Accurate coding for transfer to post-discharge facilities

Accurate ICD-9-CM codes for diagnoses and procedures performed during a hospital stay will only partially determine payment. Discharge status codes must be given equal attention.

Accurate ICD-9-CM codes for diagnoses and procedures performed during a patient's acute care hospital stay will only partially determine payment for the hospitalization. Discharge status codes also play a major role in determining the hospital's payment and must be given equal attention.

Fifteen years after the implementation of Medicare Diagnosis-Related Group (MS-DRG) reimbursement for inpatient hospital stays, CMS determined that hospitals should not receive the full DRG payment if the patient required subsequent services from other agencies also paid by Medicare. At the start, 10 DRGs were subject to payment reduction; currently, the number is 273.


CMS will reduce reimbursement to a hospital when all of the following conditions exist: an acute care patient falls under one of the 273 DRGs, the patient is transferred to one of the selected post-discharge destinations, and the transfer occurs more than 24 hours before the last day specified by CMS’ Geometric Mean Length of Stay (GMLOS).

Consider the example of a nursing home patient admitted for treatment of aspiration pneumonia with a secondary diagnosis of acute and chronic systolic congestive heart failure. By hospital day four, the patient no longer requires an acute level of care. In addition, the patient has achieved the required three-day qualifying stay for Medicare-reimbursed skilled nursing care. She continues to need skilled nursing care for continuation of intravenous (IV) antibiotics, as well as respiratory and physical therapy to prevent further deterioration of her ability to ambulate.

On hospital day four, she is transferred to a skilled nursing facility (SNF) for continued care. Rather than receiving the usual full DRG for this case ($11,218.68, based on a 7.2-day GMLOS), the hospital will receive reduced reimbursement of $6,267.67 for the three days she was hospitalized: $3,133.83 for the first day and $1,566.92 each for days two and three. CMS reimburses the hospital twice as much for the first day as for subsequent days because the former usually incurs higher costs.

If the patient had stayed the full 7.2 days, the hospital wouldn't be reimbursed for the seventh day, because it had already been reimbursed at a double rate for the first hospital day. If the patient had simply gone home before 7.2 days, and hadn't been transferred to a Medicare-reimbursed post-discharge destination, the hospital would still have gotten paid the full DRG rate.

Coders assign a discharge status code on the inpatient claim to inform the payer that the patient has been transferred to a Medicare-reimbursed post-hospital service. Complete, accurate documentation of the care level to which the patient was transferred is critical to payment accuracy.

Updating discharge documentation when plans change is also essential. For example, a physician may write orders for a patient to be seen by home health, but the patient is instead transferred to an assisted living facility at the patient's and family's request.

Errors in discharge status coding are a target for Recovery Audit Contractor payment recoupment. The Fiscal Intermediary or Medicare Administrative Contract may also audit these errors and recoup improper payments.

Discharge status codes that result in payment reductions include

Code 03: Discharged/transferred to an SNF in anticipation of covered skilled care.

The patient is directly transferred to a Medicare-certified SNF and qualifies for skilled care, regardless of whether he or she has skilled benefit days. This code includes the rehab unit of an SNF. Hospitals with an approved swing bed arrangement should use Code 61 instead, as this transfer is exempt from the payment reduction.

Note: Coders often report they can't determine from the documentation whether the facility to which the patient was transferred was an SNF or an intermediate care facility (ICF). If the patient is transferred to an ICF (Code 04), Medicare does not provide reimbursement and the full DRG will be paid to the hospital. Because some facilities are dually licensed as SNFs and ICFs, it is important that documentation reflect the intended level of care (i.e., skilled or non-skilled) to prevent either over- or underpayment.

Code 05: Discharged/transferred to a designated cancer center or children's hospital.

A list of National Cancer Institute Designated Cancer Centers is available online. Transfers to non-designated cancer hospitals should use Code 02.

Code 06: Discharged/transferred home under the care of an organized home health service organization in anticipation of covered skilled care.

The patient is discharged/transferred to home with a written plan of care for home care services to begin within three days following discharge. This code is not used for home health services provided by a durable medical equipment supplier or a home IV provider. If home health services are unrelated to the reason for hospitalization, use Code 42 and the transfer payment reduction will not apply.

Code 62: Discharged/transferred to a rehabilitation facility, including distinct rehab units within a hospital.

Use Code 03 if the patient is admitted to a rehab unit within an SNF.

Code 63: Discharged/transferred to a long-term care hospital.

Long-term care hospitals provide acute inpatient care with an average length of stay greater than 25 days.

Code 65: Discharged/transferred to a psychiatric hospital or distinct psychiatric unit within a hospital.

Use Code 43 if transferring to a psychiatric unit of a Veterans Administration hospital, and the transfer payment reduction will not apply.