On May 28, 2014, OIG released a report asserting that over $19 million in inappropriate payments were made to hospitals for inpatient claims subject to the post-acute care transfer policy.  These overpayments were the result of hospitals improperly coding patients as being discharged to home rather than to a post-acute facility.  OIG said that during the period of January 2009 through September 2012, Medicare incorrectly paid 6,635 noncompliant claims.

In the post-acute care context, discharge from an IPPS hospital to a qualifying post-acute care setting, such as a skilled nursing facility, is considered a transfer pursuant to 42 C.F.R. § 412.4(c).  Under the IPPS, the post-acute case transfer policy makes a distinction between discharges and transfers of Medicare beneficiaries.  Complete MS-DRG payments are made to hospitals when beneficiaries are discharged to their homes or certain health care settings, such as hospice.  However, for certain specified MS-DRGs, hospitals transferring inpatients to certain post-acute settings are paid a per diem rate for every day of the stay (not exceeding the full MS-DRG discharge payment).  The status code determines whether Medicare pays for a discharge or a transfer (and thus whether a per diem rate is paid).  CMS uses Common Working File (CWF) edits to detect incorrectly coded transfers.

In its report, OIG stated that “[h]ospitals improperly coded these claims as discharges to home (4,613 claims) or to certain types of health care institutions (2,022 claims) rather than as transfers to post-acute care by using the incorrect patient discharge status codes,” resulting in overpayments to these hospitals.  Additionally, OIG stated that “the CWF edits related to transfers to home health care, skilled nursing facilities, and non-IPPS hospitals were not working properly.  Specifically, some Medicare contractors did not always receive the automatic adjustments that identify overpayments on inpatient claims.”

As a result, OIG’s report recommended that CMS:

• direct the recovery of the $19 million by the contractors;
• direct the contractors to recover any subsequent overpayments in the post-OIG audit period;
• ensure the CWF edits are fixed and working correctly; and
• emphasize to hospitals the importance of reporting the correct patient discharge codes on post-acute transfer claims.

While CMS generally concurred with OIG’s recommendations, it did note that some of the claims reviewed by OIG were approaching the end of the 4-year claims reopening period.  CMS also noted that it does not currently mandate areas of review for the contractors.  OIG’s report is available here.

Reporter, Katy Lucas, Atlanta, +1 404 572 2822, klucas@kslaw.com.