Several acute-care hospitals will likely have to pay back $54.4 million to Medicare after an investigation found that the program wrongly billed inpatient claims subject to the post-acute care transfer policy. 

A new report by the Office of the Inspector General revealed the hospitals improperly billed the claims by using incorrect patient discharge status codes.

Specifically, they coded the claims as discharges to home or other types of healthcare institutions, like custodial care, rather than as transfers to post-acute care. 

By doing so, Medicare had to make full Medicare Severity Diagnosis-Related Group (MS-DRG) payments to the hospitals. If the claims were coded correctly to post-acute care, the federal program would have only paid a per diem rate for each day for each day of the beneficiary’s stay in the hospital. 

“The total overpayment of $54.4 million represented the difference between the amount of the full MS-DRG payments and the amount that would have been paid if the per diem rates had been applied,” the report stated. 

Medicare could have saved $70 million over six years if appropriate actions were taken, according to the OIG. 

Hospital compliance with the post-acute care transfer policy has been a longstanding issue, the OIG stated. Investigators reviewed more than $212 million in Medicare Part A payments for 18,647 inpatient claims subject to the policy. 

The agency recommended that CMS recover the $54.4 million in overpayments; identify any claims for transfers to post-acute care where incorrect status codes were used; and ensure Medicare contractors are receiving the post payment edit’s automatic notifications of improperly billed claims and making necessary adjustments. CMS agreed with the recommendations.