The OIG Finds $54M in Transfer DRG Overpayments – What Hospitals Need to Know

Doctor hand with magnifying glassThe purpose of this communication is to inform you of the Office of Inspector General (OIG) November 2019 audit regarding the Post-Acute-Care Transfer Policy (PACT). As a result of this audit, the OIG found that Medicare overpaid acute-care hospitals $54.4 million for 18,647 claims subject to the PACT policy for services rendered from January 1, 2016 to December 31, 2018. We can help you navigate the best action steps to avoid takebacks and ensure compliance.


The PACT policy was enacted in 1998 to prevent CMS from “paying twice” for a patient’s care. In cases where a patient was discharged early and sent to receive post-acute services to continue their treatment and recovery, CMS was paying the hospital the full DRG rate, regardless of the patient’s length of stay (LOS). 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.

The OIG’s November 2019 report found that Medicare overpaid acute-care hospitals more than $54 million as it relates to the PACT policy. Such audits are not new, nor are the findings. Prior OIG reviews for PACT policy discharges resulted in $242 million in estimated overpayments, where acute-care hospitals were paid the full DRG reimbursement when patients actually received post-acute care services after discharge. Of the $54.4 million in overpayments identified in the 2019 report, $45 million consist of overpayments for patients who received home health care services within three days of discharge, but the coding reflected a discharge to home. Another $7.3 million comprises patients who received skilled nursing services after discharge, but the coding reflected a discharge to home. The remaining overpayments of $2.1 million were related to patients who received other post-acute care, such as inpatient rehabilitation, and were coded as either discharge to home or another discharge status that resulted in full payment. A breakdown of the distribution can be seen below, as illustrated in Figure 2 from the OIG report.

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.


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 $54.4 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.

Recommended Action:

In addition to our traditional Transfer DRG review, we provide a listing of claims subject to the PACT policy that were coded as being discharged to home (status code “01”), meaning you were paid at the full DRG rate. Revint reviews these cases as part of our standard review to ensure that these accounts were properly billed and paid and verify that the MAC’s edits are working appropriately. With each review we complete an analysis of these claims to ensure that no post-acute services were rendered (i.e. skilled nursing, home health services post-discharge).

Revint recommends that you further investigate these claims to ensure no overpayments have occurred. If you learn that post-acute care was provided, we advise an adjustment claim be submitted to reflect the appropriate per-diem discharge status. Should you require further support, Revint is available to assist under a separate statement of work.

Finally, in anticipation of increased MAC and RAC audit activity and the potential for higher RTP or rejection rates, Revint advises your billing team to consistently monitor your rejected claims log in search of cases where the CMS edit took place. If this does occur, we recommend an adjustment claim is submitted with the appropriate patient discharge status code to receive a per-diem payment. Please note, as your vendor in this space, Revint has and will continue to perform routine, rolling lookback reviews for claims that rejected or RTP’d due to the CMS PACT policy edits. Revint will identify and bring to your attention any claims in which Medicare took back the original payment or provided zero payment due to a post-acute transfer and assist in getting these claims processed and paid appropriately.


Compliance related to the PACT policy remains a hot topic and hospitals must be vigilant in monitoring for risks. Discharges to home remain a key focus area for the OIG as evidenced in the latest report. Understanding these issues and being able to navigate your way around them will ensure that your organization stays clear of penalties and is not raising any “red flags.”