Articles on Compliance Strategies

Operational Changes May Improve Income, Compliance With Post-Acute Care Transfers

Reprinted from the Oct. 2, 2006, issue of REPORT ON MEDICARE COMPLIANCE, the nation's leading source of news and strategic information on false claims, overpayments, compliance programs, billing errors and other Medicare compliance issues.

Hospitals face an uphill compliance climb and a reimbursement paradox with the Medicare post-acute-care transfer policy, which requires hospitals to bill patients as "transfers" if they are discharged to skilled nursing or rehab, or receive home health and have an average length of stay one day or more below the geometric mean length of stay (GMLOS). The policy applies to 182 diagnostic related groups (DRGs).

On the compliance side, hospitals must report the correct discharge disposition code, which determines whether the patient is reported as a transfer or a discharge. Obviously that's easier said than done because noncompliance is fairly common, according to Linda Coe, director of coding and reimbursement for QHR Consulting Services, and Ed Emnett, QHR's director of case management. In fact, the HHS Office of Inspector General's (OIG) 2005 review found that 381 of 400 claims sampled were improperly coded.

On the reimbursement side, it has turned out rather ironically that the longer patients stay under the post-acute-care transfer policy, the more money hospitals make, with the exception of the last day. That's a reversal of the behavior that's been ingrained since the adoption of the prospective payment system 21 years ago. "People have to turn their thinking on its head," Emnett says. They can improve their revenue picture with some retooling.

The GMLOS is designed to be a real-world representation of a typical patient. It's calculated by counting the total number of Medicare patients for a given DRG, and then dividing it by the total number of days they spent in the hospital - minus hospital stays on the very high end and the very low so the calculation doesn't get distorted.

Hospitals have a lot of reimbursement at stake now that the post-acute-care transfer policy applies to 182 DRGs. Medicare pays per diems for these transfers, with the total not to exceed the normal DRG payment. The amount is subject to the hospital's specific blended base rate.

Hospitals are used to rushing patients out — assuming it's safe and that they meet discharge protocols — because the DRG payment is obviously the same regardless of the resources used. But with transfers, the sooner patients leave, the more money hospitals lose because they collect fewer per diems, Coe and Emnett say.

That's why it's important for hospitals to track this and possibly keep patients longer, within reason and if it's clinically feasible. "By no means are we trying to game the system," Coe says. "We are just trying to use the system wisely. The discharge criteria are all mapped out. It's evidence based."

They advise hospitals to analyze their top 25 DRGs that fall under the post-acute-care transfer policy. "They have the potential for a huge financial impact," Emnett says.

Take, for example, DRG 113 (amputation for circulatory system disorders except upper limb) at ABC Hospital. The blended rate for the DRG is $4,000. (The numbers will be specific to the hospital). The case weight is 3.1682, and the geometric length of stay is 10.8. Per-diem payment under the post-acute care transfer policy is $2,346.82 for the first day (it's double the first day because more resources are used). Then the per diem is $1,173.41 for each of days two through nine, and the leftover amount is $938.70 on day 10.

This is major surgery, and it's probably reasonable to keep these patients in the hospital for awhile, Coe and Emnett say. If you hurry them along — consistent with the usual incentive - the hospital is more likely to lose a bundle, they add. This may not always be the case, so hospitals must do a financial analysis to see how the transfer policy affects the post-acute DRGs they bill most often, the consultants say.

If hospitals can figure out how to keep post-acute care transfer patients longer — when it benefits them financially, does not compromise patient care and may possibly improve outcomes and then make those operational changes — it may generate significant revenue, Coe and Emnett say.

The main obstacle may be persuading physicians to adapt to yet another change, especially since they have been painstakingly trained to discharge patients promptly under the inpatient prospective payment system (IPPS). "We are adding another level of confusion" with all these changes, especially since this new way of thinking applies only to 182 DRGs, Emnett says. Coe recommends finding a "physician champion" to educate the medical staff.

Compliance Discharge Code Training Is Key

Hospitals may think they are doing a good job billing the 182 DRGs subject to the post-acute-care policy as transfers, because they aren't getting claims rejections from the fiscal intermediary, but "not all FIs are paying correctly," Coe says. Hospitals can't rely on FI actions as proof positive of compliance.

In fact, it appears some hospitals had plenty of problems correctly coding discharge dispositions when it applied only to 10 DRGs — the number set at its inception when Congress enacted the post-acute-care transfer policy. Compliance problems persisted when the number rose to 29, Coe and Emnett say, and some hospitals' apparent lack of understanding of the post-acute-care policy poses a serious danger to them now that the number of DRGs subject to the policy stands at 182 — about a third of all DRGs, they say.

One obstacle to compliance is an inaccurate discharge disposition code. If the discharge disposition code indicates the patient is going to any rehab facility or skilled nursing facility (SNF), or is receiving home health care, then the patient must be billed as a transfer. So that means the code must be correct, and that the coder must be able to locate the most current discharge plans on the medical record. But that often doesn't happen, Coe and Emnett say.

For one thing, Emnett says unit secretaries often scramble to enter discharge disposition codes, which must be done before the patient leaves. They often just enter discharge "home" because it's easy and they don't really understand the many discharge disposition codes (there are about 20). Or nurses will enter the discharge disposition codes and, while they understand the designations much better, there are still subtleties between the codes that even nurses might misinterpret. Case managers also must understand the subtle differences. "What helps more than anything is if case managers understand the various discharge dispositions," Emnett says. "A lot of them don't understand that we have more than a couple dispositions." Training in this area is sorely needed in some hospitals, he says.

Another problem is the lack of a definitive place for coders to find a final discharge designation in the medical records. It may be in the physician progress notes or the nurses' notes - "it could be anywhere," Emnett says. The compliance officer or someone has to pick one set place in the chart for the disposition code, and convey that to everyone else.

Another way hospitals get tripped up, Coe and Emnett say: They discharge patients home — meaning to the nursing home, where they live. That is accurately billed as a discharge because the patient is just receiving custodial care. But it turns out the nursing home arranges skilled nursing immediately, but this isn't relayed to the hospital. Suddenly the discharge is a transfer.

The only way to guard against this is educating and establishing good communication with area facilities, Coe and Emnett say.

Home health is a compliance nightmare of its own because Medicare decided after the fact that hospitals still have to bill these 182 DRGs as transfers even if the patients go home first - as long as home health is received anytime within three days after discharge.

Hospitals have found the only way they can know for sure is either (1) by calling all patients with one of the 182 DRGs the third day after discharge and asking if they received home health care or (2) striking agreements with home health agencies to contact the hospital if their new clients have just been in the hospital, Emnett says. While it might seem risky to rely on home health agencies, he says they rely on patient referrals from the hospital, and want to retain a good relationship with their referral sources. Coe says CMS told OIG to at least not penalize hospitals for correcting discharge disposition codes after the fact with a corrected bill.

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