WASHINGTON, D.C. (October 22, 2020)—A new report from the Department of Health and Human Services (HHS) Office of Inspector General (OIG) has found that Medicare improperly paid most inpatient claims to the transfer policy when beneficiaries resumed home health services within three days of discharge but the hospitals failed to code the inpatient claim properly and recommends the Centers for Medicare & Medicaid Services (CMS) recover a portion of the overpayments and analyze other claims for overpayment and possible recovery.
Prior OIG audits identified Medicare overpayments to hospitals that did not comply with Medicare's post-acute-care transfer policy (transfer policy).
The OIG investigation attempted to determine whether Medicare properly paid acute-care hospital inpatient claims subject to the transfer policy when hospitals:
- did not code the claims as a discharge to home with home health services when the beneficiary resumed home health services within three days of discharge,
- applied condition code 43 indicating that the home health services were not provided within three days of discharge, or
- applied condition code 42 indicating that the home health services were not related to the inpatient hospital services.
Medicare improperly paid most inpatient claims subject to the transfer policy when beneficiaries resumed home health services within three days of discharge but the hospitals failed to code the inpatient claim as a discharge to home with home health services or when the hospitals applied condition codes 42 (home health not related to inpatient stay) or 43 (home health not within three days of discharge).
Of the 150 inpatient claims OIG examined, Medicare properly paid three and improperly paid 147, with $722,288 in overpayments. Medicare should have paid these inpatient claims using a graduated per diem rate rather than the full payment.
OIG estimates Medicare improperly paid $267 million during a two-year period for hospital services that should have been paid a graduated per diem payment.
The OIG report recommends that CMS direct its Medicare contractors, for the claims that are within the four-year reopening period, to:
- recover a portion of the $722,288 in overpayments identified in our sample,
- reprocess the remaining inpatient claims in our sample frame with an incorrect patient discharge status code or condition code 43 to recover a portion of the estimated $225.7 million in overpayments, and
- analyze the remaining inpatient claims in our frame with condition code 42 and recover a portion of the estimated $40.6 million in potential overpayments.
In addition, the report's authors recommend that CMS correct its related system edits, improve its provider education related to the Medicare transfer policy, and use data analytics to identify hospitals disproportionally using condition code 42.
Finally, OIG recommends that CMS consider reducing the need for clinical judgment when processing claims under the post-acute-care transfer policy by taking the necessary actions, including seeking legislative authority if necessary, to deem any home health service within three days of discharge to be "related."
CMS concurred with the first two recommendations, but not the third. OIG recommends that CMS further explore reducing the need for clinical judgment when processing claims under the post-acute-care transfer policy.
When researching data for the report, OIG identified 89,213 inpatient claims totaling $948 million at risk of overpayment because of the transfer policy during fiscal years 2016 and 2017.