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November 26 , 2007

Discharge Disposition Dilemma
By Judy Sturgeon, CCS
For The Record
Vol. 19 No. 24 P. 30

Acute care hospitals routinely struggle to meet the reporting and payment requirements on PACT DRGs for Medicare DRGs.

In 1997, Medicare instituted the first 10 pilot post-acute care transfer diagnosis-related groups (PACT DRGs) and varied payment depending on the DRG and its geometric mean length of stay (GMLOS). If the inpatient was discharged to one of several secondary levels of care other than a home and the DRG was in the pilot group, payment was reduced if the length of stay was more than one day short of the GMLOS for that particular DRG.

What possessed Medicare to make this change? Medicare felt that it was essentially being charged twice for a patient’s care when the hospital received a full DRG but transferred the patient somewhere else for continued care in a shorter-than-average length of time. Medicare had to pay again for services from secondary caregivers such as rehab facilities, skilled nursing facilities, and home health agencies. To allow for this extended reimbursement issue, Medicare studied data from claims previously billed and decided to institute a separate payment methodology for select transfer DRGs.

How did Medicare choose which DRGs to include? According to the July 31, 1998, Federal Register, the selections were “based upon a high volume of discharges classified within such group and a disproportionate use of certain postdischarge services.”

As with many government-created processes, it gets worse instead of better. The Centers for Medicare & Medicaid Services (CMS) didn’t standardize the payment formula so facilities could consistently validate correct payment. For some PACT DRGs, the pay was calculated on a per diem basis for the specific facility—the hospital would receive double the per diem for the first day of service and the per diem for each additional day of service up to the full value of the standard DRG. Three of the 10 DRGs typically had huge charges in the first day or two of service and therefore would not cover average costs using this methodology. For the special group, the facility would receive one half of the usual DRG payment for the first day of service and then one half of the per diem for each subsequent day until the full DRG payment was reached.

What is a per diem? Divide the usual DRG payment by its GMLOS to calculate the average daily payment, or per diem. For example, a DRG that typically pays $30,000 and has a six-day GMLOS would have a per diem of $5,000. If that DRG was in the PACT group and the patient stayed two days and was discharged to a skilled nursing facility, there are two payment possibilities. The usual method would pay $10,000—double per diem—for day one and $5,000 for the subsequent day, or $15,000 total. If the DRG was in the special group, it would pay one half the usual DRG for day one—$15,000—and one half a per diem ($2,500) for the subsequent day for a total of $17,500. Note that the few special payment PACT DRGs are surgical cases with significant costs incurred on day one of admission.

For Medicare to limit payment on the PACT DRGs for the year, the patient must meet one of the following discharge criteria:

• be discharged to a hospital or hospital unit that was excluded from payment under the prospective payment system;

• be discharged to a skilled nursing facility; or

• be discharged to home but with a written care plan for home health services with the services being related to the reason for which the patient received inpatient hospital care, and the services started within three days of discharge from the inpatient facility.

When Medicare receives a claim from one of the above care providers immediately following an inpatient discharge and it was not billed with the corresponding discharge disposition, it recoups the payment from the acute care hospital and requires the claim to be rebilled with the corrected discharge disposition before it will recalculate and remit that PACT payment. Several issues arise from this mandatory claim correction process.

Even if the length of stay exceeds the DRG’s GMLOS and no change in payment will be made, the hospital must surrender its previous payment, correct the discharge disposition on the claim, and resubmit to get paid the same amount.

In all instances, Medicare assumes that the inpatient hospital has made the error. If the secondary care provider billed incorrectly, fraudulently, or on the wrong patient, the acute care facility can still be penalized. If the patient’s physician placed orders that the patient was well and ready to return to a simple nursing home residence and the receiving facility decides to place him or her in skilled nursing facility care instead, the acute care hospital loses payment on qualifying DRGs with shorter stays. If the patient is discharged to his or her home only but the personal physician later orders home health services within three days of discharge, the presumption by Medicare is that the care was related to the inpatient stay, and hospital payment is recouped until a corrected claim is submitted.

There is no appeal pathway. If the provider does not send a corrected claim, it simply loses the money. Providing chart copies to prove the discharge disposition that was originally billed matches the patient documentation will not alter the process. When hospitals protested the requirement to change a claim for payment when it was not supported by the medical record information, Medicare responded with Transmittal 140. This effectively releases the hospital from an Office of Inspector General penalty for noncompliance on this specific problem when claims trigger common working file (CWF) edit 7272, and the facility is instructed by the CMS to change the discharge disposition and resubmit for recalculated payment.

Charlotte Lane, RHIA, CCS, a consultant for hospital corporations such as HCA Healthcare Corporation and Ardent Healthcare Services and other coding consulting firms, believes communication is the key. “I think the biggest issue is that HIM departments don't interact with UR [utilization review] or case management to determine exact services provided at each post-acute care facility,” she says. “Or there may be a list of post-acute care facilities with services provided, but it hasn't been updated since the transfer provision went into effect. As with so many other things, the tendency is not to interact with other departments within the hospital.”

Lane laments coders who get caught between two parties when documentation issues arise. “The other thing I've noticed is which set of documentation do they use when assigning discharge status indicator: the physician's or case management's?” she questions. “If the doc's orders conflict with case management notes on type of post-acute care, do the coders have a procedure for clarifying correct status?”

Since productivity standards have such an impact on coding staff, they often do not take the extra time to make certain they have the correct discharge status. For example, Mr. Hip developed a postoperative staph infection and was transferred to Mom and Pop Nursing Home for intravenous antibiotics therapy. If the coders don't know that Mom and Pop has five skilled nursing beds, then they may incorrectly assign a status of 04 rather than 03.

