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Department of Health and Human Services

Office of Inspector General -- AUDIT

"Review of the Hospital Compliance With Medicare's Postacute Care Transfer Policy During Fiscal Years 2001 and 2002," (A-04-04-03000)

April 11, 2005

Complete Text of Report is available in PDF format (471 kb). Copies can also be obtained by contacting the Office of Public Affairs at 202-619-1343.


The objective of this nationwide review was to determine whether acute care hospitals complied with Medicare’s postacute care transfer policy during fiscal years (FYs) 2001 and 2002.  We found that hospitals did not always comply with the transfer policy.  Of 400 claims sampled, 381 were improperly coded as discharges to home rather than transfers to postacute care.  Potential overpayments to hospitals for these claims totaled $1,034,588.  The potential overpayments occurred because some hospitals did not have the necessary controls to ensure the accuracy of discharge status codes, and CMS lacked adequate payment system edits to prevent these overpayments.  As a result, we estimate that Medicare overpaid hospitals approximately $72.4 million in FYs 2001 and 2002.  We recommended that CMS: (1) instruct the fiscal intermediaries to recover, as appropriate, the $1,034,588 in potential overpayments identified in our sample; (2) instruct the fiscal intermediaries to review the remaining claims in our sampling universe and identify and recover additional overpayments; and (3) monitor hospitals that have a high number of claims adjusted as a result of recently implemented system edits and perform followup reviews, as appropriate, at specific hospitals.  CMS agreed to implement the first and third recommendations.  In regard to the second recommendation, CMS said that it was working on a strategy to identify and collect the remaining overpayments.