RE: Medicare s Post-acute Transfer Policy and Condition Code 42 BACKGROUND

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1 Memorandum TO: FROM: Glenn Hendrix Doug M. Hance DATE: RE: Medicare s Post-acute Transfer Policy and Condition Code 42 BACKGROUND Medicare s post-acute transfer policy distinguishes between discharges and transfers of patients from hospitals. Pursuant to 42 CFR 412.4(e) and (f), Medicare pays full diagnosisrelated group (DRG) payments to hospitals that discharge patients to their homes. For certain DRGs, however, Medicare reimburses hospitals that transfer patients to various post-acute care settings (including home health care) a pier diem rate for each day of the stay, not to exceed the full DRG payment for a discharge. CMS requires that certain condition codes be used on claims for patients transferred to home for home health services that are not subject to the post-acute care transfer policy. The pertinent CMS Manual provides that the hospital should use condition code 42 with discharge status code 06 if the continuing care plan is not related to the condition or diagnosis for which the individual received inpatient hospital services. 1 CMS has also indicated that if the hospital s continuing care plan for the patient is not related to the purpose of the inpatient hospital admission, a condition code 42 must be entered on the claim. 2 Some patients are admitted to hospitals while in the middle of a home health care episode, and then subsequently discharged back to home health care. These situations ( Hospital Interludes ) raise the question of whether the home health care provided after the hospital stay can be considered unrelated to the hospitalization. 1 CMS Manual System Pub Medicare Claims Processing, Transmittal 311 (Oct. 8, 2004). Note that CMS used the phrase condition or diagnosis rather than conditions or diagnoses Fed. Reg , (Aug. 1, 2000). CMS continued by stating, If the continuing care plan is related to the purpose of the inpatient hospital admission, but care did not start within 3 days after the date of discharge, a condition code 43 must be entered on the claim. The presence of either of these condition codes in conjunction with the discharge destination code 06 will result in full payment rather than the transfer payment amount. We intend to closely monitor the accuracy of hospitals discharge destination coding in this regard and take whatever steps are necessary to ensure that accurate payment is made under this policy. 65 Fed. Reg , (Aug. 1, 2000). Note that CMS used the phrase purpose of the inpatient hospital admission, indicating that the question of whether the continuing care plan is related should be asked in relation to the purpose of the inpatient hospital admission. Note also that CMS stated that condition code 42 must be entered on the claim when it is appropriate, suggesting that the code is required rather than optional when appropriate.

2 Page 2 ISSUE 1. When there has been a Hospital Interlude, must the hospital always consider the subsequent home health care related to the hospitalization? 2. If not, what criteria should be applied in determining whether condition code 42 is appropriate? BRIEF ANSWERS 1. When there has been a Hospital Interlude, must the hospital always consider the subsequent home health care related to the hospitalization? Response: No, for reasons discussed in further detail below. In fact, because patients who are admitted to hospitals during home health episodes may have multiple, distinct medical conditions, Hospital Interludes might actually be more likely to result in the appropriate use of condition code 42 than situations involving patients admitted to hospitals directly from home. Condition code 42 asks whether the hospital s continuing care plan at the time of discharge calls for the provision of services unrelated to the condition responsible for the patient s admission to the hospital. Patients who are admitted while in the middle of a home health care episode may require additional treatment after their hospital stay for the same medical issue that was being treated by home health care prior to their hospital admission, and this medical issue could be distinct from the condition responsible for the patient s hospitalization. For instance, if someone receiving home health care for mobility issues due to a hip fracture is admitted to an acute care facility for the treatment of pneumonia, and then is subsequently discharged to home health for mobility issues related to the hip fracture, then condition code 42 would be appropriate, as the pneumonia stay should not be subject to the postacute transfer policy. 2. If not, what criteria should be applied in determining when condition code 42 is appropriate? Response:

