Just as the seek-and-find book “Where’s Waldo” challenges you to find Waldo in a sea of similar characters, validating where your patients went after hospital transfers and discharges, can be a time-consuming in-house search process that affects hospital reimbursement.

Assigning the correct discharge status code may initially seem straightforward. However, once a patient leaves the hospital plans can quickly change. These changes are not always communicated back to the hospital staff by the post-acute provider, patient, or family member to update the discharge plan. In the event discharge changes are communicated to hospital staff promptly, there may not be any processes in place to update the patient’s medical record and adjust the discharge status code on the UB04-Medicare bill to reflect those changes.

Accurately reviewing the post-acute discharge or transfer that patients receive and identifying both over and underpayments can provide hospitals with meaningful insight into their transfer DRG operations. Budget and staffing constraints in hospital departments may not allow for a comprehensive review or even general follow-up with patients or post-acute facilities.

Currently, there are no Medicare edits in place to identify potential underpayments. The sole responsibility falls on the provider to validate the discharge disposition code billed. A common scenario is a patient who fails to comply with physician orders for home care upon hospital discharge. If the hospital never adjusted the Medicare claim to reflect the discharge to home, they will be paid a reduced per-diem rate instead of the full DRG reimbursement. Conversely, if a patient was discharged home by the hospital and then received orders from their primary care provider for home care services, the hospital would not be paid based on the original discharge disposition of home, but rather based on the patient receiving home care services. Acute and post-acute communication efforts are essential for capturing accurate hospital reimbursement.  A lack of communication could lead to OIG exposure.


The Centers for Medicare and Medicaid Services (CMS) reimburses Medicare inpatient hospital care based on Diagnosis Related Groups (DRGs). Currently, there are 280 DRGs (known as Transfer DRGs) paid under the Medicare Post Acute Care Transfer Rule (PACT Rule), which reduces payments to hospitals that transfer patients to other providers to continue treatment. The most common post-acute transfers are home health, hospice, and skilled nursing.

The Office of Inspector General (OIG) has identified millions in overpayments. The OIG revealed that CMS’s system edits to identify Transfer DRG overpayments were inadequate and not meticulously designed. The OIG also found that hospitals may be using condition codes incorrectly to bypass CMS’s system edits to receive higher payments for acute-care patients who received home health services after hospital discharge.

The discharge status code is a critical component of the PACT Rule. The hospital assigns the discharge status based on the expected treatment planned after the patient leaves its care. However, circumstances might change once the patient is transferred/discharged from the hospital, resulting in situations where the hospital may receive an over or underpayment. Especially seen through the Pandemic, post-acute care plans changed quickly and once the patient is outside the hospital, their care can evolve differently than originally planned. Although it will not lead to additional reimbursement in all cases, accurately representing where the patient obtains their continued care is extremely important.

External Transfer DRG Reviews

Take the guesswork out of Transfer DRG and engage McBee to provide a comprehensive review (Over/Under payment approach for your Transfer DRG applicable claims). Assist in capturing missed revenue opportunities and validate whether your hospital claims are paid correctly for full or per diem reimbursement. Limit your OIG exposure for any potential takebacks. McBee’s PACT Transfer Team will integrate seamlessly with your hospital’s HIM/PFS team to review and validate the discharge destination for your patients from a compliance and revenue recovery perspective. McBee will bridge that gap with post-acute providers to validate the original discharge disposition or if the new plan that was established was outside the initial discharge. McBee will provide documentation showing the discharge disposition changes and adjust and track claims to ensure corrected payments are received. Allow McBee to partner with your acute care hospital team to navigate the sea of discharges and transfers to deliver accurate and meaningful results.

Contact us for a free estimate today of our comprehensive Transfer DRG Review services.

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