While a normal Medicare DRG audit will correct both underpayments and overpayments, such is not the case with the PACT DRG discharge disposition discrepancies. If the payer identifies cases where the patient did get post-acute care but the claim didn’t have the matching discharge disposition, it is quick to rescind the original payment. However, if the hospital reports “discharge to home health” but the patient never follows through or discharges with expected skilled nursing facility care but no such bed is available, no corrected claim will be requested and no extra payment will be made.

The burden is on the hospital to follow up on these cases and validate that the reported level of care was in fact provided—and provided within the qualifying time frame. This type of account research is labor intensive; the facility cannot simply resubmit all possible underpaid claims with another discharge disposition in the hope that it results in a higher payment. Such a move would constitute a significant compliance breach because it would be viewed as submitting false claims to Medicare for those that truly did receive qualifying post-acute care.

Timely follow-up and claim correction is another issue since the hospital must work within the constraints of mandatory filing deadlines. The provider’s staff would have to track reports of target cases at risk for underpayment, contact the nursing homes and local home health providers to make sure the patient received the expected services and accomplish this within the filing deadline for corrected claims to the payer before it would be entitled to send a corrected claim.

According to customer service for Trailblazer Health Enterprises, the Part A/Part B Medicare administrative contractor for Texas, New Mexico, Colorado, and Oklahoma, even if the facility contacts the home health provider and receives confirmation that the patient did not receive the expected care, there is another major hurdle that must be overcome. If the secondary provider has created a case file with Medicare for that patient under the intended level of care, Medicare holds that file open until the secondary care provider requests that it be closed. Even if the hospital submits an appropriate corrected claim with “discharge to home,” Medicare will not send a corrected payment or contact the secondary provider for an updated file. The hospital is burdened to convince the secondary care facility to do so with no benefit for that agency to respond in a timely manner.

In evaluating a facility’s process in handling Medicare PACT DRG cases, several questions must be answered and processes adjusted accordingly to be certain that both compliance and financial needs are met.

Who initially enters the discharge disposition into the hospital information system? Do you trust the interface from the unit clerk’s entry at the patient floor to be correct? Do your coders check the physician orders and the social worker/case manager/care manager/utilization review staff notes?

Do your coders take extra time to validate the discharge disposition for only Medicare patients, or do they do so for all financial classes? If they only review cases currently listed as Medicare financial class, what happens to Medicare secondary or tertiary claims? Along the same lines, does your staff validate the discharge disposition only on transfer DRGs for the year or for all DRGs? Validating only a subgroup increases the chances that some will be missed when a coder is feeling the pressure to produce and forgets to differentiate financial classes and custom DRGs for special handling.

If the physician’s orders do not match the social worker/care manager/utilization review notes for discharge disposition, whom do you believe? Do you query for clarification?

When Medicare recoups payment because it has received a subsequent claim from one of the target caregivers and your original claim did not identify this accurately, does your billing staff correct the claim and promptly resend it? Do they first check the documentation or ask your coding staff to validate the corrected claim prior to rebilling?

If coders do review the case, do they correct the coded abstract to match the recoupment directions from Medicare? Even if the billed code matches the documentation in the chart? (For example: You discharged to home, but the patient’s primary care physician later arranged home health within three days of discharge.)

Does anyone ever communicate to the coder or acute care staff that an error was made at their level in the process? If not, how will they know to tend to the issues more carefully and prevent future errors? If your facility uses an electronic medical record, is it programmed with discharge descriptions matching those needed for Medicare claims reporting?

Does your facility check to see if the patient actually received home health services or a skilled nursing facility level of care? If the patient never utilized the intended service and the hospital did not receive full payment for the DRG, it is legitimately entitled to rebill the claim with a corrected discharge disposition and receive full payment. Is there a way to create such a process that will cost less than it recovers?

Also to be considered is the volume of cases at risk. One facility may only have a few; however, a large urban hospital with a significant Medicare population may have a significant financial incentive to initiate an appeal process for these underpaid claims.

What is the turnaround time for corrected claims? When Medicare recoups what it considers to be an incorrect claim, any delay in rebill is a delay in usable cash and interest that it could be accruing.

In the coding arena, it should be obvious that many critical factors in the discharge disposition dilemma are handled by the billing department. Billers reading the summary will be concerned by how much responsibility lies in the coding department, and unless someone notifies the unit clerks and care managers, they will probably never read the document—and may refer to all discharges as “nursing home resident” when the true status may be on the skilled nursing wing (causing recoup-rebill delays). Conversely, they may call everything an “SNF [skilled nursing facility] discharge” when the patient is transferred to a facility that doesn’t have a skilled nursing facility unit, causing underpayments that may never be detected and corrected.

This new transfer DRG payment system must have worked well for Medicare because the number of PACT DRGs has increased significantly each subsequent year. For the coding year 2007 to 2008, 273—nearly 37%—of the 745 total Medicare severity DRGs are in this category. Of those, only 25 qualify for special payment methodology.

It is imperative in the face of diminishing payments and increasing regulations that the acute care facility do everything in its power to make certain the initial discharge disposition on the claim is correct to the best of its knowledge and follow diligently those cases at risk for underpayment. Communication, education, and persistence can pay off.

For detail on the history, reasoning, and process of the PACT DRGs, visit here. Also, contact your representatives and let them know how you feel about the burden of the PACT DRGs on your hospital.

— Judy Sturgeon, CCS, is the hospital coding senior manager at The University of Texas Medical Branch in Galveston and a contributing editor at For The Record. While her initial education was in medical technology, she has been in hospital coding and appeal management for the past 18 years.