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Open Door Forum for Part A to Part B Rebilling Demonstration Program

This afternoon, CMS conducted the first special Open Door Forum (ODF) on the Part A to Part B Rebilling Demonstration Program. The ODF involved a brief overview of the Demonstration Program followed by many questions by the ODF participants. Although the ODF provided some clarification on the Demonstration Program, CMS’ answers also gave rise to many concerns regarding the fairness of the Demonstration Program.

One of the most serious concerns is a Demonstration Program participant’s right to appeal a denial of an inpatient claim. According to CMS’ answers from callers’ questions, participation in the Demonstration Program is “all-or-nothing”. This means that if a participant’s claim is denied for lack of medical necessity for services provided in the inpatient setting, the participant’s only option is to resubmit the claim for outpatient reimbursement. Even if the participant disagrees with the contractor’s denial of the inpatient claim, the participant will not be allowed to appeal the inpatient denial. Clearly this limitation has very serious consequences for hospitals because it requires participants to waive all of their due process rights for these claims. First, between the RAC Demonstration Program and Permanent Program we have had success in overturning 90% of short-stay inpatient claims denied for services provided in the wrong setting. Accordingly, requiring a hospital to waive the right to challenge these denials appears to be a high price to pay to participate in the AB Demonstration Program. The limitation highlights the inequity of a system where a provider must choose between either appealing the denial of an inpatient claim, but being unable to rebill the claim for outpatient reimbursement or rebilling the claim for 90% reimbursement of the outpatient claim, but waiving all due process rights.

In a program where RACs are paid through a contingency fee based upon the dollar amount of claims they deny, it is concerning that RACs now have an incentive and unbridled discretion to deny inpatient claims where there will be no right to appeal. During the ODF, CMS insisted that the RACs will not be informed of the hospitals participating in the demonstration program and thus, will not have an incentive to deny more inpatient claims. However, RACs will likely be able to deduce the participants because the participants will not appeal any inpatient claim denials and RACs contingency fee for participants will be different from non-participants. Specifically the contingency fees that RACs will receive as a result of denials from participants will not be the contingency fee of the full inpatient claim or the outpatient claim, but of the difference between the full inpatient claim and outpatient claim. This differential will be unique to program participants. Therefore, it is likely that RACs will know the participants of the Demonstration Program and could target them because of the participants’ inability to appeal denied inpatient claims.

In the initial RAC Demonstration Program for six states, hospitals were allowed to rebill at any time during the appeals process. At a minimum, we urge hospitals to request that CMS allow an AB Demonstration Program participant to make a determination on a claim-by-claim basis on whether to rebill a claim for outpatient services or to appeal the denied inpatient claim.

For more information on the Demonstration Program, or to discuss the audit appeals process with a Wachler & Associates attorney, please visit or call 248-544-0888.

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