CMS is Having a . . . Fire Sale?

Initially announced right before Labor Day, the Centers for Medicare and Medicaid Services (“CMS”) is trying to reduce its substantial backlog of appeals regarding Medicare claim denials.  CMS recently updated the offer and has issued some frequently asked questions about the settlement offer.  An explosion in the number of appeals has left CMS unable to address all, or even a fraction, of the appeals in a timely manner.  CMS has even gone so far as to put a moratorium on all new appeals.

As a carrot to get appeals settled, CMS is offering to settle currently pending appeals for 68% of the net allowable claim.  In exchange, the hospital will withdraw the pending appeal.  The arrangement would be memorialized in an administrative agreement.  Only two types of hospitals are eligible to seek the settlement though: acute care hospitals and critical access hospitals.  Among those left out are psychiatric hospitals, inpatient rehabilitation facilities, long-term care hospitals, cancer hospitals and children’s hospitals.

Additionally, the claim settlement only applies to appeals regarding inpatient status claims.  Claims are eligible if they meet the following criteria:

  1. The claim is not for items or services provided to a Medicare Advantage plan enrollee;
  2. The claim was denied due to a patient status audit conduct by a Medicare contractor;
  3. The claim regarded a date of admission prior to October 1, 2013; and
  4. As of the date the provider seeks to settle an appeal decision must be pending or all appeal rights have not yet been exhausted.

As indicated, only appeals related to inpatient status claims are eligible.  That means appeals related to coding disputes cannot be entered into the settlement program.

Validation of settlement requests will likely go through a three step process.  The steps are as follows:

  1. The hospital submits a proposed spreadsheet of eligible claims for CMS to review along with a signed administrative agreement. CMS will then validate the information and notify the hospital if there are any discrepancies.
  2. Hospitals will review any discrepancies and resubmit a revised spreadsheet and administrative agreement for another round of CMS review.
  3. The final stage is a reconciliation process where an administrative law judge or the department of appeals board reviews the settlement. If an error is found, then CMS will be requested to take back extra money or pay the provider any deficiency.

The entire settlement process appears to be somewhat unprecedented.  First, the number of backlogged appeals is staggering and a dire situation.  The appeals are locking up a large amount of funds that a hospital may be eligible to receive.  This impacts the ability of a hospital to function and improve facilities or take other actions.

Now, with the settlement offer, CMS seems to be ignoring the underlying problem and attempting to get hospitals to play along by throwing around some money.  Before entering into the program, a hospital would do well to ask whether the settlement is a good deal and how it will impact activities going forward.  However, it is necessary to ask whether this a practice that should be encouraged.

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About Matt Fisher

Matt is the chair of Mirick O'Connell's Health Law Group and a partner in the firm's Business Group. Matt focuses his practice on health law and all areas of corporate transactions. Matt's health law practice includes advising clients with regulatory, fraud, abuse, and compliance issues. With regard to regulatory matters, Matt advises clients to ensure that contracts, agreements and other business arrangements meet both federal and state statutory and regulatory requirements. Matt's regulatory advice focuses on complying with requirements of the Stark Law, Anti-Kickback Statute, fraud and abuse regulations, licensing requirements and HIPAA. Matt also advises clients on compliance policies to develop appropriate monitoring and oversight of operations.
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