OIG: Pay Hospitals Less for Early Discharge to Hospice

The Centers for Medicare & Medicaid Services should consider implementing a new payment policy for early discharges from hospitals to hospice care that has the potential to save the programs hundreds of millions of dollars, says a newly released report from the Department of Health & Human Services’ Office of the Inspector General.

Medicare Part A payments to hospitals rose 80% to $2.7 billion from 2007 to 2010 corresponding with a 66% rise in the number of beneficiaries discharged from hospitals to hospice care during that same time period.  

Current Medicare policies adjust payments for discharges from hospitals to other hospitals or post-acute care facilities that are made sooner than a Medicare-established length of stay (called an early discharge), but does not have a transfer payment policy when beneficiaries are discharged early from a hospital into hospice care. 


Based on sample results collected for the OIG’s report, Medicare could have saved about $602.5 million by applying a hospital transfer payment policy for early discharges to hospice care.

Approximately 30% of all hospital discharges to hospice care were early discharges that would have received per diem payments rather than full payments, had such a hospital transfer payment policy been in place, the report found, but the OIG believes the payment policy would not have caused significant financial disadvantage for hospitals.

After examining a sample of 100 claims collected between 2009 and 2010, the OIG found payments based on a daily rate rather than full payment for sampled claims would have netted almost $380,000 in savings.


Those “savings” come in the form of less reimbursements to hospitals, causing concern for CMS officials that hospitals would simply prolong acute care days for beneficiaries rather than discharge them early into hospice in order to get the full amount of the payments for which they could qualify. 

However, an “overwhelming majority” of hospital officials stated in the OIG’s questionnaire that having such a policy would not influence medical practice in a way that increases the health risks for beneficiaries or creates an incentive for hospitals to extend hospital stays. 

Written by Alyssa Gerace