Hospital Discharges Rise Where Medicare Rules Trigger Higher Payments to Facilities

A Kindred Healthcare Inc. hospital in Houston discharged 79-year-old Ronald Beard to a nursing home after 23 days of treatment for complications of knee surgery.

The timing of his release didn’t appear to correspond with any improvement in his condition, according to family members. But it did boost how much money the hospital got.

Barbara Beard, shown with medical records connected 
to her late husband’s care, said his condition hadn’t improved 
by the time he was discharged from a long-term-care 
hospital. Photo: Eric Kayne for WSJ

Kindred collected $35,887.79 from the federal Medicare agency for his stay, according to a billing document, the maximum amount it could earn for treating most patients with Mr. Beard’s condition.

If he had left just one day earlier, Kindred would have received only about $20,000 under Medicare rules. If he had stayed longer than the 23 days, the hospital likely wouldn’t have received any additional Medicare money.

Kindred declined to answer questions about Mr. Beard’s case, but said it seeks to provide quality care and comply with all laws and regulations.

Under Medicare rules, long-term acute-care hospitals like Kindred’s typically receive smaller payments for what is considered a short stay, until a patient hits a threshold. After that threshold, payment jumps to a lump sum meant to cover the full course of long-term treatment.

That leaves a narrow window of maximum profitability in caring for patients at the nation’s about 435 long-term hospitals, which specialize in treating people with serious conditions who require prolonged care. General hospitals are paid under different rules.

A Wall Street Journal analysis found that many long-term-hospital companies discharge a disproportionate share of patients during that window when hospitals stand to make the most, a sign that financial incentives in the Medicare system may shape patient care.

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