Medicare Prospective Payment System Edit for Incorrect Hospital Coding of Patient (Discharge) Status

This report provides the results of our review of the effectiveness of the prepayment edit used to detect incorrect patient status codes in the Medicare prospective payment system (PPS) when patients are transferred to another hospital. The objective of our review was to determine whether this claims processing edit would prevent overpayments for all incorrect usages of the patient status code. We determined that while the edit detects most overpayment situations, it does not detect transfers that are improperly coded as transfers to hospitals, or distinct parts of hospitals, which are not participating in PPS. We estimate that annual cost savings of $8.1 million are available if the Health Care Financing Administration revises the edit to also detect these incorrectly coded transfers.