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December 2001
Office of Inspector
General
 Medicare Inpatient
Hospital Prospective Payment System Transfers Incorrectly Reported
as Discharges
(A-06-00-00041)
BACKGROUND
A prospective payment system (PPS) transfer occurs when a
patient is admitted to a PPS hospital on the same day that he/she
is discharged from a different PPS hospital. When a PPS transfer
occurs, payment to the hospital from which the patient is
transferred is based on a per diem methodology. If the
transferring PPS hospital incorrectly reports the transfer as a
discharge, it receives the full diagnosis related group payment,
which is often more than the per diem payment for a transfer. In
this review, the transferring hospital would have received a
lesser payment about 52 percent of the time had it reported a
transfer rather than a discharge.
Hospitals that do not accurately report PPS transfers have been
a concern of both the Office of Inspector General (OIG) and the
Centers for Medicare & Medicaid Services (CMS) for many years.
Shortly after the implementation of PPS, OIG began work to
determine whether PPS hospitals properly adapted to the new rules
governing payment for PPS transfers. In 1988, OIG issued a report
where it determined that PPS hospitals had not taken steps to
properly report PPS transfers. In 1992, following a successful
pilot project in Region VI, OIG and CMS initiated a nationwide PPS
transfer recovery project. The pilot and nationwide recovery
projects resulted in about $219 million in Medicare recoveries.
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