Department of Health and Human Services

Office of Inspector General -- AUDIT

"Expansion of the Diagnosis Related Group Payment Window," (A-01-02-00503)

August 20, 2003

Complete Text of Report is available in PDF format (570 KB). Copies can also be obtained by contacting the Office of Public Affairs at 202-619-1343.


Included in the Medicare diagnosis related group (DRG) payments hospitals receive are nonphysician outpatient services, such as laboratory, radiology, and other diagnostic tests, provided (1) up to 3 days prior to the date of admission and (2) by the hospital or a related provider.  The intent of the 3-day payment window provision is to prevent hospitals from claiming separate payments for preadmission services that should already be included in the inpatient DRG payment.  This final report points out, however, that providers often render such services 4 or more days prior to the inpatient admission.  Based on a statistical sample, we estimate, for 10 specific DRGs, that during calendar year 2000 Medicare reimbursed providers approximately $37 million for preadmission services rendered 4 to 14 days prior to the date of a related inpatient admission.  Additionally, the beneficiaries were assessed $35 million for coinsurance and deductibles for these services.  We recommended that the Centers for Medicare and Medicaid Services (CMS) consider proposing legislation to expand the DRG payment window.  The CMS concurred with our recommendation, but raised a concern as to whether such an action  could influence medical practice and increase the health risks for beneficiaries.  We agree that CMS should take such factors into consideration before proposing a legislative change expanding the payment window.