Implementation of Medicare's Postacute Care Transfer Policy at First Coast Service Options

EXECUTIVE SUMMARY:

Medicare's transfer policy calls for inpatient payment rates to be reduced when prospective payment system (PPS) hospitals discharge beneficiaries in 10 specified diagnosis related groups (DRG) to certain postacute care settings such as skilled nursing facilities or home health agencies. This final report points out that First Coast Service Options, a fiscal intermediary, properly reduced payments when hospitals correctly coded transfers to postacute care settings. However, overpayments resulted when the hospitals erroneously coded the claims as discharges instead of transfers. We estimate, based on a statistical sample, that hospitals serviced by First Coast Service Options were reimbursed $2,042,060 in excessive DRG payments as a result of these erroneous codings for the year ending September 30, 1999. In addition to financial adjustments, we recommended certain controls be put in place to assure that the transfer/discharge information on Medicare claims are correctly coded. The Health Care Financing Administration concurred with our recommendations.