Transfer DRG Condition Code 42

Over the recent past, SunStone has noticed heightened discussion surrounding the use of Condition Code 42 in the context of the Medicare Post-Acute Care Transfer Policy.  Here are our thoughts on the issue.

Medicare's Post-Acute Care Transfer Policy distinguishes between discharges and transfers of beneficiaries from hospitals under the inpatient prospective payment system. Medicare pays full diagnosis-related group ("DRG") payments to hospitals that discharge inpatients to their homes. In contrast, for specified DRGs, Medicare pays hospitals that transfer inpatients to certain post-acute care settings, such as a skilled nursing facility or home health care, a per diem rate for each day of the stay, not to exceed the full DRG payment for a discharge.

Condition Code 42 is intended to be used when billing an inpatient hospital claim in conjunction with patient discharge status code "06" defined as "Discharged/Transferred to Home under Care of Organized Home Health Service Organization in Anticipation of Covered Skilled Care."  Hospitals are instructed to report Condition Code 42 on the claim when a patient is discharged to home for the provision of home health services, but the continuing care is "not related" to the condition or diagnosis for which the individual received inpatient hospital services. Condition Code 42 will result in the claim being paid the full DRG payment amount, rather than, subjecting the claim to the Post-Acute Care Transfer Policy reduced amount.

The question concerns the definition of "not related".  There appears to be little specific authoritative discussion issued by the Centers for Medicare & Medicaid Services ("CMS") relative to the definition of "not related".  Part of what makes this particularly interesting is that this is in stark contrast with the original ruling relating to Outpatient Services Treated as Inpatient (the 3-Day Payment Window) in which the definition of related non-diagnostic services was so specifically defined, i.e., an exact match for all digits between the ICD-9-CM principal diagnosis code assigned for both the preadmission services and the inpatient stay.  While there is no clear definition of "not related", it is important to recognize that Medicare considers home health services to be related "when the patient is discharged from the hospital with a written plan of care for the provision of home health care services" that relate to the condition or diagnosis for which the individual received inpatient hospital services.  Additionally, CMS appears to grant hospitals fairly broad latitude as to what is related as they do not define what a written plan of care for home health services must entail.

While some recommend comparing the principal diagnosis on the inpatient bill and home health bill to determine relatedness, it is important to recognize that CMS makes no such requirements.  In fact, CMS disagrees with this method and considers it unreliable due to the variability of coding practices of the providers involved.  

Due to the lack of a specific authoritative definition, and as part of SunStone's ongoing effort to be comprehensively knowledgeable and in a position to provide our clients with the best possible consulting advice, we have communicated with CMS and received the following:

The use of CC42 on 06 discharges requires the hospital to fully document the factors used for determining the continued care episode is unrelated from the admission.  It is fair to conclude that the "default" assumption under the transfer policy is that the care would be related.  We would not agree with a hospital adopting a firm policy of applying CC42 to any claim where continued care is not directly related to the principle diagnosis.  Inpatient admission orders require a variety of complex factors regarding the severity of a patient's underlying conditions.  If any of these conditions are considered to support a practitioner's decision to admit, they should be considered "related" under the post-discharge plan of care.  Reviewing the principle diagnosis may be useful in reviewing the applicability of CC42, though we would not consider it definitive.

Since similar cases may involve very different specific circumstances, it would be difficult to provide precise examples of an "unrelated" condition.  Ultimately, it would require a case-by-case review to determine whether the condition requiring continued care was substantially unrelated to the hospital admission.

Additionally in support of a client matter, SunStone has interacted with the Office of Inspector General ("OIG") relating to this issue and found their approach to be simple and straight-forward. In our interactions, the OIG consistently maintained that if a physician prescribes home health care services as part of the overall plan of care, then the services are related.  This is particularly true when a home health episode immediately follows the inpatient stay.  Said another way, they maintain that an inpatient stay is the event that triggers the need for home health care services.   In our dealings with the OIG, they have indicated that the most likely scenario for home health services to be "not related" involves patients who are admitted to a hospital while under a current home health episode period.  However, often the original home health care orders are amended to include care "related" to the current inpatient acute care stay.    

While we certainly recognize that instances do exist where the use of Condition Code 42 is appropriate, we advise our hospital clients to exercise caution in its' use and to avoid a simple matching process , i.e., comparing diagnoses.  For more information please contact Brian Barbera, Principal, or John Denniston, Senior Manager, at 717-319-4341 and 717-756-3460, or via email at and, respectively.