DEVELOPING: RACs Target Condition Code 42

While hospitals are continuing to wonder when the Recovery Audit Contactors (RACs) are going to be given approval to start auditing short-stay inpatient admissions, the RACs continue to expand their non-admission status targets.

Last week, two of the RACs, Cotiviti and Performant, received approval to audit hospitals for the use of condition code 42.

What the heck is condition code 42, you ask? Well, so did I. It is a condition code that is put on a claim when an inpatient is being discharged with home health, but the home health treatment is unrelated to the hospital treatment. An example would be a homebound patient with a chronic wound who receives home care services after being hospitalized with pneumonia.

Say the treatment of the pneumonia is completed in the hospital in three days. The admission is assigned DRG 178, respiratory infections and inflammations with CC, with a geometric mean length of stay (GMLOS) of 4.7 days. The patient is discharged back home with resumption of home care for the wound, but no additional care needed for the pneumonia. If condition code 42 is applied to the claim, there will be no post-acute payment reduction.

What is a post-acute payment reduction, and why do they exist? Simplistically, I view them as taking part of the DRG payment for the admission back from the hospital because they did not complete the treatment for the patient’s condition. In the case above, since the actual length of stay is more than one day less than the GMLOS, if the patient was discharged to receive home care services for her pneumonia or was discharged to a skilled nursing facility (SNF) for care, the hospital would have a reduction to their payment for the admission. If she was kept another day or two, the patient may not have needed that post-acute care, so the hospital should not be financially “rewarded” for an early discharge.

(As an aside, the post-acute transfer policy applies if the patient starts home care within the three calendar days after discharge, but the payment for discharge to a SNF only applies to transfers on the day of discharge. That means if a patient is discharged home and then is admitted to the SNF the next day, there is no payment reduction.)

This means that if a hospital applies condition code 42, there is no post-acute payment reduction to the DRG; the patient’s illness was treated completely and the hospital earned the right to receive the total payment, even if the stay was shorter than predicted by the DRG data. While many of us have never heard of it, apparently it is used enough for the Centers for Medicare & Medicaid Services (CMS) to allow the RACs to audit for it – so it must have some pretty hefty money behind it.

I would suggest that each reader check with your billing staff to ask how often you use condition code 42, and find out who makes the determination that its use is appropriate. The decision to apply condition code 42 is not one that can be made by someone without a clinical background. If the coders are applying it independently, an in-depth analysis (and perhaps a call to your compliance hotline) are in order.

Program Note:

William Dombi, vice president of law for the National Association for Home Health and Hospice, will be reporting on condition code 42 during the next edition of Monitor Mondays, Aug. 14, 10 a.m. Eastern.

Register to listen.