Health Information Management

Don't let improper discharge disposition codes fly under the radar at your facility

JustCoding News: Inpatient, June 23, 2010

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You may think the discharge disposition codes you assign are correct, but discharge plans often change after patients leave the hospital. Discharge codes should reflect those changes, particularly when compliance ramifications—and dollars—are at stake.

Hospitals could inadvertently leave money on the table when cases fall into MS-DRGs subject to the Post Acute Care Transfer (PACT) policy, says William E. Haik, MD, director of DRG Review, Inc., in Fort Walton Beach, FL. The PACT policy reduces hospital payments to a per diem rather than a full DRG amount when patients are discharged to certain postacute care settings.

Many hospitals don’t follow up with patients after discharge and simply assume the per diem payment is correct, says Haik. The countless retrospective audits he performs often reveal significant underpayments due to incorrect assignments of discharge disposition codes that trigger the PACT policy. “There’s a myriad of pitfalls where the hospital can be adversely affected financially with this payment methodology,” he says.

Recovery audit contractors (RAC) already are taking a closer look at patient discharge status. For example, CGI Federal (the RAC for Region B) is auditing hospital-to-hospital transfers to identify MS-DRG inpatient claims improperly reported as a discharge to home instead of a transfer to another hospital. When patients are discharged home, transferring hospitals receive a full DRG payment they might not actually deserve.

HealthDataInsights (the RAC for Region D) is auditing incorrect patient status in the inpatient rehabilitation facility setting. Its intent is to determine the validity of discharge status codes when patients are transferred to another facility.

RACs aren’t alone in looking for overpayments. CMS has implemented billing edits through its Common Working File—a major repository for Medicare admissions, discharges, and transfers—to identify overpayments as well. Ironically, no edits identify underpayments, underscoring the need for hospitals to monitor and retrospectively audit discharge disposition codes, says Haik.

Many hospitals are unaware of condition codes they can report, when appropriate, to circumvent the PACT policy and receive a full MS-DRG payment, says Debbie Mackaman, RHIA, CHCO, regulatory specialist for HCPro, Inc., in Marblehead, MA, and an instructor for HCPro’s Medicare Boot Camp®—Hospital Version.

Consider the following scenario:

  • A patient with pneumonia and acute respiratory failure (MS-DRG 193) is discharged home after four days with instructions to follow up with a home healthcare agency regarding care for pneumonia within the next three days
  • A coder or biller assigns discharge disposition code 06 to denote a patient was discharged or transferred to home under care of organized home health services in anticipation of covered skilled care to begin within three days of discharge
  • A hospital receives a per diem DRG payment based on the PACT policy because the transfer occurred before the geometric length of stay for this DRG (i.e., 5.3 days)

However, what happens when a patient postpones home healthcare so that services are rendered after three days have passed?

When this occurs, coders and billers should report discharge disposition code 06 and condition code 43, which denotes discharge with home care services that don’t begin until after the third day post-discharge. This allows transferring hospitals to receive a full DRG payment.

Another question concerns what coders and billers should do when home healthcare is unrelated to the reason for the inpatient stay. For example, if a patient with a urinary tract infection (UTI) is discharged to home healthcare for resumption of care for a decubitus ulcer (and not the UTI), coders and billers can report condition code 42, says Haik.

This condition code indicates the home health treatment plan is unrelated to any conditions or services addressed during the inpatient stay. Conditions treated during the hospital stay include those for which a patient was admitted, as well as any new conditions that developed during the stay, says Haik.

Many hospitals don’t report condition codes 42 and 43, says Mackaman. Instead, they simply assign discharge disposition code 01 (discharge to home) when patients don’t meet the criteria for 06. This practice is noncompliant and could subject hospitals to Office of Inspector General reviews and RAC audits, she says.

Coders and billers should audit claims retrospectively to ensure correct discharge disposition status codes based on the setting to which a patient ultimately went—not necessarily the setting the physician may have ordered, says Mackaman. “Just because the physician ordered something doesn’t mean that it actually occurred,” she says. “Sometimes you have to dig into nursing notes, social work notes, or case management notes.”

The audit process can be laborious, but it’s well worth it in the end, Haik says. A recent audit revealed $400,000 in missed reimbursement over the course of 16 months. The culprit? Incorrect discharge disposition codes that inadvertently triggered the PACT policy.

During retrospective reviews, coders and billers should:

  • Generate a report of all cases with discharge status codes that trigger the PACT policy. Compare the hospital length of stay (LOS) for each transfer with the geometric mean length of stay (GMLOS) for the specific DRG. When the hospital LOS is less than the GMLOS, follow up with the facility to which the patient supposedly was transferred. This task typically is assigned to a case management staff member who calls the postacute care facilities directly, says Haik.

Coders also sometimes perform this task, Mackaman says. Calling postacute care facilities is often an onerous process, particularly when the name of the specific facility isn’t documented. In urban areas with numerous home health agencies, for example, determining which one actually provided services is much more difficult, she says.

Focusing on high-volume or high-dollar MS-DRGs is another approach. Determine whether any of these DRGs are subject to the PACT policy and whether any related claims include discharge status codes 06. Then audit for compliance and to determine whether condition codes 42 or 43 would have been applicable, says Mackaman.

Reviewing discharge dispositions generally should be part of larger audits that look at documentation, coding, and other aspects of the chart, she adds.

  • Open the lines of communication with education. If coders understand the PACT policy, they can educate discharge planners regarding the importance of documentation of patient discharge status, says Mackaman. 
  •  Be inquisitive. Ask questions during retrospective audits. Determine whether documentation supports assignment of the specific discharge disposition code. If it doesn’t, additional coder or discharge planner education may be necessary.

When a discharge disposition code triggers the PACT policy, call the postacute care facility and ask:

  • Did the patient go to that postacute care setting, or did the patient refuse care entirely?
  • If the patient received home healthcare, on which day did the services begin? Was it within three days of discharge? Was the home health service related to the reason for hospitalization?
  • If the patient received skilled nursing care, was it actually skilled care, or was it custodial care, intermediate care, or hospice care?

Only skilled care is subject to the PACT policy, says Haik.

This article was originally published in the June issue of Briefings on Coding Compliance Strategies. E-mail your questions to Contributing Editor Lisa Eramo, CPC, at

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