Hospital settles $1.3M transfer discharge case
At least 100 other hospitals are being targeted
Medicare is taking a hard look at "transfer" diagnosis-related groups (DRGs) as opposed to "discharge" DRGs, and it may be time for a lot of hospitals to get up to speed on the matter quickly.
The warning is compelled by a Delaware hospital’s recent $1.3 million settlement with the federal government in response to allegations of Medicare fraud. This first-ever settlement dealing with transfer DRGs resulted from a national federal investigation of the way hospitals handle their Medicare billing when transferring a patient to another facility.
The government contends that between 1992 and 1999, Beebe Medical Center in Lewes, DE, knowingly submitted claims to Medicare for payment for certain patients on the basis that they were discharged to their homes when the patients actually were discharged to other hospitals reimbursed under the Prospective Payment System (PPS). As a result, the Delaware U.S. Attorney claims, Beebe received higher reimbursement than that to which it was entitled.
"If a patient is discharged home from the hospital, the transferring hospital is not entitled to the full DRG," according to a statement from the Delaware U.S. Attorney. "Instead the transferring hospital should only receive a pro-rated share of the DRG. The United States’ contention in this case was that Beebe failed to properly state in its claims to Medicare that certain patients were transferred to another hospital, instead of stating that the patients went home, and therefore Beebe received higher reimbursement from Medicare."
"We contend that they knowingly violated the rules," says Luis Montos, Assistant U.S. Attorney for Delaware, who handled the case for the government. "The settlement requires them to set up certain procedures and in-house policies to ensure that no further financial missteps occur."
The DRG system has itemized 10 conditions that are most likely to lead to discharge to another facility for postacute care. They are:
• stroke;
• amputation;
• total joint replacement;
• hip and femur comorbidity or complication;
• hip and femur;
• fracture of hip with no surgery;
• skin graft comorbidity or complication;
• skin graft;
• organic disturbances;
• tracheostomy.
A transfer DRG should be coded when a patient is discharged for one these 10 DRGs and the discharge occurs before the expected length of stay (LOS), which is set each year by the Health Care Financing Administration (HCFA). Medicare’s Balanced Budget Act of 1997 provided that the 10 DRGs with a high volume of discharges to postacute care and a disproportionate use of postacute care services be assigned as "transfers."
But there are complicated conditions and payment calculations that apply to these DRGs, according to Jackie Birmingham, RN, MS, consulting associate for the South Natick, MA-based Center for Case Management and director of clinical design for Integrated Healthcare Networks in Newton, MA.
"There is a distinction between a discharge and a transfer," Birmingham explains. "A discharge occurs when a patient leaves an acute care hospital after receiving complete acute care treatment. A transfer occurs when a patient is transferred to another acute care hospital for related care. A transferring hospital receives a per diem rate not to exceed the full DRG rate."
Process provides ample opportunity for error
The process for transfer DRGs goes through several hands before it reaches the coder’s desk, according to Ellen Schedel, coding coordinator at University Hospital in Denver. First, the physician documents details of the patient’s situation on the chart. Then the chart goes to the discharge planner. If the doctor is sending the patient to a nursing home, a rehab hospital, or another outside facility, this is added to the medical record. "The coding process simply reveals the documentation from the medical record. That’s what determines the DRG," says Schedel. "The coder then enters the DRG code based on the information in the medical record." She adds that there is plenty of opportunity for human error throughout the process.
The doctor could enter vague, confusing, or incomplete information on the chart. The discharge planner could misunderstand the doctor’s expectations for the patient at the second facility. If the documentation isn’t precise, the coder could read the situation differently from the way the doctor intended and enter an incorrect DRG code. Or the coder could simply make a typographical error — a miscoding that then is sent on to Medicare for reimbursement.
To make things more difficult, Medicare assigns per diem rates for hospitals that are treating any of the 10 discharge DRGs. "The geometric LOS is the expected LOS for a specific DRG and is set each year by HCFA," Birmingham explains. "The geometric LOS is then used to establish the per diem rate. For instance, if Hospital A has a calculated rate of $10,000 for a specific DRG and the geometric LOS is five days, then by dividing $10,000 by five, the per diem rate of $2,000 is set."
