Medicare Overpaid Nearly $19.5 Million for Improperly Coded Discharges

18866181_lThe Department of Health and Human Services Office of Inspector General (OIG) found in a recent report that Medicare continues to overpay hospitals that did not comply with Medicare’s post-acute care transfer policy.

The area is one OIG has examined before—namely, whether hospitals that transfer inpatients to certain post-acute care settings are being overpaid because the claims they submit improperly code the transfer as a discharge to home, which is reimbursed at the full Medicare Severity Diagnosis-Related Group (DRG) amount. Medicare generally pays a lesser amount to hospitals that transfer inpatients to certain post-acute care settings, such as skilled nursing facilities or home health care.

In its latest review, which examined the January 2009 through September 2012 period, OIG found Medicare inappropriately paid 6,635 claims subject to the post-acute care transfer policy, amounting to nearly $19.5 million in overpayments. Of these claims, 91% were followed by claims for home health services, and 9% were followed by claims for services in other post-acute care settings, the report said.

Hospitals improperly coded these claims, OIG said, as discharges to home instead of as transfers to post-acute care. The overpayment amount is the difference between the full MS-DRG payments and the per diem rates that should have been applied, OIG added.

Common Working File Edits Faulted

OIG attributed the Medicare overpayments to faulty Common Working File (CWF) edits. According to OIG, Medicare contractors failed to receive automatic adjustments identifying overpayments on inpatient claims in some instances.

OIG said CMS has taken steps as a result of the review’s findings to fix the CWF edits. “Medicare could have saved approximately $31.7 million over 4 years if it had had controls to ensure that the CWF edits were working properly,” OIG said. That amount includes the $19.5 million identified in the latest review, as well as the $12.2 million previously identified.

In addition to correcting the CWF edits, OIG also recommended CMS direct Medicare contractors to recover the $19.5 million in identified overpayments and take further steps to educate hospitals about reporting the correct patient discharge status codes on future claims.

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