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Transcript for audio podcast: Medicare Inappropriately Paid Hospitals' Inpatient Claims Subject to the Postacute Care Transfer Policy

From the Office of Inspector General of Department of Health and Human Services

[Alice Norwood] Hello, I'm Alice Norwood, audit manager, speaking with Kim Kennedy, a senior auditor from our San Francisco office, about a report titled Medicare Inappropriately Paid Hospitals' Inpatient Claims Subject to the Postacute Care Transfer Policy. Kim, can you start by telling us what postacute care is?

[Kim Kennedy] Sure Alice. Following a hospitalization for injury or illness, many patients require continued medical care, either at home or in a specialized facility. Post-acute care refers to a range of medical care services that support the individual's continued recovery from illness or management of a chronic illness or disability.

[Alice Norwood] What is the Medicare's postacute care transfer policy?

[Kim Kennedy] Under this policy, Medicare pays hospitals a per diem payment, when a hospital transfers a beneficiary from selected diagnosis-related groups to a skilled nursing facility or home health care.

[Alice Norwood] So what's the difference for a hospital if it discharges a patient, versus transferring a patient?

[Kim Kennedy] Well, Medicare pays hospitals a flat rate per case for an inpatient hospital stay. The payment is called a DRG payment, which stands for Diagnosis-Related Group. The amount of that payment depends on the patient's diagnosis. When a hospital discharges a beneficiary to a certain setting, like a hospice, or to the patient's home, Medicare makes the appropriate DRG payment. For transfers to other postacute care settings, like home health care or skilled nursing facilities, the Centers for Medicare and Medicaid Services, or CMS, pays the hospital a per diem payment.

[Alice Norwood] So a DRG payment is for a discharge. A per diem payment is for a transfer. Is there a difference in the DRG payment compared to the per diem payment?

[Kim Kennedy] Generally, the DRG payment is greater than the per diem payment.

[Alice Norwood] So why did CMS, create the transfer policy?

[Kim Kennedy] The transfer policy came out of the Balanced Budget Act of 1997. CMS created the rules after learning that acute-care hospitals transferred some Diagnosis-Related group patients to postacute care, shortly after they were admitted. CMS overpaid for these beneficiaries since they paid the hospital at the higher DRG payment rate for discharges, instead of the lower per diem rate for transfers.

[Alice Norwood] What prompted the OIG to do this review?

[Kim Kennedy] In previous OIG reviews, we identified Medicare overpayments to hospitals that failed to comply with the transfer policy. These hospitals transferred beneficiaries to certain postacute care settings but claimed the higher reimbursements you'd get for a discharge. We recommended that CMS educate hospitals on the transfer policy.

[Alice Norwood] What else did you recommend?

[Kim Kennedy] We also recommended that CMS improve how it prevents and detects postacute care transfers that are miscoded as discharges. In 2004, CMS implemented something called the Common Working File, or CWF, system edits to identify improperly coded hospital claims. It also instructed Medicare contractors to automatically cancel or deny claims with incorrect discharge codes.

[Alice Norwood] Did the CWF system edits fix the problem?

[Kim Kennedy] No. In recent OIG reviews, we found that Medicare was still overpaying hospitals for claims miscoded as discharges for patients who were not actually discharged, but rather, were transferred to postacute care. We decided to conduct a nationwide review to determine the extent of the problem and why these errors were still happening.

[Alice Norwood] So what are your current findings?

[Kim Kennedy] We found that Medicare made overpayments to hospitals because the CWF system edits tied to postacute care transfers weren't working properly.

[Alice Norwood] What does that mean Kim?

[Kim Kennedy] Some Medicare contractors did not always receive the automatic claim adjustments that the CWF system edits were supposed to make, and the CWF edits did not correctly calculate the number of days between the dates of service on the inpatient claim and the postacute care setting claim.

[Alice Norwood] So what was the cost to Medicare?

[Kim Kennedy] Medicare inappropriately paid over 6,000 Medicare claims that should have been coded as transfers. In total, Medicare made over $19 million dollars in overpayments.

[Alice Norwood] Wow, $19 million dollars. How did CMS respond to the findings and recommendations?

[Kim Kennedy] CMS generally agreed with our findings and recommendations. As a result of our review, CMS will start collecting the overpayments on claims. Additionally, CMS updated the CWF system edits, which identifies improperly coded hospital claims. This update resolves some of the vulnerabilities identified in our report. CMS also said they will provide a Medicare Learning Network Matters article to educate hospitals and Medicare contractors on the correct codes to use when patients are discharged from the hospital.

[Alice Norwood] Thank you, Kim, for sharing this important work on Medicare's postacute care transfer policy.

[Kim Kennedy] Thank you, Alice.


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