3 Page 3 As discussed in further detail below, hospitals are responsible for deciding whether the home health care the patient is to receive as part of the hospital s discharge plan is related to the condition responsible for the inpatient hospital admission. In making that determination, the services called for in the hospital s continuing care plan should be compared with the patient s primary diagnosis not the secondary diagnoses listed on the hospital s bill. If any of the services called for in the hospital s discharge plan are related to the condition indicated by the hospital s primary diagnosis, then condition code 42 should not be used. Hospitals are not expected to compare home health bills to hospital bills in order to determine relatedness between the two providers treatment. However, whenever hospitals use condition code 42, they are expected to have documentation in the patient's record supporting their decision to use the condition code. DISCUSSION The preamble to the post-acute transfer rule demonstrates that CMS intended for hospitals to determine whether condition code 42 is appropriate at the time of discharge based on the hospital s continuing care plan and the patient s principal diagnosis. Hospitals are not expected to subsequently review the diagnosis codes on home health bills and compare these diagnosis codes to the hospital s diagnosis codes. o CMS Intended for Hospitals to Determine Relatedness at the Time of Discharge CMS indicated in the preamble to the post-acute transfer rule that hospitals would be responsible for deciding whether to use condition code 42 by reviewing the hospital s continuing care plan at the time of discharge. CMS described its decision while explaining the reasons why it ruled out alternatives. The following paragraphs demonstrate two possible methods for determining relatedness between the home health treatment and the prior hospitalization, neither of which has been adopted by CMS: With regard to an appropriate definition of home health services* * * relate[d] to the condition or diagnosis for which the individual received inpatient hospital services* * *, we considered several possible approaches. Under one approach we could compare the principal diagnosis of the inpatient stay to the diagnosis code indicated on the home health bill, similar to our policy on the 3-day payment window for preadmission services. However, we believe that such a policy is far too restrictive in terms of qualifying discharges for transfer payment. In addition, a hospital would not know when it discharges a patient to home health what diagnosis code the home health agency will put on the bill. Therefore, the hospital would not be able to correctly code the inpatient bill as a transfer or discharge.

4 Page 4 We also considered proposing that any home health care that begins within the designated timeframe be included as related in our definition. However, this definition might be too broad and the hospital would not be able to predict which cases should be coded as transfers because the hospital often may not know about home health services that are provided upon discharge but were not ordered or planned for as part of the hospital discharge plan. 3 CMS explained that its chosen policy is for hospitals to maintain responsibility to code the discharge bill based on the discharge plan for the patient. CMS stated, In this way, the hospital would be fully aware of the status of the patient when discharged and could be held responsible for correctly coding the discharge as a transfer on the inpatient bill. 4 Notably, CMS indicated that hospitals are not expected to compare the diagnosis codes on home health bills with the principal diagnosis of the inpatient stay. o The Post-acute Transfer Policy Focuses on Hospitals Principal Diagnosis In addition to indicating that relatedness should be determined by the hospital at the time of discharge, CMS clarified that the post-acute transfer policy focuses on the hospital s principal diagnosis rather than any secondary diagnoses. CMS shed further light on its interpretation of relatedness between the home health services and the prior hospital stay in the following comment and response: Comment: One commenter argued that the best method to determine whether post-acute home health services are related to the inpatient stay would be to match the principal diagnosis codes on the inpatient and home health bills. The commenter believed this would alleviate situations where the patient is discharged from the hospital with a written plan for the provision of home health services, but the services are related to a medical condition other than the condition responsible for the inpatient stay. 5 In addition, the commenter noted that matching principal diagnosis codes would be consistent with current policy for the 3-day window for preadmission services. Response: 3 63 Fed. Reg , (July 31, 1998) Fed. Reg , (July 31, 1998). 5 Note that here the commenter describes situations when condition code 42 would be appropriate. Condition code 42 is CMS solution for addressing situations when the home health services are related to a medical condition other than the condition responsible for the inpatient stay.

