Audit Finds Hospital Post-Acute-Care Transfer Policy Overpayments

March 4, 2021

Post-Acute-Care Transfer Policy
Transfer DRG

As a result of an August 2020 Post-Acute-Care Transfer Policy (PACT) audit, the OIG (Office of Inspector General) found that Medicare overpaid acute-care hospitals more than $267 million for hospital claims subject to the PACT policy for services rendered from October 1, 2015 to September 30, 2017.

The PACT policy triggers when an inpatient claim includes one of the 280 Transfer DRGs, the LOS is less than the geometric mean LOS for that DRG, and the patient discharges to a qualifying post-acute care facility. When these criteria are met, CMS automatically applies a per-diem payment to the claim.

Hospitals must code claims based on their discharge plan for the patient and should adjust claims if they learn that the patient received post-acute care after discharge. While seemingly straightforward, it is common for patients to resume prior services, such as home health, without the hospital’s knowledge.

Key OIG findings about hospital Post-Acute-Care Transfer Policy overpayments

The OIG’s August 2020 report found that Medicare overpaid acute-care hospitals more than $267 million as it relates to the PACT policy. The audit findings indicated that where a patient was seeing Home Care before entering the hospital and then resumed Home Care upon discharge, the hospital failed to code the discharge status to 6 (Discharge to Home Care) or 6 with a Condition Code 42 (Discharge to Home Care Not Related to the Hospital Stay).

The OIG identified 89,213 claims totaling an at risk population of $948 million and then examined a sample of 150 inpatient claims from this area. Based upon the audit of the 150 claims, the OIG estimated the impact of overpayments to hospitals related to this issue.

CMS has put edits in place to prevent PACT policy overpayments. If these edits function properly, your Medicare Administrative Contractor (MAC) will reject or “return to provider” (RTP) all claims that note qualifying post-acute care services in line with regulatory timeframes. For home health services, this must happen within three days of discharge. For skilled nursing services, care must occur on the date of discharge. This prompts providers to correct the coding to reflect a per-diem payment instead of the full DRG payment to account for the patient transfer.

If providers do not correct the coding, they will receive no payments. As it relates to the 2019 audit, CMS maintains that the edits in place were working appropriately, but several MACs stated that the edits did not detect the inpatient claims, and as a result, they did not receive notification to take action.

Insights and recommended action

As a result of the audit, the OIG recommends that CMS instruct the MACs to recover all overpayments where the discharge status is incorrect due to the patient receiving post-acute care. The OIG also advises CMS to ensure the MACs are reviewing the payment edits and are taking the necessary action to ensure no overpayments are made for PACT impacted claims going forward. In an effort for CMS to recover the $267 million in overpayments, you may begin to see MACs take more action on the edits by rejecting claims and retracting the full payment if a transfer did in fact occur.

As a partner of R1, our standard comprehensive reviews include identifying accounts potentially impacted by CMS changes and regulations such as those subject to the PACT policy. Our reviews ensure that potentially affected accounts were billed and paid properly, and that any new edits are functioning appropriately. R1 recommends that providers investigate their claims to ensure overpayments have not occurred and make adjustments for resubmission to reflect the appropriate per-diem discharge status for those claims where post-acute care was provided.

In anticipation of increased MAC and RAC audit activity and the potential for higher RTP or rejection rates, providers should focus consistently on monitoring rejections to find cases affected by CMS edits. Providers should adjust and resubmit impacted claims with the correct information to receive accurate payment.

R1 regularly conducts rolling lookback reviews for our provider partners to identify and correct any rejections due to CMS policy edits. Learn how your organization can ensure payment accuracy with R1’s comprehensive reviews.

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