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Settlement Opportunity Available for Eligible Hospitals with Medicare Patient Status Denials

The Centers for Medicare and Medicaid Services (CMS) released the details of its Medicare hospital patient-status appeals settlement (“the 2016 Settlement”), following CMS’ initial announcement of the reopening on September 28th.

The 2016 Settlement comes as the successor of CMS’ 2014 68% settlement (the 68% Settlement), where eligible hospitals were able to settle their Medicare inpatient-status appeals for 68% of the net payable amount. The 68% Settlement successfully settled 346,000 claims with 2,022 hospitals. Since then, providers and other industry advocates (including Andrew Wachler of Wachler & Associates) have been pressuring CMS to offer another comparable settlement, and CMS responded positively with the 2016 Settlement.

The 2016 Settlement has comparable terms to the 68% Settlement, but there is one major difference: the 2016 Settlement only reimburses hospitals for 66% of the net payable amount on pending eligible claims. 2% is no minor adjustment on such a large scale, and will lead to millions of dollars less being paid out to providers. To scale, if the 68% Settlement had been for only 66%, the payout would have been roughly $1.42 billion rather than $1.47 billion. Still, with the Medicare appeals backlog as substantial as ever, many hospitals welcome the opportunity for an expedient and largely favorable resolution to their pending patient-status appeals. This is especially true considering the uncertainty of whether there will be other settlements offered in the future.

The 2016 Settlement is open to eligible hospitals for two months, between December 1, 2016 and January 31, 2017. The 2016 Settlement is offered to eligible hospitals with inpatient status appeals pending at either the Administrative Law Judge (ALJ) or the Departmental Appeals Board (DAB) level. Similar to the 2014 Settlement, only Acute Care Hospitals and Critical Access Hospitals are eligible for the settlement process. And once again, the settlement will be on an “all-or-nothing” basis—providers cannot choose to settle some claims and continue to appeal others; providers choosing to participate in the 2016 Settlement will once again need to settle all eligible claims. CMS defines patient status claims as those where the health services were potentially medically reasonable and necessary, but the inpatient status was not. Also, claims must meet all of the following criteria to be deemed eligible:

  1. The claim was denied by an entity that conducted a review on behalf of CMS;
  2. The claim was not for items or services furnished to a Medicare Part C enrollee;
  3. The claim was denied based on an inappropriate setting determination (i.e. a “patient-status” denial such that the service might have been reasonable and necessary but treatment on an inpatient basis was not;
  4. The first day of the admission was before October 1, 2013;
  5. The Hospital timely appealed the denial;
  6. As of the date of an executed settlement agreement submitted to CMS by the Hospital, the appeal decision was still pending at the Administrative Law Judge (ALJ) or the Medicare Appeals Council (Council) levels of review, or, the Hospital had not yet exhausted its appeal rights at the ALJ or Council level; and
  7. The Hospital did not receive payment for the service as a Part B claim.

Eligible providers are encouraged to file an Expression of Interest with CMS before January 31, 2017, which is the last day eligible providers can elect to participate in the 2016 Settlement.

Interested hospitals should periodically review CMS’ FAQ for the settlement and participate in the aforementioned call. Further, providers should consider obtaining counsel from an attorney familiar with the Medicare appeals process to determine if participation in the 2016 Settlement is in their best interest.

Wachler & Associates has been a leader in the field of healthcare law since 1985, with a specialty in Medicare appeals matters. If you or your health care entity have questions or concerns about the upcoming settlement or other Medicare appeal issues, please contact an experienced healthcare attorney at (248) 544-0888, or via email at You may also subscribe to our health law blog by adding your email at the top right of this page.

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