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Why the Transfer Rule is Important Webinar [PODCAST]

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In this episode, we’re pleased to welcome back Mary Devine, BESLER’s Vice President of Revenue Integrity, to give us a glimpse into BESLER’s next webinar, Why the Transfer Rule is Important, that we’re hosting on Wednesday, November 15, at 1 PM ET. 

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Highlights of this episode include:

  • What is the transfer rule
  • Who does it impact
  • Discharge status codes impacted by the transfer rule
  • Why this matters to both CMS and providers
  • What providers can do to make sure their claims are billed correctly

Kelly Wisness: Hi, this is Kelly Wisness. Welcome back to the award-winning Hospital Finance Podcast. We’re pleased to welcome back Mary Devine, BESLER’s Vice President of Revenue Integrity. In this episode, Mary will give us a glimpse into BESLER’s next webinar, Why the Transfer Rule is Important, that we’re hosting on Wednesday, November 15th at 1PM Eastern Time. Welcome back and thank you for joining us, Mary.

Mary Devine: Hi, thank you for having me.

Kelly: Well, let’s go ahead and jump in. Can you refresh us on what the transfer rule is and who it impacts?

Mary: Sure. So, in the late ’90s, soon after the DRGs were implemented, Medicare, CMS, they were really focused on the fact that they felt that they were paying for care twice. So, a lot of providers focused on the length of stay. And at that time, no matter how long you stayed in the hospital, you would get the full DRG. So, if the geometric mean length of stay on a particular DRG was five days, and you were only in there for one day, you were getting the full DRG. And then quite often, that patient was transferred to receive additional care that should have been included in that DRG payment. And so Medicare says, I don’t want to pay for that care twice, and they decided that they were going to implement what we now call as the transfer rule. And the way that it works is if a patient is admitted to a short-term acute care, PPS hospital, so this only impacts PPS hospitals and is then transferred to another PPS hospital, certain rules apply, not just PPS hospitals, but if they’re transferred to other post-acute care services such as home care or SNF. And when that happens and it’s below the geometric mean length of stay, Medicare makes a payment to the second hospital at the full DRG rate or the post-acute care provider at the full rate. And then the transferring hospital gets the per diem rate. And there are currently 280 DRGs that Medicare has this impact on. And so keep in mind, any patient for those 280 DRGs that is discharged below the geometric mean length of stay will receive a premium payment providing they receive that post-acute care as indicated on the discharge claim. I forgot to mention, who would impact? So obviously this is going to impact CMS because they get to have a cost savings there. And then it impacts, as I mentioned, any IPPS acute care providers.

Kelly: Thank you for that refresher. What are the discharge status codes impacted by the transfer rule?

Mary: So, when it first went live, the list was a little bit shorter than it is today because they’ve added in some additional discharge status codes, obviously, because it’s been working so well for them. So, when you talk about a transfer to an acute care, that’s a discharge status code of an 02, and all discharges are impacted for that discharge status code, not just within the 280 DRGs. The next is discharge status code of 03, indicating SNF care. Then we have discharge status code of an 05 for a cancer facility or a children’s facility that is, in fact, reimbursed from a PPS perspective. And then we have 06 for home care, 62 for inpatient rehab, 63 for long-term acute care, 65 for a Medicare licensed psychiatric unit. And then in addition to those two, Medicare added in on 10/01/2018, both discharge status codes 50 and 51, indicating that the patient has elected hospice on the day of discharge.

Kelly: Thank you for that. And so why does this matter to both CMS and providers?

Mary: This matters to CMS because of the very fact I mentioned previously that this is saving them money. So instead of paying the full DRG, they are only paying the per diem. And on average today, the impact of the difference between the per diem and the full DRG is about $6,500. And this saves CMS about $3.5 billion a year. So that’s money that they are no longer paying out to post-acute and to providers at this point. And then in addition to that $3.5 billion that they’re saving, there is an estimate of $41 million in overpayments that providers are receiving that CMS then after the fact looks to recover because they paid claims that were impacted by the post-acute rule that they hadn’t. And then from a provider perspective, they’re impacted, same, but opposite. The providers have that reduced reimbursement of $3.5 billion annually. And then I think the other unfortunate and unforeseen problem that providers are impacted is the rejections and/or the takebacks due to transfers that they do not know occurred when the bill was submitted. So, it could happen.

