In this episode, BESLER’s Olga Barone-Allan joins the podcast to discuss the Transfer DRG rule from a Patient Financial Services perspective.Learn how to listen to The Hospital Finance Podcast® on your mobile device.
Highlights of this episode include:
- Background on the Medicare Transfer DRG rule and how it was established to discourage transfers for financial purposes.
- How billing departments are notified that a claim is coded correctly or incorrectly as a discharge and not a transfer.
- Ways that hospitals can foster communication between PFS, utilization management, and HIM departments.
- What providers can do to find the 15% of claims that are underpaid.
- And more…
To view the transcript of this podcast episode, click HERE.
Mistakes often occur during retrospective Transfer DRG reviews that can result in compliance concerns for hospitals. Our new special report explores five common pitfalls associated with these reviews and how to avoid them.
The Transfer DRG rule from a PFS perspective
Most hospital financial professionals are familiar with the Transfer DRG rule and its significant impact on a hospital’s reimbursement. The rule reduces reimbursement 10% on average for all Medicare discharges.
Patient Financial Services (“PFS”) is responsible for billing and correcting Medicare claims. The only way the billing department can know if a claim is coded correctly, or if it is improperly coded as a discharge and not a transfer, is when the claim is rejected by the insurance payor.
The rejection received from Medicare is a C7272, which indicates a transfer/overlap. Most of the cases (approximately 85%), are coded appropriately by providers leaving 15% of claims at risk of underpayment or overpayment.
Typically, by the time the 837i (UB04 electronic claim information) arrives at the billing department claims have already been reviewed by Utilization Review (“UR”) and coded by Health Information Management (“HIM”).
Discharge status code are assigned at the end of a patient’s care at a facility or at the end of a billing cycle and must be accurate to attain proper reimbursement. If there is more than one code to the patient’s case, the coder must code the highest level of care known with any applicable condition codes.
If a facility subsequently learns the post-acute care was different than planned, the hospital should submit an adjustment bill to correct the discharge code following Medicare’s claim adjustment criteria (refer to “Edit 7272”).
CMS has edits in place to ensure providers won’t be overpaid. Underpayment reviews are the responsibility of providers. CMS’ edits are only about 90% accurate, leaving room for both overpayments and underpayments to occur.
Finding the 15% of claims that are underpaid take time and involves making numerous follow up calls to validate transfers and post-acute care provided. Providers should seek a vendor partner that can perform both underpayment and overpayment reviews.
Additional background on the Transfer DRG Rule
As of discharges 9/30/1998, CMS felt they were paying twice for these cases, which triggered CMS to create the TDRG Rule initially impacting 10 DRGs more likely to result in a transfer to a post-acute care provider. As the years progressed, CMS increased the number of DRG impacted as shown below.
- FY05 final rule, CMS increased the number of transfers DRGs to 182.
- FY06 final rule, CMS increased the number of transfers DRGS to 190.
- FY19 finale rule, CMS increased the number of transfers DRGs to 280
- FY20 final rule, CMS decreased the number of transfers DRGs to 278 (first time in years)
For a complete list of the Transfer DRGs, go to: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/FY2020-IPPS-Final-Rule-Home-Page-Items/FY2020-IPPS-Final-Rule-Tables (Tables 7A & 7B).
Hence the TDRG Rule was established to discourage transfers for financial purposes.
The Transfer DRG rule in a nut shell, once a medical decision is made, the transfer begins for both facility and physician services and impacts each entity billing submissions. The discharge status code communicates where the patient is going at the end of care and the code should reflect the care being provided post discharge.
A patient is ready for discharge:
- In the case of a transfer, full payment is made to the final discharging hospital.
- In the case of a transfer, each transferring hospital is generally paid a graduated per diem rate for each day of the patient’s stay. The per diem rate paid to a transferring hospital is calculated by dividing the full DRG payment by the geometric mean length of stay for the DRG.
The above outcomes are based on the coding assigned by HIM based on the following discharge status code outlined by CMS and can be found in the MLN Matters number: SE0801. The below discharge status codes indicate a transfer and could result in the stay being impacted by the rule:
- Discharge status code 02 – Transferred to a Short-Term General Hospital for Inpatient Care.
- Discharge Status Code 03 – Transferred to Skilled Nursing facility (SNF) with Medicare Certification in anticipation of Skilled Care”. This code should be used regardless of whether the patient has skilled benefits days and regardless of whether the transferring hospital anticipates that this SNF stay will be covered by Medicare. This code should not be used if the patient is admitted to a non-Medicare certified area.”
- Discharge status code of 05 – Transfer to an inpatient cancer/children’s hospital
- Discharge status code of 06 – Transfer to home health care related to the inpatient stay within 3 days of discharge
- Discharge status code(s) 50/51 – Transferred to hospice care inpatient or outpatient
- Discharge status code of 62 – Transferred to inpatient Rehab care
- Discharge status Code of 63 – Transfers to long-term care hospitals (LTCHs)
- Discharge status code of 65 – Transfer to an inpatient Medicare licensed psychiatric unit/facility
Mike Passanante: Hi, this is Mike Passanante. And welcome back to the award-winning Hospital Finance Podcast.
Today, we’re going to be talking about the Transfer DRG rule from a PFS perspective and to give us her insights on what that is and what it means for you. It’s Olga Barone-Allan who is on our revenue cycle team here at BESLER.
Olga, welcome to the show.
Olga: Thank you, Mike. And thank you for welcoming me back, inviting me back. I really appreciate it.
