While supplies last! Free 2022 Coding Essentials for Infusion & Injection Therapy Services book with every RACmonitor webcast order. No code required. Order now >



Providers should check their RAC communications and the Remittance Advice (RA) codes for N432, because we are starting to see automated takebacks on patient status discharge disposition errors associated with inpatient MS-DRGs.


The Post-Acute Care Transfer policy, or PACT, has been a compliance issue for years, and a revenue recapture area as well. The RAC demonstration project found overpayments and underpayments in this area, and now the permanent program is starting to do the same.


The Medicare PACT policy distinguishes between discharges and transfers of beneficiaries from hospitals under the inpatient prospective payment system. Medicare issues full Diagnosis-Related Group (DRG) payments to hospitals that discharge inpatients to their homes. In contrast, for specified DRGs (and now MS-DRGs), Medicare pays hospitals that transfer inpatients to certain post-acute care settings (such as skilled nursing facilities or home health care sites) a per diem rate for each day of the stay not to exceed the full DRG payment for a discharge.


Post-Acute Care Transfers


A post-acute care transfer occurs when a beneficiary whose hospital stay was classified within specified DRGs is released from an IPPS (Inpatient Prospective Payment System) hospital in one of the following situations:


The beneficiary is admitted on the same day to a hospital or hospital unit that is not reimbursed under the IPPS.


  • The beneficiary is admitted on the same day to a skilled nursing facility.


  • The beneficiary receives home health services from a home health agency, the services are related to the condition or diagnosis for which the beneficiary received inpatient hospital services, and the services are provided within three days of the beneficiary’s hospital discharge date.


A discharge status code is a two-digit code that identifies a beneficiary’s status at the conclusion of an inpatient stay. When a hospital discharges a beneficiary to home, discharge status code 01 (discharge to home) should be used. However, when a beneficiary is transferred to a setting subject to the PACT policy, a different discharge status code should be used, depending on the type of post-acute care setting.


For example, discharge status code 03 should be used when the beneficiary is transferred to a skilled nursing facility, while discharge status code 06 should be used when a beneficiary is transferred to home for home health services – or when the discharge was reported when the patient in actuality started home health care within three days of discharge from the hospital. Providers often don’t know that an intended patient status was not accomplished. A family could decide upon a different discharge care arrangement within three days after the acute-care discharge, thus making the CWF the only data validation source. Coding professionals often say the documentation in the medical record is conflicting, so that is something to address at your medical center.


The OIG released a report estimating that certain hospitals had improperly coded 15,051 claims during a three-year period ending Sept. 30, 2005, and that, as a result, Medicare overpaid $24.8 million to these hospitals. Access the OIG report at http://oig.hhs.gov/oas/reports/region4/40703035.pdf


It is important to note that the Centers for Medicare and Medicaid Services (CMS) implemented a Common Working File (CWF) edit on April 1, 2007 to identify transfers that often are improperly coded as discharges.


In a July 2010 OIG report, the federal oversight agency identified incorrect patient status codes on acute Inpatient Rehabilitation Facility (IRF) stays. The report is titled “Review of Inpatient Rehabilitation Facilities’ Compliance With Medicare’s Transfer Regulation During Fiscal Years 2004 Through 2007 (A-04-09-00059).” The OIG reviewed a sample of 220 claims, finding that patient status codes were coded incorrectly on 213 of them, resulting in $1.2 million in overpayments (Medicare pays IRFs a higher amount for patients who discharge home than those who transfer.) Based on the sample, the OIG estimated that IRFs nationwide were overpaid $34 million for the four-year period that ended Sept. 30, 2007. Access the OIG report at http://www.oig.hhs.gov/oas/reports/region4/40900059.pdf


The CWF provides insight into patient movement from different levels of care. This is a link for RACs into improper payment specific to discharge patient status codes. However, the majority of healthcare institutions, both acute inpatient and acute rehabilitation, don’t conduct audits comparing the CWF to their reported patient status codes within their abstractions or coded data. Now, that being said, there are ways to accomplish this validation, including using an external vendor to help conduct data-mining exercises or for establishing one’s own internal PACT confirmation processes.




Identifying underpayments also is an area in which providers can recoup lost revenue. The auditing and validation process for this activity also can be accomplished by data mining and accessing the CWF.


Providers should stay on top of this particular compliance risk area and run some reports on patient status codes, comparing them to the CWF.  Rebilling and correcting these claims can capture lost revenues for your organization and maintain accuracy within this data element.


Your RAC committee also may want to conduct a small probe audit on 50 inpatient records for patients who were transferred to another level of care after discharge in order to validate and/or confirm the statuses. Also, your RAC coordinator or manager should be receiving updates from the business office on any N432 notices to see if there are any automated takebacks for discharge status occurring. Then you’ll need to update your RAC tracking log/tool regularly to be sure you can identify patterns or trends in this area.


About the Author


Gloryanne Bryant, RHIA, RHIT, CCS, CCDS, is the Regional Managing Director of HIM for 21 acute-care hospitals in Northern California. She Co-chairs the regional RAC Committee with compliance.


Contact the Author




To comment on this article please go to editor@racmonitor.com


To read article entitled, “Winter Blues, Social Admissions, and Lack of Medical Necessity: Are you RAC-ready?,”  please click here


References: Hospital Compliance with Medicare’s Postacute Care Transfer Policy During Years 2003 through 2005, OIG Report 2007; http://oig.hhs.gov/oas/reports/region4/40703035.pdf; http://www.oig.hhs.gov/oas/reports/region4/40900059.pdf


You May Also Like

Leave a Reply

Your Name(Required)
Your Email(Required)