EXECUTIVE SUMMARY:

Medicare's postacute care transfer policy provides for reduced inpatient payment rates when prospective payment system (PPS) hospitals discharge beneficiaries in 10 specified diagnosis related groups (DRGs) to certain postacute care settings; i.e., skilled nursing facilities, PPS-exempt hospitals or units, and home health agencies. This final report estimates, based on a statistical sample, that Georgia hospitals were overpaid about $890,000 in Fiscal Year 1999 for claims involving these 10 DRGs because the hospitals erroneously coded discharges as discharges to home rather than discharges to postacute care settings. Among other things, we are recommending that the Health Care Financing Administration (HCFA) establish edits in its common working file to compare beneficiary inpatient claims potentially subject to the postacute care transfer policy with subsequent postacute claims. This will allow potentially erroneous claims to be reviewed and appropriate adjustments to be made to the discharging hospital's inpatient claim. The HCFA officials concurred with our recommendations.