The topic today, as you indicated, was the transfer rule from the perspective of PFS. And I want to clarify, there are so many acronyms being thrown around in the industry. So PFS is patient financial services. And usually, that is the business office, also known as the business office and billing department.
Most are familiar with the Medicare transfer DRG rule and its impact to the hospital’s reimbursement. On average, what we see is that 10% of all the Medicare discharges are reduced by the reimbursement.
From a PFS or patient financial service perspective, it’s very interesting because although the people within that department are responsible to collect, the reimbursement, full reimbursement, they are not responsible for coding. By the time it gets to the business office, the 837 is already coded and reviewed by utilization management and the coding department. So the business office really does not have a safety net from the perspective of the initial bill.
So, the only way the billers are able to identify those claims are through rejection through Medicare. And that’s through a rejection of a C7272 which means that there’s an overlap or a transfer issue.
Now, even though the rejections due are received, there is a lot of manual work that is involved. There are a lot of calls that need to be made to the post-acute care facilities. And with the business offices and how they’re structured today, there is a lot of strain, and there’s a lot of volume involved—not only with in-patient, but out-patient. So there’s not enough availability to make the constant calls to confirm the transfers and the post-acute confirmation of where the patient was discharged to.
What we see on average is that 85% of the cases of the Medicare transfer rule are providers that we deal with get it right—right off the bat! They code it, they bill it, they get their reimbursement exactly as expected. But there’s like 15% that’s left on the table. And for a PFS department to have to, for lack of a better term, look through and find a needle in a haystack… it’s daunting. But it results in a lot of additional reimbursement that the provider, the hospital, can receive.
So, for those that are not familiar with the transfer rule, Medicare created this rule because they had a feeling that there was some duplication of payments. So they created the rule back in 1998 to avoid paying two facilities, give reimbursements to two facilities.
The first rule impacted 10 DRGs. And now, today, we’re up to 278 DRGs that are impacted. In our blog on this topic, we outline year by year (fiscal year) the increase, the overall increase, of these DRGs. And we also put a link where these DRGs can be found in table A—7A and 7B. So if you want to do some additional research, our blog provides all that information.
But going back to the transfer, in a nutshell, in the case of a true transfer, the full payment is made to the final discharging hospital. However, in the case of a transfer where each transferring hospital generally paid a graduated per diem rate based on the length of stay, the geometric means, it’s divided by the number of days, and then the two facilities receive the appropriate amount.
So, to do that is very particular in the sense that, at the time of discharge, utilization may not know. Even though the doctor says the patient has to go to a particular facility, UR does not know exactly where that patient is ending up. The patient may decide to go home or decide to not follow the direction of the doctor. So, the necessary calls, the additional calls, need to be made.
And that is a heavy burden for a hospital to put on to their current staffing. And what we suggest is to partner with a company or vendor that really can help you, that partners with you, and this takes on that has the expertise has the tools and can do this work that can help you collect that 15% of reimbursement that’s being left on the table.
Also, in our blog, we have listed the discharge status codes and the meaning as a helpful tool. That might help utilization but again, the calls after the patient is discharged is the key. And at the end of every discharge and every billing cycle, that code, that code has to be appropriate as a reflection of where the patient ended up.
Now, if there are multiple codes, the HIM department has to call to the highest level of care known at that time. So it’s really no fault of the coder because whatever is in the chart at that moment is what they’re coding based on, but that doesn’t necessarily mean the patient is following what’s in the chart at the time of discharge.
So, it’s really clear that to get that additional 15% that’s being left on the table, the best approach that we feel is to hire a partner that understands, that has dealt with this for many years, has multiple hospitals that we are engaged with and that does this on a daily basis. This is the expertise where we really do—we could do four to five calls on one account just to make sure where the patient ends up, and then recommend the appropriate coding. And if there is a condition code that’s associated with that change in discharge status, we also recommend that information.
The one last thing that I do want to stress is that Medicare, although it has edits in place, 90% are accurate, but there is that 10% that their systems do not capture. And because Medicare has placed the burden on the provider, it’s very important that these situations are reviewed, but not only under-payments, but also over-payments because Medicare does focus on that. And so, partnering with someone, an expert or a vendor, that can help a provider is probably the best approach that I would recommend.
Michael: Olga, if a hospital wanted to try to improve that process, and perhaps look at ways to foster communication or collaboration between PFS and utilization management and HIM areas, in order to try to capture some of those 15% claim that you mentioned and ensure that they’re correct when they first leave the door, what are some of the tips you could give them?
Olga: Well, that’s a great question, Mike… collaboration between the departments. A lot of facilities large organizations are transferring or shifting where utilization management is reporting under the revenue cycle umbrella, which in most cases means that PFS and utilization management review, however you refer to it now at the provider site, they work as a team.
So, what we have found with our recommendations, and also in those organizations where they collaborate, PFS provides feedback to utilization review in terms of which accounts are being coded or rejected by Medicare with this C7272.
So, with that information, utilization can go back and look at charts and possibly make calls to the post-acute. But again, that puts an additional burden.
But there are cases in particular where there might be a misinterpretation. There might be a language put in the chart where utilization can go back to the physician and ask, “What did you mean by this?”, which could help in some of the opportunities that are being found?
Michael: Well, great information, Olga. As you mentioned, there’s a blog post which has even more information if you’d like to go and read that. Just go up to besler.com, click on the Insights button, look for the Revenue Cycle tab, and you’ll find this… and a whole lot more!
Olga, thanks so much for joining us today on the podcast.
Olga: Mike, thank you again for inviting me.