CMS Pitches Medicare Appeals Deal to Hospitals

Federal officials are urging hospitals to accept a settlement for thousands of Medicare claims denied because of patients' admission status.

In a conference call Monday with hospital executives from across the country, officials from the Centers for Medicare & Medicaid Services highlighted a claims appeals settlement deal that offers 68 cents on the dollar.

Gerald Walters, senior adviser to the CFO at CMS's Office of Financial Management, said the settlement offer is both necessary and worthy of consideration. "There's been an unprecedented growth of claims appeals," he told hospital executives, adding that the federal agency's appellate apparatus faces an overwhelming caseload.

In a memorandum dated December 2013, Chief Administrative Law Judge Nancy Griswold described the caseload: "From 2010 to 2013, [Office of Medicare Hearings and Appeals] claims and entitlement workload grew by 184% while the resources to adjudicate the appeals remained relatively constant."

"To settle these claims appeals, CMS had to make an offer… Take every opportunity that is available to you," Walters implored.

Providers Skeptical of Medicare Appeals Deal

The so-called two-midnight rule that went into effect in October 2013 is expected to reduce confusion over the distinction between outpatient and inpatient status, reducing the number of future appeals, Walters said.

But admission status presents major Medicare payment consequences for healthcare providers: payment rates for inpatient care under Medicare Part A are considerably higher than payment rates for outpatient care under Medicare Part B.

The CMS settlement offer is limited to acute care hospitals and critical access hospitals and they have until October 31, 2014 to submit their signed agreements.

"When we look at these claims, we believe the preponderance of the denials were from acute care hospitals and critical access hospitals, so we chose to focus on those areas," Walters said, noting that CMS has no plans to offer a similar settlement deal to other healthcare providers such as children's hospitals.

Contrary to what some hospitals may believe, organizations with multiple pending appeals will not be allowed to cherry pick from their caseload: "It's all or nothing," he said. "You may not choose to pick some claims [for settlement] and leave others out."

Walters urged hospital leaders to take CMS up on the offer. "Sixty-eight percent: Consider the net present value. It's a good solution," he said.

Key Settlement Rules
Melanie Combs-Dyer, director of CMS's Provider Compliance Group, identified four requirements for a Medicare claim appeal to be eligible for the settlement deal:

• Claims have to be pending appeal
• Patient admissions status has to be the main reason claims were denied
• Date of hospital admission has to be prior to enactment of the two-midnight rule on Oct. 1, 2013
• Claims must not have been withdrawn and resubmitted for Medicare Part B reimbursement

Combs-Dyer said one of the most crucial steps in the settlement process is when hospitals email a signed administrative agreement and caseload spreadsheet to CMS. As long as the hospital's caseload spreadsheet matches CMS's records, settlement payments should go out to hospitals within 60 days, she said: "We want to resolve these appeals as quickly as possible."

Settlement payments could take longer than 60 days if hospital and CMS records do not match. Since Medicare Administrative Contractors will be processing settlement deal payments, "The MAC and the hospital will have a discussion to try to resolve any discrepancies," Combs-Dyer said.

"I do not agree that the 68 cents on the dollar is fair," said Mark Bogen, CFO and senior VP of finance at South Nassau Communities Hospital in Oceanside, NY, when reached for comment. He did not attend the hearing.