Challenges, Pitfalls, and Opportunities When Dealing With Medicare Transfer DRG Cases

In this issue of IMA Insights, we would like to discuss an issue that has impacted hospital reimbursement increasingly since the inception of the post acute transfer rule in Federal Fiscal Year (FFY) 1998. Based on our experience, we have identified a window of opportunity for hospitals to recover Medicare reimbursement ranging, on average, from $150,000 to $4 million.  The question arises as to what a hospital can do to recover this revenue while at the same time keeping in mind the compliance implications inherent in the recovery process. 
As initially enacted by Congress and implemented by The Centers for Medicare and Medicaid Services (CMS), the scope of the transfer payment policy was relatively narrow. Effective for discharges that occurred on or after October 1, 1998, CMS identified 10 DRGs as those likely to result in a transfer to a post acute care provider that might require PPS payment adjustment through DRG proration. Five years later, CMS expanded the transfer payment policy effective October 1, 2003 to include 30 DRGs.
CMS expanded the post acute transfer rule to apply to 273 DRGs beginning October 1, 2007.  This means that for any patient which is admitted to a hospital under one of the 273 DRGs identified by CMS the hospital will be paid a per diem rate as opposed to the full DRG payment if the patients' stay is less than the geometric mean length of stay and the patient is discharged to a post acute care setting. As defined by the regulation this includes discharges to Skilled Nursing Facilities and Home Health Agencies which are under a written plan of care or a hospital or distinct part hospital unit excluded from the prospective payment system. For further background on this issue, please refer to our March 2006 IMA Insights.

Armed with the knowledge that instances occur where a patient discharged from a hospital to a post acute care setting does not always receive the care that was expected upon discharge, hospitals are left to determine how best to ensure they are paid properly for the care they provided. CMS has not implemented edits for claims that were prorated under the transfer DRG rules but should have been paid at the full DRG rate. In cases like this, the hospital has been underpaid.  Consequently, hospitals cannot rely upon CMS or their servicing Medicare fiscal intermediary to identify and correct these underpayments. Instead, hospitals will need to be diligent in proactively identifying these types of cases and seeking to recoup appropriate additional payments through the claims adjustment and rebilling process. Unfortunately, there is no easy way to complete this review. Accordingly, hospitals must complete a retrospective review of all claims billed (for a number of years), on a one-by-one basis.
With the significant increase in the number of transfer DRGs, CMS implemented edits to detect discharges that were paid at the full DRG amount that should have been prorated under the transfer DRG rules. CMS is able to identify these claims and make downward payment adjustments for them. However, in a letter to CMS in February 2009, The Office of the Inspector General (OIG) reported on an audit they performed to determine if the CMS edits were identifying all overpayments made to hospitals where patients receiving post acute care services coded as discharged to home incorrectly were identified by the CMS edit. This audit resulted in a determination that the CMS edits had not captured 13% of those patients where the patient was inappropriately identified as discharged to home.
The issues identified above lead to the question of how does a provider make sure that it is reimbursed correctly for services rendered, while at the same time considering the issue raised by the OIG with regard to the CMS edit and most importantly ensuring compliance.
Hospitals are left with trying to figure out how and if they are receiving the correct payments from CMS for patients who are admitted under one of the 273 DRGs. This becomes particularly difficult in light of the resources available within the hospitals to do the extensive research that is needed to make a determination as to whether the post acute care was actually provided.  In reviewing this issue, the hospital must utilize a multitude of sources to make a determination as to whether the hospital has received the proper reimbursement. These sources include reviewing payment history in the Common Working File (CWF), reviewing information contained in the hospital medical record and interviewing post acute care providers. The problem in accomplishing this task lies in the fact that many hospitals do not employ people with the skill set (i.e., extensive understanding of the post acute provider setting) needed to properly complete the task.
In order to properly discern whether post acute care services are rendered, the person auditing the account should possess a background in the issues surrounding the post acute care providers. The reviewing individual should be familiar with the complexities surrounding the post acute care arena when it comes to certification, coding and billing requirements to name a few. This knowledge will help to ensure that no services are rebilled incorrectly and that all opportunities are identified.
For example, when reviewing the CWF to determine if a discharged patient received SNF services post discharge, a reviewer must be careful to consider all circumstances before making a final determination. Have the patients utilized all of their benefit days, did they have a qualifying hospital stay, were they put on hospice upon returning to the SNF. These represent some of the issues that must be considered and how each is considered will affect the determination.
Another common pitfall when reviewing this area is to only check the area identified by the hospital on the initial discharge. This can result in a hospital mistakenly rebilling a claim to a discharge status code that will result in full payment when in reality the patient may have received another post acute care service. For example, if a patient is discharged to home with the anticipation of home care, the reviewer may recommend a rebill opportunity if they were to review only the home care eligibility screens in the CWF and saw that no home care was provided. But what if upon returning home, the patient's family decided they just could not provide the care needed and they arranged for an admission to a SNF unbeknownst to the discharging hospital. This scenario would result in a completely different discharge status code recommendation and no increased reimbursement for the hospital.
Also at issue, is how the hospital is affected by this issue with regard to their Medicare Managed Care contracts. Many Medicare Managed Care contracts follow the same payment guidelines as traditional Medicare resulting in this issue affecting a hospital's payment in this realm as well.  Reviewing this area will require knowing the intricacies of the reimbursement system for each of the hospital's managed care payors and having the knowledge to speak with both payors and post acute care providers to determine if rebilling opportunities exist.
There is much guidance to assist in making in this determination and the resources must be carefully reviewed to implement a system that is both accurate and compliant in its approach. Additionally, in light of the previously mentioned OIG report, hospitals must consider the implications of those patients discharged to the home setting and paid the full DRG rate. A hospital would be unwise to review this area without giving consideration to potential overpayments. We recommend that a hospital review a sampling of those patients discharged to home to ensure that the CMS edit is working and no overpayments to the hospital are identified.
Finally, the time period to review must be taken into consideration. The timely filing of a claim requires that claims be filed and/or adjusted by December 31 of the calendar year following the end of the Federal Fiscal Year, meaning for services rendered between October 1, 2007 and September 30, 2008 (Federal Fiscal Year 2008) a provider must file a claim by December 31, 2009. However, the Medicare Claims Processing Manual indicates that a claim may be re-opened for up to four years if the provider can demonstrate "good cause". 42 CFR Section 405.980 (b) (3) defines "good cause" as "supplying new evidence that was not available or known at the time of the determination or decision that may result in a different conclusion where the evidence that was considered in making the determination or decision clearly shows on its face that an obvious error was made at the time of the determination or decision". This issue has been interpreted differently by the fiscal intermediaries but is worth pursuing as a provider reviews this issue.

We are pleased to have the opportunity to present this information to you. If you have any questions or need assistance with evaluating your facility's exposure to this issue, please do not hesitate to contact Jim Collins at 267-626-1192.

Yours very truly,  
Anthony J. Scarcelli, Jr.
IMA Consulting