In this episode, Kathy Ruggieri, Senior Director of the Revenue Cycle team at BESLER Consulting, discusses how to manage your Transfer DRG recovery vendor.
Michael Passanante: Hi, I’m Mike Passanante, your host for the Hospital Finance Podcast. I’m joined today by Kathy Ruggieri who is the Senior Director of our Revenue Cycle team here at Besler Consulting. Welcome Kathy.
Kathy Ruggieri: Welcome Mike.
Michael: Kathy is going to walk us through today how to manage your transfer DRG vendor which is something that’s a specialty of hers.
Let’s jump right in. Kathy, why is it important to oversee and manage a transfer DRG vendor when so many hospitals have used the same vendor for maybe over eight years and they seem pleased with the revenue recovery results that they are achieving?
Kathy: The first word that comes to mind is compliance. Not all vendors have fully integrated compliance into their revenue recovery process. The Transfer DRG regulations are complex, tools such as the Common Working File and the integrated voice recognition system commonly known as the IVR only portray part of what occurs after discharge.
It is very important for hospital providers to understand the detailed processes their vendor applies to their revenue recovery work to ensure that it is compliant.
Michael: I thought there were CMS edits in place, so if the vendor makes a mistake, the edits will catch it.
Kathy: Actually, yes, there are claim edits in place. The OIG has worked very closely with CMS over several years to implement edits, to identify situations where a patient received post-acute care after discharge and was subject to the transfer rule. However, the hospital did not originally bill the claim as a transfer and received the full DRG payment.
Then, for example, a home health claim is built for services that began just two days after discharge. Medicare will pay the home health claim and would fully recap the DRG payment it made to the hospital as a result of the upfront claim edits. The hospital will then need to submit a new claim with the revised discharge status.
Unfortunately, these edits are not 100% and do not identify all situations where post-acute care is received after discharge. The edits are very good at capturing patients who receive home health or skilled care immediately following discharge, but they’re just not perfect.
The OIG has issued numerous reports providing examples to CMS where the edits have failed. As a result of these reports, the MACs have refined their edits. However, the OIG has published audit results reporting the edits only really worked 85% of the time.
Michael: Kathy, can you tell us when edits do not work?
Kathy: In the work we do here at BESLER, we have seen the edits not work in a few consistent scenarios. One example is a patient who was admitted to LTAC, long-term acute care hospital, and transferred to an acute care hospital. The patient is treated at the acute care hospital and transferred back to the LTAC. MAC edits do not always identify the transfer back to the LTAC as a transfer.
The same example would pertian to a rehab patient. The patient is in a rehab facility, requires admission to an acute care hospital, and following treatment was discharged back to the rehab. MAC edits do not always identify the transfer back to the rehab as a transfer.
The last example is when a patient is transferred to a skilled nursing facility, however the patient did not have a 3-day qualifying stay in the hospital and the patient receives skilled nursing care post- discharge. If the skilled nursing facility did not submit a no-pay claim to Medicare, then Medicare will not know the patient received skilled care post-discharge. Therefore, the MAC edits will not identify the transfer if the SNF did not bill a no-pay claim.
Michael: You provided some very technical information here. What does all these mean to a hospital provider?
Kathy: This means if your Transfer DRG vendor is not performing detailed validation work with the post-acute providers and instead relies solely on information from the IVR or the Medicare Common Working File to make their underpayment determinations, then the hospital could be at risk for submission of a false claim.
In the LTAC example, if the transfer vendor does not call the LTAC to confirm readmission, they may miss the readmit back. And if it’s missed, the MAC edits may not pick up the transfer back to the LTAC. If the vendor then recommends a discharge status that reflects a non-transfer, the hospital will be paid the full DRG which they are not entitled to.
In the SNF example, we have seen some vendors rely on information in the Common Working File. And when they don’t see a SNF claim after the hospital bill, they assume the patient did not receive post-acute care.
Well, in the example of a SNF patient who did not have a 3-day qualifying stay, there may not be a record of the claim because Medicare did not make a payment. But that doesn’t matter. If the patient received skilled care, the patient was indeed a transfer and the hospital is not entitled to the full DRG. If the vendor is not calling the SNF and relies on the Common Working File, then the recommendation could be made to change the discharge status to receive the full DRG. This would not be compliant resulting in an overpayment to the hospital.
Michael: Have you seen any other inconsistent vendor processes?
Kathy: We see many vendors utilize a discharge status of 01, discharged to home, in situations where the patients received home healthcare after discharge but not within the prescribed post-discharge window.
The regulations are very clear. The Special Edition Med Learn Matters SE0801 requires a condition code 43 be appended to the claim when home health is not provided within three days of discharge.
For example, if a patient received home health four days after discharge, discharge status 06 reflecting discharge to home health is appropriate with condition code 43. CMS has implemented the condition code requirement so they can track the patients who received home health outside of the prescribed post-discharge window of three days.
Even though a discharge status of one and a home health claim with a condition code added a 43 will still give you the same payment. If your vendor is not using condition code 43 in these situations, you are not following the CMS regs.
Michael: So what can a provider ask their vendor to ensure that the vendor processes are compliant?
Kathy: I think the most important question to ask your vendor is to discuss their validation processes in full detail. You want to make sure the validation process includes direct contact with the post-acute providers.
You also may want to ask what the skill set is of the staff who performs the validation work and whether clinical staff is involved in the process.
Michael: You talked a lot about compliance which I understand is very important, but how do you know whether a transfer vendor is capturing all the underpayments.
Kathy: You really don’t know whether all underpayments are identified and recovered unless you perform a secondary review using another vendor.
Kathy: A secondary review will highlight additional recover opportunities and potentially, opportunity trends. These trends can then be compared to the revenue recovery results of your primary vendor.
It is important to manage your transfer vendor like you manage your other revenue recovery partners you utilize in your revenue cycle.
Michael: Can you talk about the type of documentation that hospitals should require back from their vendor?
Kathy: An audit trail of the vendor’s work should be provided to justify the recommended discharge status or condition code changes. This documentation should then be provided electronically or manually and be accessible to both medical records and the business office should an audit ever occur.
Michael: Kathy, what other value-added services should a hospital expect from their transfer vendor?
Kathy: Education back to the providers on lessons learned from the review is really best practice. There are some process improvement opportunities that can be implemented by the hospital as a result of the Transfer DRG underpayment review. That will allow hospitals to capture underpayments concurrently going forward.
Also, vendors should be reviewing claim rejections with scrutiny to ensure the rejection is accurate. The reality is there is human element to this review by the transfer vendor, the post-acute providers and the MACs and your vendor should be closely reviewing and resolving every claim that is rejected.
Michael: Kathy, do you have any closing recommendations for providers?
Kathy: Transfer DRG recovery ensures hospitals are properly paid. It’s an important initiative requiring finance department oversight. But it’s also important to integrate other departments such as the business office, medical records and compliance into the vendor management functions. The revenue recovery effort and relationship with the vendor will work best when it’s a collaborative initiative.
Michael: Kathy, thank you so much for the great insights and for spending some time with us today.
Kathy: Thank you.
Resources related to this episode:
- [White Paper] Transfer DRGs: Approaches to Revenue Recovery
- [Special Report] Transfer DRG Underpayments: Still an unsolved problem?