Transfer DRGs: Trouble lurks in DRG coding errors, post-discharge decisions
Number of transfer DRGs multiplied in recent years; categories refined
In four short years, the number of diagnosis-related groups (DRGs) that are subject to the post-acute-care transfer definition ("transfer DRGs") has mushroomed from 30 to 273, exponentially increasing the impact that incorrect assignment can have on a hospital's Medicare reimbursements.
Transfer DRGs originate from the Balanced Budget Act of 1997 and were created after Centers for Medicare & Medicaid Services (CMS) did some studies that indicated many patients admitted to an acute hospital were transferred shortly after admission to post-acute care, creating an overpayment to the acute care hospital or, as some authors have described it, a double payment (full DRG rates to both acute and post-acute care) by Medicare for the same patients.
"Patients stay for as long as they need to, but the hospital is paid only for the applicable DRG, so that incentivized the hospitals to keep patients' acute-care stay as short as possible," says case management consultant Deborah K. Hale, CCS, president and CEO of Administrative Consultant Service LLC, in Shawnee, OK, in an explanation of the history of DRGs.
But just as hospitals became efficient at cutting acute-care length-of-stay, CMS introduced transfer DRGs to further restrict the possibility of overpayments, a move Hale says hospitals viewed as "penalizing them for being efficient." The number of transfer DRGs though not the actual diagnoses that comprise them took a sharp upturn when CMS introduced its reclassification of DRGs into "medical severity DRGs, (MS-DRGs)" which subdivides diagnoses into levels of severity. For example, heart failure would now fall into three MS-DRGs: heart failure, heart failure with comorbid conditions (CC) and heart failure with a major complication or comorbidity (MCC).
The financial impact of the MS-DRG classification can be sobering: An average acute-care hospital treating a Medicare beneficiary diagnosed with acute ischemic stroke with thrombolytic therapy given might qualify for reimbursement of $14,047 if that patient has an MCC; however, if incorrectly assigned to a DRG for a simple CC, or no comorbid conditions at all, reimbursement might be reduced by as much as 20% to 30%, respectively, in an example provided by Hale.
Assigning a patient to an appropriate MS-DRG is not the biggest concern to many in case management and discharge planning; the tricky part is the requirement under CMS's Post-Acute Care Transfer (PACT) policy that hospitals report accurate discharge disposition codes even when a patient's disposition changes after discharge.
A common example of the difficulty this requirement can present is when a patient perhaps at his or her family's insistence is discharged home to be cared for by a relative or for self-care. Within a day or so, the patient and family change their minds, and ask their physician to refer them to home health care.
Medicare says that if the patient goes into home health care within three days of discharge, whether the hospital is aware of it or not, it will pay a reduced rate under the transfer DRG for that patient, rather than the full DRG amount.
For the 273 transfer DRGs, payment may be reduced if a patient is transferred to:
- Skilled nursing (other than a swing bed)
- A rehabilitation unit or facility
- Long-term acute care
- Home health (within 3 days of discharge)
- A psychiatric hospital or unit
- A children's hospital
- A designated cancer hospital (Note: for a state-by-state listing of designated cancer centers, go to http://cancercenters.cancer.gov.)
Plan, be clear in discharge coding
"Hospitals lose money when their records don't reflect the kind of bed patients are transferring into," says Hale. Even records that are noted with the facility name that a patient is going to might not be clear enough.
"Say a patient's discharge planning documentation says he or she is going to Cherry Hill Nursing Home. But Cherry Hill Nursing Home has two kinds of beds skilled and unskilled," Hale says, giving a hypothetical example. "It makes a difference what status code you use for discharge and the amount of reimbursement the hospital is going to receive for that patient." (See chart for description of discharge codes.)
The PACT policy makes correct discharge dispositions important for the hospital to receive the correct MS-DRG payment. PACT divides MS-DRGs into two categories: regular and special pay. As of 2008, CMS lists 248 regular transfer DRGs, and 25 special-pay DRGs that are almost entirely surgical diagnoses. For a regular transfer DRG, CMS has calculated that higher costs are weighted on the first day of hospitalization, so Medicare pays a double per-diem rate for the first day of treatment and a per diem amount thereafter up to but not exceeding the full DRG. For special-pay DRGs, half the allowable DRG is paid in the first day, along with a single per-diem amount because the cost for the first day is substantially higher, and the remaining days are paid at half the per-diem rate, up to the full DRG payment.
When a patient who has been discharged home then is admitted to home health within three days for a condition related to his or her hospital stay, the hospital is responsible for adjusting its claim with Medicare.
"If the patient gets home health for a reason that's not related to the inpatient admission, then they're not subject to a transfer DRG," Hale explains. "But if he or she receives home health that is related to their hospitalization, and they receive that care within three days of [discharge from] acute care, the hospital is subject to a payment reduction."
Hale says this has put some hospitals into the burdensome position of calling patients shortly after discharge to find out if they've gone into home health.
Patients who are discharged into home health care, but who ultimately don't qualify, also need to be reclassified. If the patient does not receive home health, as indicated in the discharge plan, the discharge disposition should be corrected so that the hospital will be reimbursed at the appropriate and higher – rate for not transferring the patient to home health.
Medicare is phasing in recovery audit contractors (RACs) in all states in a multi-year rollout (2006-2010). RACs are charged with recovering overpayments and identifying underpayments; according to CMS, during fiscal year 2007, RACs collected $371 million in overpayments. Discharge status errors were responsible for some of these overpayments.
CMS indicated that the three-day home health window post-acute-care for adjusting hospital payments may be incentivizing hospitals and home health agencies to delay care so the hospital
will not have their DRG payment reduced, Hale says. Under a proposed 2009 change to its inpatient prospective payment system (IPPS), CMS seeks to change that window to seven days for hospitals to discourage intentional delay of care by home health agencies.
Sources
For more information, contact:
- Deborah K. Hale, CCS, President and CEO, Administrative Consultant Service, LLC, Shawnee, OK. Phone: (405) 878-0118.
- Centers for Medicare & Medicaid Services (CMS). Recovery Audit Contractor demonstration information available at www.cms.hhs.gov/RAC. For a list of information resources on the IPPS and DRGs, go to www.cms.hhs.gov/AcuteInpatientPPS/IPPS/list.asp.
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