A patient could be discharged to go home, and they go home and they’re home for four hours and maybe they slip and fall and they go to an emergency room and they have to get admitted because they need to get their hip replaced. Well, the discharging facility had no idea that that patient was going to be readmitted to the facility. They submit their claim. They get it in before the second provider gets theirs in and they get their claim paid. And then six months down the road, Medicare is going to do a take back. And not only do they receive a reduced payment, but they lose their payment altogether until they fix that discharge status code. So, they’re now faced with a rejection on that claim that they have to get fixed in order to receive at least the per diem amount.

Kelly: Wow, so that can be very significant. Yeah, so how does CMS know if the claim is billed correctly?

Mary: I think CMS is somewhat omniscient. They know everything, but they’ve gotten– over the years, they have gotten better and better and better about knowing whether the patient received that post-acute care. And so they’re able now to identify that. It’s somewhat difficult when the claim is initially billed from the transferring provider, but certainly, if it goes in indicating that the patient was just discharged, again, utilizing the 01 from a discharge home, and then six months down the road, nine months down the road, there is an incoming claim. Right away, those claims are going to match up from a CMS data mining perspective, and there’s going to be a rejection that that claim receives. So, they’ve implemented a bunch of edits in the billing platform known as DDE, and all these edits are designed to capture claims from being paid where there is a claim that is indicating post-acute care. So, they basically have created these edits so they know that the claim was billed correctly or not. What they don’t know is if you submit it as a transfer and the patient wasn’t transferred, they don’t care to let you know that that patient wasn’t transferred, even though they know it, they don’t care to share that with you. So at that point, your claim would be underpaid versus overpaid or paid correctly.

Kelly: Wow, that seems a little confusing, but it kind of makes sense too, yeah. So, what can providers do to make sure their claims are billed correctly?

Mary: There are several things that providers can do both from a pre-billed perspective and a post-billed perspective to ensure they are receiving the correct reimbursement. And certainly being overpaid or underpaid is never good when it comes to dealing with your Medicare claims. They’re supposed to be accurate. From a pre-bill perspective, you want to make sure that you’re working with physicians and case management, that they’re coding that claim. I’m sorry, not their claim, but the medical record correctly. They’re writing down correct documentation, so it allows HIM to get that coded appropriately. In the example of the claim where the physician writes in the notes, patient transferred to SNF and HIM codes at a 03, when really that patient is on a Medicaid bed hold and they’re going back to that nursing home where they live, well, that doesn’t allow HIM to capture that correctly. So, making sure that you capture correct notes in your medical record, allowing the code to be correct. That’s one spot from a pre-billed perspective.

And then from a post-bill perspective, I highly encourage all providers to have some sort of internal review of claims post-bill, especially when you own that home health, looking where you can potentially correct that discharge status code, and then from a best practice perspective, allowing a vendor to come in and do a post-bill review, making sure that you are not underpaid or overpaid on your transfer claims.

Kelly: Appreciate those tips. Is there anything else you can share regarding the transfer rule?

Mary: I guess the one thing that I would share is just recently, matter of fact, the report was put out in September of 2023. The OIG did a review of what would happen if 100% of the DRGs were impacted by the transfer rule. And so as of right now, there’s nothing that’s finalized. They are looking to reduce the deficit that they have right now of $7.3 billion. And this would certainly be a way to do that, to expand that transfer rule to cover all discharges and not just the ones currently that are impacted with the 280. So that’s the only thing that I could think of that could be potentially on the horizon to impact the transfer rule.

Kelly: Well, thank you for sharing that. And thank you so much for joining us, Mary, and for sharing this sneak peek into BESLER’s upcoming webinar, Why the Transfer Rule is Important, that you’re presenting live on November 15th at 1 PM ET.

Mary: Thank you for having me.

Kelly: Thanks again. And thank you all for joining us for this episode of The Hospital Finance Podcast. Until next time…

[music] This concludes today’s episode of the Hospital Finance Podcast. For show notes and additional resources to help you protect and enhance revenue at your hospital, visit The Hospital Finance Podcast is a production of BESLER | SMART ABOUT REVENUE, TENACIOUS ABOUT RESULTS.


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