Tracking excessive DRG payments falls on CMs

OIG estimates $52.3 million in overpayments

Hospital case managers responsible for discharging patients to post-acute settings should take note that many of these discharges violate the new transfer rules that went into effect two years ago. In fact, the Health and Human Services Office of Inspector General (OIG) estimates that Medicare paid approximately $52.3 million nationwide in excessive DRG payments to prospective payment system (PPS) hospitals as a result of erroneously coded discharges.

"In most hospitals, case managers are responsible for documenting the discharge planning arrangements," says Deborah Hale, president of Administrative Consulting Services in Shawnee, OK. "That is what the coder uses to assign the disposition code."

In the final rule, the Centers for Medicare & Medicaid Services (CMS) indicated that hospitals maintain their responsibility to code the discharge based on the discharge plan for the patient. If the hospital subsequently learns that post-acute care was provided, the hospital should submit an adjustment bill. However, the agency acknowledged that hospitals will not always know the disposition of patients.

"It is a crazy system, and it puts the hospital in a difficult position," Hale says. That is because hospitals often lack the resources to track patients once they are discharged. If case managers do their job well in planning for discharge by looking at all the options and knowing what all the possibilities are, that is about as much as they can do, she says.

According to the OIG, CMS has no controls in place to prevent excessive payments to PPS hospitals for erroneously coded patient discharges that are followed by post-acute care, such as care in a skilled nursing facility or a home health agency. There were more than 1 million discharges between Oct. 1, 1998, and Sept. 10, 1999, within the 10 specified DRGs. Of these discharges, 14,890 claims were followed by post-acute care treatment that fell within the window of time necessary to categorize the discharge as a qualified discharge/post-acute care transfer and met all of the criteria necessary to potentially result in an overpayment, the OIG said.

Medicare payment rules provide that, in a transfer situation, payment is made to the final discharging hospital and each transferring hospital is paid a per-diem rate for each day of the stay, not to exceed the full DRG payment that would have been made if the patient had been discharged without being transferred.

As of Oct. 1, 1998, a discharge from a PPS hospital with one of the 10 specified DRGs to a post-acute care setting is treated as a transfer case. The applicable post-acute care settings include: a hospital or hospital unit that is not reimbursed under PPS, a skilled nursing facility, or home if there is a written plan of care for the provision of home health services and the services begin within three days of the discharge.

Reimbursement for qualified discharges is made under one of two payment methods, each of which is designed to match more closely the reimbursement to the hospital’s cost of providing care to the patient. In the event that the cost of providing care to a patient meets the criteria to be deemed an outlier, additional payment is allowed for the qualified discharges.

For DRGs 014, 113, 236, 263, 264, 429, and 483, hospitals are reimbursed at a graduated per-diem rate for each day of the beneficiary’s stay. Under this calculation, the full DRG payment amount is divided by the mean length of stay for the specific DRG to which the case is assigned. Twice the per-diem amount is paid for the first day, and the per-diem rate is paid for each of the remaining days, not to exceed the full DRG payment.

For DRGs 209, 210, and 211, the reimbursement is calculated differently. On day one of a postacute transfer, hospitals receive one-half the DRG payment amount plus the per-diem payment for the DRG. For each subsequent day prior to transfer, hospitals receive one-half the per diem up to the full DRG payment.

In addition to recovery of overpayments, the OIG recommends that CMS establish edits in its Common Working File to compare beneficiary inpatient claims potentially subject to the post-acute care policy with subsequent claims. The agency says this will allow potentially erroneous claims to be reviewed and appropriate adjustments to be made to the discharging hospital’s inpatient claim. CMS officials concurred with these findings and recommendations.