Effective financial management is essential for healthcare organizations tackling the challenges of Medicare reimbursements. At the heart of this process are Transfer DRGs (Diagnosis Related Groups), a key factor in ensuring hospitals get compensated fairly and accurately.
While they’re designed to streamline payments, Transfer DRGs can create obstacles for RCM teams, making it crucial to maintain billing accuracy and protect vital revenue streams.
With the right strategies and tools, these challenges can be transformed into opportunities for smarter, more resilient financial operations.
What are Transfer DRGs?
Transfer DRGs are a subset of DRGs introduced by the Centers for Medicare & Medicaid Services (CMS) to adjust Medicare reimbursements for patients who transfer from one hospital to another or to a post-acute care facility before completing treatment. Without Transfer DRG adjustments, CMS would risk reimbursing both providers at the full DRG rate for the same patient, resulting in overpayment.
To manage this efficiently, CMS identifies about 270 DRGs annually that qualify for reduced payment under the Post-Acute Care Transfer rule if a patient is discharged early and receives post-acute care. These adjustments help ensure financial fairness while maintaining clinical continuity across healthcare systems.
However, the intricate regulations surrounding Transfer DRGs make this reimbursement model both critical and challenging for providers.
What are the current Transfer DRG challenges facing healthcare providers?
The implementation of Transfer DRGs has introduced unique hurdles that, if not addressed, can lead to significant revenue losses.
1. Disposition Coding Errors
Disposition coding errors is one of the most common and costly problems associated with Transfer DRGs. A single incorrectly coded transfer discharge can result in underpayments averaging $2,800 per claim and, in some cases, as much as $70,000.
For instance, when a patient is discharged with the intent to receive post-acute care but doesn’t follow through, the provider may still be eligible for a full DRG payment. Unfortunately, coding errors often prevent hospitals from submitting accurate claims, leading to lost revenue.
2. Medicare Audits
Coding inaccuracies also put health systems and hospitals at risk for Medicare audits. These audits can trigger payment takebacks for overpayments and uncover underpayments, further complicating operations. With nearly 40% of Medicare discharges falling under the Transfer DRG umbrella, the stakes are exceptionally high.
3. Cumbersome Processes
Securing accurate Transfer DRG payments can be tricky and time consuming. Hospitals need to carefully audit, adjust disposition codes and manage the claims cycle—all while juggling tight deadlines. It’s a process that requires accuracy but can easily get bogged down by inefficiencies and human error, even for the most dedicated teams. Simplifying these steps allows organizations to cut down on administrative work and focus more on delivering better outcomes.
RELATED: How to Maximize Medicare and Medicaid Reimbursements
Opportunities for revenue enhancement
Despite the challenges, opportunities abound for hospitals and health systems to refine financial processes and recoup lost revenue effectively. Here’s how healthcare organizations can optimize Transfer DRG reimbursements and strengthen their financial foundation.
1. Prioritize Coding Accuracy
Accurate coding can unlock significant reimbursement potential. For instance, correcting discharge disposition codes and consistently conducting post-acute transfer reviews can help ensure compliance with Medicare rules, while reducing the risk of underpayment.
Finance teams should focus on training health information management (HIM) teams and case managers to enhance their coding capabilities. Doing so not only mitigates audit risks but also sets the stage for providers to reclaim rightful payments. According to industry estimates, hospitals can recover up to $1 million annually simply by improving Transfer DRG coding accuracy.
2. Leverage Auditing Tools
Advanced auditing tools can identify missed revenue opportunities within thousands of patient accounts. Retrospective audits, comprehensive reviews of DSH (Disproportionate Share Hospital) logs and consistent monitoring of uncompensated care records enable providers to identify issues early and act decisively.
For example, leveraging analytics platforms that cross-reference claims or automate transfer reviews can prevent underpayments and reduce reliance on human oversight—saving both time and costs. One Midwestern health system, for instance, recovered $2.1 million over five years by implementing FinThrive’s Transfer DRG solution.
3. Educate and Train Staff
Often, the difference between missed and maximized revenue lies in properly trained staff. Equip your billing and reimbursement teams with education on evolving CMS rules, coding best practices and audit preparations to boost financial results. Regular training fosters a culture of accuracy and accountability across departments.
RELATED: Transforming Government Reimbursements: A Path to Financial Health for Healthcare Organizations
Transfer DRGs represent both challenges and opportunities for healthcare organizations. While errors in disposition coding, audits and process inefficiencies threaten revenue streams, strategies like improving coding, leveraging auditing technology and educating staff can set hospitals and health systems on a path to reclaim lost reimbursements and improve financial health.
Providers can’t afford to overlook transfer-related claims, especially given the significant portion of underpayments that can add up quickly.
If you're ready to transform your organization’s reimbursement strategy, unlock additional revenue and move closer to financial sustainability, start evaluating your Transfer DRG processes today and learn how FinThrive can help you simplify a complex reimbursement landscape.
