs subject to the PACT policy in Table 5 of the applicable Fiscal Year IPPS Final Rule. For FY 2019 there are 280 transfer DRGs.

The Bipartisan Budget Act of 2018 required the addition of discharges/transfers to Hospice Home (Discharge Disposition Code 50) and discharges/transfers to Hospice, General Inpatient Care or Inpatient Respite (Discharge Disposition Code 51) be added to the list of qualified discharge dispositions included in the Post-Acute Transfer (PACT) Policy. This change was finalized in the FY 2019 IPPS Final Rule with an effective date of October 1, 2018. CMS actuaries estimated this change in the PACT policy will “generate an annual savings of approximately $240 million in Medicare payments in FY 2019, and up to $540 million annually by FY 2028.”

Transfer MS-DRG Payment

A transferring hospital is generally paid based on a graduated per diem rate for each day of stay, not to exceed the full MS-DRG payment that would have been made if the patient had been discharged without being transferred. A per diem rate is calculated for each transfer DRG based on the following formula:

  • MS-DRG Payment ÷ GMLOS = Per Diem Rate

For Transfer MS-DRGs, a hospital is reimbursed twice the per diem amount for the first day of the hospitalization and an additional single per diem rate for subsequent days up to the full MS-DRG payment.

CMS noted in the 2019 IPPS Final Rule, “(t)he rational for per diem payment as part of our transfer policy is that the transferring hospital generally provided only a limited amount of treatment. Therefore, payment of the full prospective payment rate would be unwarranted.” (49 FR 244)… Our longstanding view is the policy addresses the appropriate level of payment once clinical decisions about the most appropriate care in the most appropriate setting have been made.” 


Special Payment MS-DRGs

To account for MS-DRGs subject to the PACT Policy that have exceptionally higher shares of costs very early in the hospital stay, CFR 412.4(f) also includes a special payment methodology. For these MS-DRGs hospitals receive 50 percent of the full MS-DRG payment, plus the single per diem payment, for the first day of the stay, as well as a per diem payment for subsequent days (up to the full MS-DRG payment).

PACT Policy Payment Examples

To help understand the policy payment, following are examples of a Transfer MS-DRG and a Special Pay Transfer MS-DRG.


PACT Policy

MS-DRG 470 (Major hip and knee joint replacement or reattachment procedures of the lower extremity with MCC without MCC) has been designated as Transfer MS-DRGs. Below is an example of payment utilizing FY 2018 IPPS Final Rule data. 

MS-DRGGMLOSDischarge DispositionPer Diem RateNational Average Payment Rate
4702.2Home Health$5,036.62$11,080.58
LOSDay 1Day 2PaymentPayment Reduction
1 Day$10,073.24 $10,073.24($1,007.43)
2 Days$10,073.24$1,007.34 (Remaining Amount to Reach National Average Reimbursement)$11,080.58-

Special Pay MS-DRGs

MS-DRG 266 (Endovascular cardiac valve replacement with MCC) has been designated as Special Pay MS-DRGs. Below is an example of payment utilizing FY 2018 IPPS Final Rule data. 

MS-DRGGMLOSDischarge DispositionPer Diem RateNational Payment Rate FY 2018
2665Home Health$8,526.54$42,632.71
LOSDay 1Day 2Day 3Day 4PaymentPayment Reduction
1 Day$29,842.90   $29,842.89($12,789.82)
2 Days$29,842.90$4,263.27  $34,106.16($8,526.55)
3 Days$29,842.90$4,263.27$4,263.27 $38,369.43($4263.28)
4 Days$29,842.90$4,263.27$4,263.27$4,263.27$42,632.70-

Case Study

With the addition of Hospice to the PACT Policy and the estimated savings by CMS actuaries, what could this mean for individual hospitals? MMP conducted this case study with the objective of answering this question.


How Case Study Conducted

The first step was to select a group of short term acute care hospitals in Alabama both urban and rural. The second step was to use paid claims data from our sister company RealTime Medicare Data (RTMD) RealHealth Analytics database. Specifically, MMP used a report available in the Inpatient Compliance-RAC-Quality options titled Your Post-Acute Care Transfer Risks.


Specific parameters selected to run the report included:

  • Hospital Name,
  • Dates of Service: FY 2018 (October 1, 2017 through September 30, 2018), and
  • Discharge Status Codes for Hospice Only.

Data Elements utilized from the report to identify potential financial impact included:

  • DRG and DRG Description,
  • Identified if Transfer DRG was also a Special Pay DRG,
  • GMLOS,
  • National Average Reimbursement for the DRGs,
  • Length of stay for each claim; and
  • Hospital specific unadjusted reimbursement.

Case Study Findings:

The following table depicts Transfer MS-DRG Volumes for FY 2018 where the discharge was to hospice, the hospital actual unadjusted reimbursement, the national average reimbursement, what the new national average payment would be when applying PACT policy payment methodology and the payment reduction the hospital could anticipate in FY 2019.

HospitalVolume of ClaimsHospital Unadjusted ReimbursementNational Average ReimbursementNew Payment Based on PACT Policy MethodologyNational Average Payment Reduction

Hospitals in this case study can anticipate a 25-40% reduction in reimbursement due to the addition of discharge to hospice to the PACT Policy. It is important to understand the potential shift in hospital revenue. However, I believe it is more important to ensure your patients receive the right care, at the right time and in the right setting.

Article Author: Beth Cobb, RN, BSN, ACM, CCDS
Beth Cobb, RN, BSN, ACM, CCDS, is the Manager of Clinical Analytics at Medical Management Plus, Inc. Beth has over twenty-five years of experience in healthcare including eleven years in Case Management at a large multi-facility health system. In her current position, Beth is a principle writer for MMP’s Wednesday@One weekly e-newsletter, an active member of our HIPAA Compliance Committee, MMP’s Education Department Program Director and co-developer of MMP’s proprietary Compliance Protection Assessment Tool.

This material was compiled to share information.  MMP, Inc. is not offering legal advice. Every reasonable effort has been taken to ensure the information is accurate and useful.