Audits, Overpayments and Transfer DRG: Here’s How to Worry Less and Recoup More
A recent Office of Inspector General (OIG) Audit for non-compliance with Post-Acute Care Transfer Policy (PACT) is creating a stir among hospitals, who now are worrying about their risk for takebacks and whether using Transfer DRG services could increase that risk.
CMS pays for Medicare inpatient hospital care based on Diagnosis Related Groups (DRGs). Transfer DRGs are paid under the PACT rule. CMS adopted the PACT rule in the 1990s after realizing that some brief hospital stays were being transferred to another healthcare provider to complete treatment and recovery but were still being reimbursed at the full DRG rate. Medicare was, in effect, paying twice for certain patients’ treatment. Medicare Transfer DRGs account for 41.6% of all Medicare discharges, according to CMS.
OIG audits have been strictly focused on overpayments to hospitals. Hospitals are on their own to detect any underpayments.
The OIG’s November 2019 report found that Medicare improperly paid acute-care hospitals $54.4 million for 18,647 inpatient claims subject to PACT. The hospitals improperly billed the claims by using incorrect patient discharge status codes, according to the report. Most of the claims were coded as discharges to home rather than as transfers to post-acute care.
When CMS performs an audit, it’s important to note that it is primarily looking for cases where hospitals have discharged a patient to home as a non-transfer. However, if the patient receives post-acute care, such as home health services, he or she should have a transfer discharge status.
A discharge to home health services is not a discharge to home. These cases result in overpayments to the hospital where CMS paid a full amount when they should have paid a partial or per diem payment because the patient was transferred to post-acute care. In an audit, CMS takes back the amount that was overpaid, leaving hospitals with the reduced per diem payment.
How do Transfer DRG services fit in, and how can they help?
Transfer DRG payment analysis services look for the exact opposite set of claims than those the CMS audit is focused on. Transfer DRG services look at cases in which the patient was discharged to post-acute care, such as skilled nursing or home health, but instead went home and/or never received the care he or she was discharged for. When this situation happens with a patient, the hospital is eligible to recoup the full payment for the DRG, as opposed to the reduced per diem payments intended for follow-up care. In its November study, the OIG specifically excluded claims where the discharge status codes indicated post-acute care was received.
According to the OIG report: “We excluded inpatient claims (1) with discharge status codes indicating discharges to home with home health services and discharges to SNFs and non-IPPS facilities because these claims are paid at the per diem rates; (2) in which beneficiaries were discharged to home to resume home health services; (3) billed by acute-care hospitals in Maryland and by cancer hospitals because these hospitals are not paid under the IPPS; (4) in which beneficiaries began hospice care after being discharged from the acute-care hospitals; and (5) in which beneficiaries left the hospital against medical advice but began receiving post-acute-care services after leaving.”
The OIG audit only focused on overpayments, and hospitals will not receive any adjustments for underpayments based on the audit.
Can Transfer DRG services put you at risk for takebacks?
The risk of takebacks is low, but not nonexistent, with Transfer DRG services. Your risk often comes down to your internal practices and/or the accuracy of your contracted vendor. However, if you don’t use these services, you stand to lose considerable dollars. Whatever risk may be involved with performing a TDRG service far outweighs the risk of doing nothing.
Because Transfer DRG services change discharge status in many cases to home, those claims that were previously adjusted by Transfer DRG services are included in the audit. During the adjustment process, CMS takes its own second look at these claims and evaluates whether there is just cause for payment. Just because a claim is reopened and an adjustment is attempted, that doesn’t mean CMS will automatically pay. If CMS agrees with the new assessment and pays the claim, then you can expect that the CMS data aligns correctly at that point in time.
How can you minimize your audit risk?
- Make sure your service is only focused on claims six months or older. This ensures post-acute claims have a chance to appear in the Common Working File (CWF) and patient information is accurate. If you are adjusting inpatient claims too soon after discharge, then there is a risk that the post-acute information will be missed just because the claim has not yet been billed to Medicare.
- Ensure that your current vendors have Medicare expertise, such as being an approved Medicare Network Service Vendor with access to the CWF. CMS uses the CWF to perform audits and defaults to CWF data over internal medical records. Make sure your vendor can access the same data that CMS is using.
- Check the historical adjustment success rate across all of a vendor’s clients. Make sure they have a high success rate of claims submitted for adjustments that CMS agreed with and paid. A good question to ask is, “What percent of claims that you adjust are paid by CMS?” If you see low rates here, it indicates disagreement in the data used by your vendor and CMS – and this could expose you to additional audits.
Where can you find additional revenue to cover takebacks?
- Consider adding another Transfer DRG vendor to run behind your current services. This often can help you find additional underpayments that were missed the first time around. A second vendor who performs at the highest level will provide peace of mind that you are maximizing your recoveries.
- Add additional revenue integrity services, such as Insurance Discovery, to find funds in different areas.
Are you at risk for additional CMS audits of this data in the future?
While future audits are always possible, CMS has ordered MACs to put edits in place that will prevent claims from being submitted with incorrect discharges to home where known post-acute care is being delivered.
The best way to protect your hospital’s bottom line is to work with a thorough, experienced Transfer DRG partner like eSolutions who can help you detect and analyze any underpayments. Our revenue integrity solutions – including Transfer DRG, Insurance Discovery and Pharmacy Insurance Discovery – are designed to identify and recover missed reimbursement opportunities on behalf of healthcare providers. Over the past 10 years, this suite of best-in-class products has identified and recovered more than $1 billion for its provider customers.