OIG targets excessive transfer DRG payments

Hospitals routinely are violating federal patient transfer rules when they discharge patients to post-acute settings, the Health and Human Services (HHS) Office of Inspector General (OIG) recently concluded. The agency estimates that Medicare paid approximately $52.3 million nationwide in excessive DRG payments to PPS hospitals as a result of erroneously coded discharges between Oct. 1, 1998, and Sept. 10, 1999.

In the final rule, the Centers for Medicare and 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," says Deborah Hale, president of Administrative Consultant Service in Shawnee, OK. That is because hospitals often lack the resources to track patients once they are discharged, she explains.

Hale says that if hospitals 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.

According to the OIG, CMS has no controls in place to prevent excessive payments to prospective payment system (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.

According to the OIG, 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 determined that 14,741 of those claims were erroneously coded, and the agency estimates that Medicare paid $52,311,082 in excessive DRG payments to PPS hospitals as a result of these erroneous codings.

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 are a hospital or hospital unit that is not reimbursed under PPS, a skilled nursing facility, or home if there’s a written plan of care for the provision of home health services and the services begin within three days of the discharge.

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. According to the OIG, this will allow potentially erroneous claims to be reviewed and appropriate adjustments to be made to the discharging hospital’s inpatient claims. CMS officials concurred with these findings and recommendations.