Reimbursement News

CMS Offers 66% Settlement to Reduce Medicare Appeals Backlog

CMS reopened a settlement option for hospitals with inpatient status claim denial disputes currently pending in the Medicare appeals backlog.

By Jacqueline LaPointe

- In an effort to resolve the Medicare appeals backlog, CMS recently reopened a settlement option that would allow hospitals to receive partial reimbursement for some claim denials currently stuck in the appeals process.

CMS to offer 66 percent settlement option to reduce Medicare appeals backlog

Similar to the 2014 settlement option, CMS has offered to pay hospitals 66 percent of the net allowable amount of certain appealed claims at the Administrative Law Judge and Departmental Appeals Board level. The settlement would only apply to inpatient status claims with service dates prior to Oct. 1, 2013 and where the patient was not a Part C enrollee.

In exchange for the partial payment, hospitals must withdraw all pending appeals for inpatient status denials.

Through the settlement option, CMS intends to resolve the Medicare appeals backlog, which grew to 898,891 pending appeals at both the Office of Medicare Hearings and Appeals (OMHA) and Medicare Appeals Council levels by the end of 2015, according the Department of Health and Human Services (HHS).

HHS estimated that it would take 11 years to resolve all pending claims at the OMHA, while it would take six years at the Medicare Appeals Council level.

“CMS believes this process will ease the administrative burden of current appeals, and the associated litigation risk, for both the hospital and Medicare program,” the federal agency stated on its website.

Starting on Dec. 1, 2016, eligible hospitals will have until Jan. 31, 2017 to submit an Expression of Interest to CMS to be considered for the settlement option. Only critical access hospitals and acute care hospitals, including those reimbursed under the prospective payment system, periodic interim payments, and the Maryland waiver, will be considered.

CMS noted that other healthcare facilities are not eligible to submit a settlement request, including inpatient rehabilitation facilities, long-term care hospitals, cancer hospitals, children’s hospitals, and psychiatric hospitals reimbursed via the Inpatient Psychiatric Facilities Prospective Payment System.

Other hospitals may also be excluded from the settlement option because of pending False Claims Act investigations or litigations, the federal agency added.

In a similar settlement option in 2014, CMS paid roughly $1.47 billion to resolve Medicare claim denial disputes. The settlements were distributed to 2,022 hospitals to end the appeals process for about 346,000 claims.

However, the federal agency revealed that the most recent option will be slightly different than 2014 settlements. Most notably, CMS paid 68 percent of net allowable amount of inpatient status claims as part of the 2014 settlement option.

The federal agency also made the following changes:

• Providers must submit an Expression of Interest and CMS will create a list of potentially eligible claim appeals, rather than the provider creating the list

• Providers must verify the CMS-created potentially eligible claim appeals list, instead of the provider submitting a claim list to CMS for verification

• Providers must sign the administrative agreement when they approve the list and decide to move forward with the settlement, rather than signing the agreement first then deciding if they want to continue with the settlement option

• Medicare Audits Contractors will price the claim appeals included in the settlement after the agreement has been signed by both parties, whereas the claims used to be priced upfront

• CMS will only make one payment to hospitals rather than two rounds of payment to reduce stakeholder burden and quicken the process

The CMS announcement came a day before the federal agency was scheduled to respond to potential Medicare appeals backlog solutions from the American Hospital Association (AHA). The proposed solutions were part of a federal court case brought by the AHA and three other hospital organizations to compel HHS to comply with statutory deadlines for deciding appeals.

In October, the AHA called on HHS to offer a reasonable settlement option similar to the 68 percent settlement in 2014. The option should be available to a significant portion of Medicare providers and suppliers, the organization added.

Additionally, the AHA advised HHS to delay disputed claim repayments and toll interest accruals as long as the appeal is pending beyond mandatory timeframes at the administrative review levels. The organization also pushed for financial penalties against Medicare Recovery Audit Contractors who have high turnover rates for appealed claim denials.

The AHA presented the solutions after a federal district court struck down a HHS request in September to postpone legal proceedings with the Medicare appeals backlog case. A district judge denied the request because the AHA’s lawsuit had “equitable grounds for mandamus,” which would require HHS to comply with mandatory deadlines for Medicare appeals. Therefore, the court could not grant further delays to the case.

The judge added that proposed administrative fixes were not enough to constitute “sufficient progress” towards a solution. HHS proposed several resolutions, such as encouraging more settlements at the CMS-governed appeal levels, expanding prior authorizations, bringing back retired judges to help mitigate the caseload, and increasing the appeals process budget.

HHS projected the administrative changes to reduce the Medicare appeals backlog at the OMHA level by 50 percent in 2020, but the judge stated that the figures do not account for the growing number of appeals every year. With the current rate of appeals, the backlog would still be over 1.9 million cases by the end of 2020.

“‘Significant progress toward a solution’ cannot simply mean that things get worse more slowly than they would otherwise,” wrote the judge. “It has to mean real movement towards statutory compliance. The process must improve. By the Secretary’s own numbers, the proffered administrative fixes do not clear that bar.”

While it is unclear if the recent settlement option will significantly reduce the Medicare appeals backlog according to the federal district court’s standards, HHS is scheduled to respond to AHA solutions later today.

Dig Deeper:

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