Inpatient Facility Coding & Compliance Alert

Question: What are transfer DRGs and how do they apply to acute care hospitals?

Mississippi Subscriber

Answer: “Transfer DRGs” are a short-cut term for the post acute transfer (PACT) policy of Medicare. Hospitals are paid for acute inpatient care of Medicare patients on the basis of diagnosis related groups (DRGs). For some DRGs, CMS created special rules for patients who are discharged immediately following their hospitalization to a rehab hospital, skilled nursing facility, a long-term care hospital or home health care. These DRGs are what we call “Transfer DRGs.” 

Transfer DRGs are an outgrowth of the Balanced Budget Act of 1997. Studies revealed that patients who required transfer shortly after their admission from an acute hospital to other post-acute care facilities caused exorbitantly high reimbursement because the acute hospital was paid at the full DRG rate, and then, in the post acute phase, paying a home health agency or rehab hospital the full amount under their payment rules.