Audit of Hospital Patient Transfers Paid as Discharges and Claimed Under the North Carolina Medicaid Program

EXECUTIVE SUMMARY:

The objective of this review was to determine whether inpatient hospital claims for patients transferred from one hospital to another on the same day were properly coded and paid in accordance with North Carolina's Medicaid reimbursement requirements.  We identified 817 claims, submitted by 111 hospitals, that appeared to be transfers incorrectly coded as discharges, which resulted in overpayments to the transferring hospitals.  We limited our medical record review to 564 claims from 35 hospitals with total potential overpayments greater than $20,000 or with neonatal diagnosis related group (DRG) claims with an estimated overpayment per claim greater than $5,000.  Of these, we determined that 512 claims, totaling $4.7 million at 35 different hospitals, were  transfers incorrectly coded as discharges.  After recalculating the correct reimbursement for these transfers, we estimated that overpayment to the transferring hospitals amounted to $1,849,683 (Federal share).  We recommended a financial adjustment for this amount.  We also recommended that North Carolina reassert Medicaid guidance to hospitals, emphasizing the importance of coding the correct patient status and the appropriate DRG with special consideration given to the transfer of newborns, and consider implementing a postpayment edit to detect improperly coded transfers.  North Carolina concurred with our findings and took appropriate corrective action.