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That’s how CMS puts it in response to a recommendation made by the Department of Health & Human Services Office of Inspector General (OIG) in its June 2010 report entitled Review of Inpatient Rehabilitation Facilities’ Compliance With Medicare’s Transfer Regulation During Fiscal Years 2004 Through 2007.



More specifically, the OIG recommended that CMS consider reviewing inpatient rehabilitation facility (IRF) claims paid after the audit period to identify any improperly coded transfers. CMS agreed to do this, explaining that RACs review Medicare claims on a post-payment basis and are tasked with identifying underpayments and overpayments.


Transfer Regulation: More or Less


For the audit period, the OIG auditors discovered that IRFs did not always code claims in compliance with Medicare’s transfer regulation, which, in a nutshell, works like this. Medicare pays the full prospective payment to an IRF that discharges a beneficiary to their home. Medicare pays a lesser amount if the beneficiary is considered a transfer case. Whether Medicare pays for a discharge to home or a transfer to another facility depends on the patient status code indicated on the IRF’s claim.


Previous OIG audits identified Medicare payments that occurred because IRFs did not comply with Medicare’s transfer regulation. In those reports, the OIG recommended that CMS implement edits in the common working file (CWF) that match beneficiary discharge dates with admission dates to other providers to identify claims potentially miscoded as discharges rather than transfers. In response, CMS implemented a CWF edit on April 1, 2007.


$34-Million Overpaid


In this follow-up audit, the OIG reviewed a sample of 220 claims. Of the 220 claims, seven claims paid after the implementation of the CWF edit were not subject to the transfer regulation. The remaining 213 claims, which pertained to transfers to facilities that were subject to the transfer regulation, were improperly coded as discharges. These 213 claims resulted in overpayments of $1,212,745. Based on the sample results, the OIG estimated that Medicare fiscal intermediaries (FIs) overpaid $34,051,807 to IRFs for the four-year period that ended September 30, 2007.


In its recommendations, the OIG directed CMS to have its Medicare contractors recover the $1,212,745 uncovered in the audit, which, of course, the agency agreed to do. It also agreed to work to improve its oversight to ensure IRF compliance. As stated above, part of this effort will be to inform RACs that IRFs’ transfer policy would be a lucrative place to identify overpayments.


About the Author

Barbara Vandergrift, RN, BSN, MA, is a senior healthcare consultant with Medical Learning, Inc. (MedLearn®), St. Paul, MN. MedLearn is a nationally recognized expert in healthcare compliance and reimbursement. Founded in 1991, MedLearn delivers actionable answers that will equip healthcare organizations with their coding, chargemaster, reimbursement management and RAC solutions.

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