Audit Finds Hospital Post-Acute-Care Transfer Policy Overpayments

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 is triggered when an inpatient claim has one of the 280 “Transfer DRGs,” the LOS is less that the geometric mean LOS for that DRG, and the patient is discharged to a qualifying post-acute care facility. When these criteria are met, CMS automatically applies a per-diem payment to the claim.

Hospitals are responsible for coding claims on the basis of their discharge plan for the patient and should adjust claims if they find out 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 being seen by Home Care prior to entering the Hospital and then resumed Home Care upon discharge, the Hospital failed to properly 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 took a sample of 150 inpatient claims to examine this area, Based upon the audit of the 150 claims, the OIG arrived at the estimated impact of overpayments to Hospitals related to this issue.

CMS put edits in place to ensure PACT policy overpayments do not occur. If these edits are working properly, your Medicare Administrative Contractor (MAC) will reject or “return to provider” (RTP) all claims for which qualifying post-acute care services are noted in line with regulatory timeframes. For home health services, this is within three days of discharge. For skilled nursing services, care must occur on the date on discharge. This will trigger providers to correct the coding to reflect a per-diem payment instead of the full DRG payment to account for the patient transfer.

If the coding is not corrected, no payments will be received. 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 subsequently they were not notified to take action.

Insights and Recommended Action: As a result of the audit, the OIG recommends that CMS direct 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 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 Cloudmed, our standard comprehensive reviews include identification of accounts potentially impacted by CMS changes and regulations such as those subject to the PACT policy. Our reviews ensure that potentially affected accounts were probably billed and paid, and that any new edits are working appropriately. Cloudmed 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 ensure a focus is made to consistently monitor rejections in search of cases affected by CMS edits. Impacted claims should be adjusted and resubmitted with the appropriate information to receive accurate payment.

Cloudmed regularly performs 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 Cloudmed’s comprehensive reviews.