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CMS Announces Settlement Offer to Hospitals

In an effort to reduce the amount of cases currently pending appeal, specifically the backlog at the Administrative Law Judge (ALJ) level of appeal, the Centers for Medicare & Medicaid Services (CMS) announced an offer to hospital appellants to settle their patient status claim denials currently pending appeal. In exchange for hospitals’ withdrawal of their pending appeals, CMS has offered to pay hospitals 68% of the net payable amount of the claims.

In its announcement, CMS lists a number of conditions that must be met for a hospital to be eligible for settlement, including:

  1. The provider must be either (1) an Acute Care Hospital, including those paid via Prospective Payment System, Periodic Interim Payments, and Maryland waiver, or (2) Critical Access Hospitals (CAH). Those entities which are not eligible for the settlement include: psychiatric hospitals paid under the Inpatient Psychiatric Facilities Prospective Payment System, Inpatient Rehabilitation Facilities (IRFs), long-term care hospitals (LTCHs), cancer hospitals and children’s hospitals.
  2. The claim was not provided to a Medicare Part C (i.e., Medicare Advantage) enrollee.
  3. The claim was denied upon review by a CMS audit contractor (e.g., Recovery Audit Contractor (RAC), Medicare Administrative Contractor (MAC), Zone Program Integrity Contractor (ZPIC) or Comprehensive Error Rate Testing Contractor (CERT)).
  4. The claim was denied was based on the CMS contractor’s finding that the patient was inappropriately treated as an inpatient as opposed to outpatient.
  5. The first day of the inpatient admission was before October 1, 2013.
  6. The claim denial was timely appealed, or the provider has not yet exhausted their appeal rights.
  7. The provider did not subsequently rebill and receive payment for the claim under Medicare Part B.

For those hospitals with eligible claims, CMS has provided instructions on its website detailing the process for hospitals to participate in the settlement offer. In order to take advantage of the settlement offer, hospitals must submit their settlement requests by October 31, 2014.

According to the Administrative Agreement (i.e., settlement agreement), CMS will pay the agreed amount to the hospital within 60 days from the date in which the binding settlement agreement is executed. Once the binding settlement agreement is entered into, the pending appeals associated with the settled claims will be dismissed and the settlement will serve as the final administrative and legal resolution of those claims.

This past July, the Department of Health and Human Services (HHS) introduced two new pilot programs – Settlement Conference Facilitation Pilot and Statistical Sampling Pilot – as alternative methods for eligible providers to resolve their appealed claim denials currently pending at the ALJ level of appeal. The recently announced settlement offer to hospitals is an added initiative implemented by HHS in an effort to reduce the ALJ backlog. CMS will be holding a national provider call on September 9, 2014, to further discuss the announced settlement offer. Wachler & Associates will be participating in that call. If you have any questions regarding the CMS settlement offer or pilot programs, or if you need assistance in the pursuing a settlement, please contact an experienced healthcare attorney at (248) 544-0888 or wapc@wachler.com.