OIG: Medicare could save millions by expanding hospital transfer payment policy

Wednesday, October 25, 2023

The Office of Inspector General (OIG) recently conducted an audit to determine the financial impacts of expanding CMS’ hospital transfer policy for discharges to post-acute care to include all MS-DRGs.

The audit reviewed a stratified random sample of 100 acute-care inpatient hospital claims for Medicare enrollees who were discharged early to post-acute care between 2017 and 2019. The sampled claims were billed with specified MS-DRGs that are not subject to CMS’ hospital transfer policy.

Had the transfer payment policy included these MS-DRGs, 99 of the sampled claims could have had transfer payments based on the reduced per diem rate instead of the full payment, according to the OIG. This would have resulted in net Medicare cost savings of over $1 million.

The OIG estimated that Medicare could have saved nearly $700 million, or an average of $6,407 per claim, from 2017 to 2019 if its transfer policy included all MS-DRGs. “We expect the Medicare program could achieve similar cost savings in the future if CMS would expand the policy to include all MS-DRGs and hospital billing practices would remain the same,” said the OIG.

While this policy change might negatively impact revenue, the transfer payment would have exceeded hospital-reported costs for 65% of claims that hospitals billed to Medicare with MS-DRGs not subject to the transfer policy for enrollees who were discharged early to post-acute care, according to the OIG.

CMS has not made significant changes to the criteria for determining which MS-DRGs qualify for post-acute care transfer payments since 2005, according to the report. The OIG recommended that CMS conduct an analysis of its hospital transfer payment policy and expand the policy as needed.

Although CMS did not explicitly concur with the OIG’s recommendations, it said it will examine the data relative to the current list of MS-DRGs that are subject to the policy to potentially assist in the identification of additional MS-DRGs for future rulemaking.

Editor’s note: Find more NAHRI coverage of OIG audits and reports here.