Knowledge Base Article

If you are a frequent reader of our newsletter, you often see the acronyms “OPPS” and “IPPS.” These refer respectively to the outpatient and inpatient prospective payment systems. Medicare describes a Prospective Payment System (PPS) as “a method of reimbursement in which Medicare payment is made based on a predetermined, fixed amount. The payment amount for a particular service is derived based on the classification system of that service (for example, diagnosis-related groups (DRGs) for inpatient hospital services).” This means for a particular DRG, a hospital always receives the same payment. Well, that is, until they don’t. Under Medicare’s transfer policies, DRG payments are prorated (reduced) when a patient transfers to another hospital or to select post-acute care settings. The specific regulations regarding transfer policies can be found in Chapter 4 of the Medicare Claims Processing Manual, Section 40.2.4.

The transfer policies bring in yet another acronym - the post-acute care transfer (PACT) policy. In recent weeks, two issues have come up related to the PACT policy. Before discussing these issues, let’s do a quick review of the policy.

• PACT policy only applies to certain MS-DRGs. The list of DRGs to which the policy applies is updated annually as Table 5 of the IPPS Final Rule.
• PACT policy only applies when the patient is transferred to certain post-acute care settings:
• Inpatient rehab facilities and units (discharge status code 62)
• Long term care hospitals (code 63)
• Psychiatric hospitals and units (code 65)
• Children’s and Cancer hospitals (code 05)
• Skilled nursing facilities (code 03)
• Home with a home health plan of care that begins within 3 days (code 06)
• Medicare identifies transfers to the affected settings by the discharge status code on the claim. If Medicare receives a claim from a post-acute care provider for days immediately after discharge, they will ask the transferring hospital to adjust their discharge status code as needed.
• Payment is only reduced if a patient stays fewer days than expected in the first (transferring) hospital for a particular DRG (the geometric mean length of stay or GMLOS).
• Payment is reduced to the transferring hospital. A per diem rate is calculated by dividing the MS-DRG rate by the GMLOS. The transferring hospital is paid 2 x the per diem rate for the first day and the per diem rate for subsequent days up to the full MS-DRG payment.
• There are special pay MS-DRGs (also noted in Table 5) that are paid differently, with a higher payment percentage for the first day of hospitalization.
• Transfer cases are eligible for outlier payments

Also see MLN Matters Article SE1411 for more information about discharge status and Medicare transfer policies.

The first new PACT issue is that the 2019 IPPS Final Rule added discharges to hospice to the PACT policy. This change was made in accordance with amendments to the Social Security Act by the Bipartisan Budget Act of 2018. The new law requires a discharge to hospice care provided by a hospice program to be a qualified discharge under PACT. This means qualifying DRGs with a Patient Discharge Status code of 50 (Discharged/Transferred to Hospice—Routine or Continuous Home Care) or 51 (Discharged/Transferred to Hospice, General Inpatient Care or Inpatient Respite) are subject to the post-acute care transfer policy effective for discharges occurring on or after October 1, 2018.

The second issue related to the PACT policy is a new item added to the August update of the Office of Inspector General (OIG) Work Plan:

“Hospitals' Compliance with Medicare's Transfer Policy With the Resumption of Home Health Services and the Use of Condition Codes

Medicare payments to acute care hospitals for inpatient stays under Medicare Part A are made on the basis of prospectively set rates. Normally, Medicare pays a hospital discharging a beneficiary the full amount for the corresponding diagnosis-related group (DRG). In contrast, a hospital that transfers a beneficiary to another facility or to home health services is paid a graduated per diem rate, not to exceed the full DRG payment. When transferring a patient to home health services, the hospital can apply specific condition codes to the claim and receive the full DRG payment. The hospital is responsible for coding the bill on the basis of its discharge plan for the patient or adjusting the claim if it finds out that the patient received postacute care after the discharge. We will determine whether Medicare appropriately paid hospitals' inpatient claims subject to the postacute care transfer policy when (1) patients resumed home health services after discharge or (2) hospitals applied condition codes to claims to receive a full DRG payment.”

The PACT policy applies when patients are discharged to “home under a written plan of care for the provision of home health services from a home health agency and those services occur within 3 days after the date of discharge - Patient Discharge Status Code 06 (or 86 when an Acute Care Hospital Inpatient Readmission is planned)” with some exceptions. One exception is when the home health services are not related to the reason for the inpatient admission hospital stay. In this case, condition code 42 is reported on the claim with a discharge status code 06, and the hospital will receive full payment based on the MS-DRG and not a per diem payment. This may occur when there is a resumption of home care services the patient was receiving before hospital admission, if the reason for the home health services is not related to the reason for hospital care.

A hospital can also receive full payment if the home health services do not begin within 3 days of the inpatient discharge. If home care was started more than three days after discharge from the hospital, the hospital would report condition code 43 on the claim. Again, in this case, the hospital will receive full payment based on the MS-DRG and not a per diem payment.

Hospitals should definitely be reporting these condition codes when applicable so as to receive appropriate Medicare payments. But they also need to be sure they are using the codes correctly and only when the required conditions apply. The tricky part about discharge status coding is that the hospital staff may not always know what actually happens when the patient leaves the hospital. It is a good practice to have someone verify with the patient if and exactly what and when post-discharge care occurred. For example, if home health services were planned to begin on day 4 after discharge, but actually began on day 3, it would not be appropriate to report condition code 43. Or the reverse could happen – home health planned for day 2 but does not begin until day 4 after discharge, in which case reporting condition code 43 could result in a higher, appropriate payment.

Another key is communication between case management/discharge planners, coders, and the billing office. Case management documentation is usually the most reliable source for post-discharge plans. If something changes after discharge, and the case managers have followed up to know that, they need to amend documentation and inform the coders and billers if the account has already been coded and/or billed. One last recommendation is a compliance review of discharge status every now and then. This was a huge issue when I started in hospital compliance many years ago and as you can see by the new OIG Work Plan item, it continues to be so. Here is a list of the tips noted above plus a few more to ensure accurate discharge status coding, billing, and appropriate payments:

• Make sure coders know and understand correct use of the discharge status code,
• Make sure coders know where in the record to find the most accurate information concerning discharge status and whom to ask if they have questions,
• Have a system in place to follow up after discharge to verify what post-discharge care the patient actually received,
• Have processes for clear and timely communication between case management, coders and billers concerning discharge status,
• Have a procedure to handle Medicare requests to change discharge status (this can occur when Medicare receives claims from other hospitals or post-acute care providers for services immediately following a hospital discharge), and
• Perform periodic audits of discharge status.

Following these recommendations may prevent the OIG from NYTTW (nailing you to the wall) should your claims be audited.