5 Page 5 We disagree that the determination of whether home health care is related to the acute hospitalization should be based on the presence of identical diagnosis codes on the inpatient and home health bills. This approach would rely on the coding practices of the providers involved. Providers, especially post-acute care providers, frequently have the discretion to select from several possible diagnosis codes. A common practice of post-acute care providers is to use the V57 diagnosis code category (care involving use of rehabilitation procedures) as principal because those codes best describe the reason for the post-acute care. However, this code is seldom used by hospitals for acute care discharges because they are instructed by coding rules to code as principal the condition that required the hospital admission as determined at the time of discharge. In fact, if the hospitals coded discharges with the rehabilitation codes as principal, the discharges would never be included in the post-acute care policy because those discharges would never be classified to one of the 10 selected DRGs. We believe our proposed policy on this issue is preferable. We note that hospitals that code a discharge to home health will be permitted to indicate through a condition code on the inpatient bill that the hospital s discharge plan does not call for home care related to the hospitalization, but that other nonrelated home care is appropriate. This way, the hospital will make a conscious selection that the home care the patient is to receive is not related to the hospitalization, and would be expected to have documentation in the patient's records to that effect (emphasis added). 6 CMS statement that if the hospitals coded discharges with the rehabilitation codes as principal, the discharges would never be included in the post-acute care policy is significant because it clarifies that the post-acute care policy focuses entirely on the hospital s principal diagnosis, rather than on any secondary diagnoses. CMS stated that if a principal diagnosis is not one of the DRGs subject to the post-acute care transfer policy, then the post-acute care transfer policy does not apply to the patient, regardless of whether any secondary diagnosis lists a DRG that is typically subject to the policy. Given that the post-acute care transfer policy is either applicable or inapplicable based on the hospital s principal diagnosis code, the question of relatedness between the home health treatment and the prior hospital stay would also seem to be limited to the condition indicated on the principal diagnosis for the patient. This is consistent with CMS use of the phrase purpose of the inpatient hospital admission 7 when describing condition code 42 (since hospitals are instructed by coding rules to code as principal the condition that required the hospital 6 63 Fed. Reg , (July 31, 1998). 7 See supra, note 2.

6 Page 6 admission), as well the fact that CMS overall discussion in the preamble to the post-acute transfer rule focuses on a hospital s principal diagnosis. CMS did not intend for the post-acute transfer policy to apply whenever any of the services provided during a home health episode are related to any of the services provided during the prior hospital stay. Rather, CMS focus when it created the post-acute transfer policy was on the principal diagnosis and whether continued treatment related to that diagnosis is required upon discharge. EXAMPLES The following examples illustrate the application of the rule: o Hip Fracture/ Pneumonia In this example, someone receiving home health care for mobility issues due to a hip fracture is admitted to a hospital for the treatment of pneumonia, and then is subsequently discharged to home health for mobility issues related to the hip fracture. When determining whether to use condition code 42, the factors that should be compared are the condition responsible for the hospitalization (as indicated by the hospital s principal diagnosis) and the services called for in the hospital s continuing care plan. In this example, the condition responsible for the hospitalization was pneumonia, while the hospital s discharge plan called for only home health care related to treatment for the hip fracture. Here, the post-acute transfer policy should not apply. The pneumonia issue was resolved during the hospital stay, so the patient would have been discharged home if not for her separate, unrelated physical injury. Since the reasons for the hospital stay and the home health treatment were distinct, the hospital should bill using condition code 42. If the hospital s continuing care plan called for continued treatment and monitoring of the pneumonia, however, then condition code 42 would not be appropriate. o Bronchitis/ Kidney Failure In this example, the hospital compares the patient s initial home health treatment for obstructive chronic bronchitis to the hospital s primary diagnosis of acute kidney failure with the bronchitis diagnosis in second position. When deciding whether to use condition code 42, the question that the hospital should ask is whether the patient will continue to receive treatment for the condition that caused her hospitalization (the acute kidney failure) as part of the hospital s home health continuing care plan. This example, as stated, does not provide enough information to determine whether condition code 42 should be used because it does not include the reason for the discharge to home health care.

7 Page 7 The fact that the patient had been undergoing treatment for bronchitis prior to her hospitalization is not relevant to the analysis, and neither is the fact that her bronchitis was listed in second position by the hospital. The question of relatedness between the home health care treatment and the hospitalization focuses on the condition responsible for the inpatient admission (which, according to CMS coding guidelines, should be synonymous with the hospital s primary diagnosis). In this example, if the patient s home health discharge plan called for only treatment of the patient s bronchitis (but not continued care related to the acute kidney failure which was responsible for her hospitalization), then condition code 42 would be proper. CONCLUSION Condition code 42 can be used for Hospital Interludes. CMS anticipates that Hospitals will look to the patient s record to determine whether the hospital s discharge plan called for services separate and distinct from the condition responsible for the patient s hospitalization. If the record demonstrates that the patient was discharged to home health for reasons unrelated to the condition responsible for her hospitalization, then condition code 42 is appropriate.