Palmetto GBA, LLC, Inappropriately Paid Hospitals' Medicare Claims Subject to the Postacute Care Transfer Policy in Jurisdiction 1

Palmetto GBA, LLC (Palmetto), the Medicare contractor for Jurisdiction 1 hospitals in three States (California, Hawaii, and Nevada) and three territories (American Samoa, Guam, and Northern Mariana Islands), inappropriately paid 1,656 Medicare claims subject to the postacute care transfer policy during calendar years 2008 through 2011. The hospitals used incorrect patient discharge status codes on their claims, indicating that the patients were discharged to home rather than transferred to postacute care. Of these claims, 97 percent were followed by claims for home health services, and 3 percent were followed by claims for services in other postacute care settings. Because the postpayment edits were not working properly, Palmetto did not receive the Common Working File (CWF) edit alerts or associated detail (trailer) information notifying it that the miscoded claims required payment adjustments. Consequently, Palmetto overpaid the hospitals by $10.8 million.

We recommended that Palmetto (1) recover $10.8 million in identified overpayments; (2) educate Jurisdiction 1 hospitals on the importance of reporting the correct patient discharge status codes on transfer claims, especially when home health services have been ordered; and (3) continue working with the CWF maintenance contractor to ensure that it receives the CWF edit alerts and associated trailer information. Palmetto provided information on actions that it had taken to address our recommendations.