Birmingham illustrates with the following formula:
If the DRG payment for a patient who is transferred is $10,000, the current calculation is:
Day one: two times the per diem
Each day after one: per diem
How it’s calculated:
Day one: $4,000
Day two: $2,000 Subtotal DRG payment: $6,000
Day three: $2,000 Subtotal DRG payment: $8,000
Day four: $2,000 Total DRG payment: $10,000
Day five: DRG has already been met
Why the per diem arrangement? "What was happening is that hospitals were keeping patients for the full length of stay," explains Birmingham. "It gave the impression that they were changing the patient’s care level for financial purposes."
So how can a hospital escape expensive and unsavory charges of fraud, especially if the institution is unaware of the human error or computer deficiency that may have generated the claim?
"When you submit a bill to Medicare, it must be accurate," says Matthew Biscan, a health care attorney with the Denver firm of Hall & Evans. "A miscoding isn’t necessarily intentional. It could be an undertrained employee, but the government looks on it all as fraud. It’s important to know that human error can generate a claim against an institution. Fraud is not always fraud. The use of the term does not necessarily indicate intent."
A representative of Beebe Medical Center suggests the following basic responses if the OIG comes calling:
• Thoroughly check out the allegation. If it’s true, don’t fight it. Instead, seek an equitable settlement.
• Be open. Don’t try a cover-up. The best way to handle bad news is to get through it.
• Keep the hospital board informed from the beginning.
"The mistakes [at Beebe] primarily relate to the inaccurate assignment of codes regarding discharge status on Medicare claims for patients who were transferred from Beebe to other hospitals," according to Sharon Perry, a Beebe spokeswoman. "We fully cooperated with the OIG throughout its investigation of the hospital’s Medicare billing procedures," she adds. "The hospital has already established a Corporate Integrity Program in an effort to prevent such mistakes from occurring in the future. One aspect of the Corporate Integrity Program is a comprehensive employee education program on correct coding procedures." This includes a billing training program, a code of conduct, self-audits, and annual compliance reports.
But there are other communication issues. "Let’s say the patient went home," says Birmingham, "and there was no referral to another facility. Then, if a doctor ordered the referral later, the hospital would not necessarily know this. That might fly with the HCFA inspectors, but it could raise questions about the quality of discharge planning at that hospital."
Employees need continuous education
The answer, agrees Biscan, lies in education. "Employees involved in coding need continuous updates and instructions regarding DRG codes and upcoding," she advises. And right now is a crucial time to be examining discharge codes vs. transfer codes. "They need to understand the consequences of mistakes and develop a serious focus on their responsibilities. Supervisors should be reviewing the work of coders and working closely with them to verify Medicare claims carefully."
But Beebe is only the first facility to be scrutinized under the OIG’s current initiative. "It is the first settlement or adjudication of a case of this nature in the country," says Montos. The OIG won’t comment on how many other hospitals might be under investigation, but there are reports that Medicare discharge payments to 100 or more hospitals nationwide are currently under examination.
But DRG codes are numerous and complex and easily lend themselves to error. "The vast majority of risk is in institutional error," says Biscan. "Maybe the hospital doesn’t have a billing program that allows for the correct data field for the current DRG code. Maybe somebody new in coding and billing doesn’t understand the DRGs correctly."
But this isn’t going to soften the government’s approach. "The coding errors are something hospitals should really have been addressing for some time," Biscan contends. "As defined by OIG and the Department of Justice, a reasonable compliance plan includes employee education about standards and upcoding."
Beebe’s Perry claims, "our billing errors were caused in large measure by the inaccurate assignment of coding information regarding patient transfers. These transfers typically were out-of-state referral centers for medical services that are not available at Beebe."
"I once predicted that many hospital and medical records personnel wouldn’t understand the distinctions and the significance of the discharge and transfer codes," says Birmingham.
"It’s all administratively burdensome," Biscan allows, "but if stalling on these matters is going to cost you $1.3 million in the long run, then the time and investment in equipment and education is worth it."
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