All hospitals paid under the Inpatient Prospective Payment System (IPPS) have the potential for underpaid claims as a result of the Postacute Care Transfer Policy.  This policy potentially reduces the Diagnosis-Related Group (DRG) payment for patients transferred to psychiatric, rehabilitation or long-term care hospitals/units, skilled nursing facilities (SNFs) or home health agencies (HHAs).  For many hospitals, identification and recovery of these underpayments can be a significant source of revenue.

Background

The Postacute Care Transfer Policy mandates prorated DRG payments (per diem rates) for patients transferred to psychiatric, rehabilitation or long-term care hospitals/units, SNFs or HHAs under the following conditions:

• The MS-DRG for the claim falls within the list of MS-DRGs subject to the policy (currently 273 MS-DRGs)
• The transfer takes place at least one day prior to the geometric mean length of stay for the MS-DRG
• With regard to home health, the patient is treated for a condition related to the hospitalization within three days of discharge from the hospital

The policy has grown from affecting ten DRGs when established for federal fiscal year (FFY) 1998, to 273 out of 745 MS-DRGs (36 percent) for FFY 2009.

How do overpayments & underpayments occur?

Overpayments and underpayments typically result from a patient status code on a claim that ultimately does not bear out.  The code is based on facts at the time of discharge and a forward-looking discharge plan for the patient.  For example, a patient is expected to receive a home health visit on the third day following discharge, but the patient reschedules the visit for the fourth day following discharge.  There are endless scenarios for why a patient does not ultimately receive the care planned at the time of discharge.  It is unreasonable to expect hospital personnel to foresee such changes in post-discharge facts and virtually impossible to track every discharge and accurately determine if a change has occurred.

Compliance-driven opportunity

The Office of Inspector General (OIG) conducted several studies identifying significant overpayments to hospitals where patients received qualified postacute care, but were coded for a patient status other than one subject to the Postacute Care Transfer Policy.  As a result, the Centers for Medicare & Medicaid Services (CMS) instituted a claim edit (C7272) that identifies and recovers such overpayments.  The edit does not attempt to identify underpayments.  As an additional safeguard, the Recovery Audit Contractors (RACs) have established postacute care transfer payments as a focus issue and have identified and recovered further overpayments.

While CMS and the RACs are working hard to identify and recapture overpayments, CMS has clearly stated it is the hospital’s responsibility to research their own claims and identify underpayments.

Estimating the affect on your hospital

The affect on each hospital varies widely based on many factors including, but not limited to, diversity of postacute market, utilization of postacute market, acuity of patients, culture of patient population as it relates to compliance and hospital internal practices.  Experience shows the aggregate underpayment for Medicare fee-for-service MS-DRG payments to your hospital is likely to be between $1,500 and $2,700 per claim for 1 percent to 3 percent of Medicare fee-for-service discharges.  Actual amounts may not be within this estimate.

Payment recovery process

Underpayments are best recovered during the timely filing period through the adjustment claim process. Claims must be corrected for FFY 2008 (October 1, 2007, through September 30, 2008) by December 31, 2009.  Due to the length of time required to research, correct and claim the underpayments, hospitals should begin this process now.

Contact your BKD National Health Care Group advisor for additional information regarding these changes and for compliance-driven assistance with identifying Medicare underpayments resulting from the application of the Postacute Care Transfer Policy.