Blog, Reimbursement, Transfer DRG

OIG Workplan Update: Audit of the Transfer DRG Rule Impact

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Mary Devine

The Post-Acute Transfer Rule reduces Medicare reimbursement to hospitals by millions of dollars each year. In fact, when an account is impacted by the Rule, it reduces reimbursement, on average, by $3,000 per discharge.


Accounts are impacted by the Rule if:

  • the account is one of the DRGs included on the impact list in table 5;
  • the length of stay is below the GMLOS (Geometric Mean Length of Stay);
  • and the discharge status code indicates a transfer.

Additionally, 100% of all discharges to another acute setting (discharge status code 02) are impacted by the rule.

Recently, the OIG has added an item to its workplan entitled, “Impact of Expanding the Hospital Transfer Payment Policy for Early Discharges to Post-acute Care.”

This new issue was added so the OIG can determine how the hospital transfer policy for early discharges to post-acute care would financially affect Medicare and hospitals if they decided to expand the Transfer Rule to include all Medicare DRGs.  

OIG Auditors will analyze Medicare claims data to determine if there is a significant occurrence of early discharges from hospitals to post-acute care facilities (PAC) for DRGs that are not currently subject to the post-acute transfer payment policy. Medicare currently pays a full DRG to hospitals for these early discharges.

Currently, Medicare pays hospitals a reduced payment for shorter lengths-of-stay for 280 impacted DRGs when beneficiaries are transferred to PAC settings. This proposed audit would provide CMS with a more updated analysis of the financial impact that an expanded hospital-to-PAC transfer payment policy (all MS-DRGs) would have on Medicare and hospitals. This is expected to be completed in 2022 and could be implemented as early as 2023.

This type of change would likely triple the impact of the Transfer Rule to most providers that are reimbursed by the IPPS/DRG.

Hospitals that are not taking necessary steps currently to protect Medicare reimbursement by performing Transfer DRG audits to confirm post-acute care, they must start to do so.  All providers need to ensure they are receiving the proper Medicare reimbursement on all accounts impacted by the Rule and consider expanding this review to all DRGs. 

A decision to begin reviewing all discharges impacted by the Rule by discharge status code and length-of-stay would certainly prepare hospitals for the implementation of this expansion. It would also help them quantify the volume of accounts that would be impacted along with potential reimbursement reductions.

Learn more about getting started with a Transfer DRG audit.  

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