Medicare Inappropriately Paid Hospitals' Inpatient Claims Subject to the Postacute Care Transfer Policy

Hospitals are required to include patient discharge status codes on all inpatient claims and are responsible for coding each bill on the basis of the discharge plan for the patient. Medicare inappropriately paid 6,635 Medicare claims subject to the postacute care transfer policy during the period January 2009 through September 2012. The hospitals used incorrect patient discharge status codes on their claims, indicating that the patients were discharged to home or certain types of health care institutions rather than transferred to postacute care. Of these claims, 91 percent were followed by claims for home health services, and 9 percent were followed by claims for services in other postacute care settings. Medicare overpaid the hospitals by $19.5 million. Medicare overpaid the hospitals because the Common Working File (CWF) edits related to postacute care transfers were not working properly. Medicare could have saved approximately $31.7 million over 4 years if it had had controls to ensure that the CWF edits were working properly.

We recommended that the Centers for Medicare & Medicaid Services (CMS) (1) direct the Medicare contractors to recover the $19.5 million in identified overpayments in accordance with CMS's policies and procedures; (2) direct the Medicare contractors to identify any transfer claims on which the patient discharge status was coded incorrectly and recover any overpayments after our audit period; (3) correct the CWF edits and ensure that they are working properly; and (4) educate hospitals on the importance of reporting the correct patient discharge status codes on transfer claims, especially when home health services have been ordered.

CMS partially concurred with our first and second recommendations and concurred with our third and fourth recommendations.