CMS offers deal in lieu of appeal
The CMS has made a tempting offer to hospitals as a way to clear its heavily backlogged Medicare appeals process, and many may take it to save time and money. But the deal does nothing to change a process that has become so badly bogged down that several hospitals and their trade group are suing the government over the lag.
On Aug. 29, the CMS said it would pay hospitals 68% of inpatient-status claims lingering at various stages within the Office of Medicare Hearings and Appeals. That office currently has a twoyear pileup of unanswered appeals. Only acute-care and critical-access hospitals are eligible for the payment.
In return, providers must withdraw their appeals. And it’s an all-or-nothing offer: Hospitals can’t choose to settle some claims and pursue appeals on the rest. Once hospitals turn in their documentation and receive approval, the CMS says it will cut them a check within 60 days.
Hospitals appeal claims when they disagree with a determination from one of Medicare’s four recovery auditor contractors. The RACs, which are paid a fee from Medicare to find improper payments, predominantly review hospitals for short inpatient stays that supposedly should have been billed at lower outpatient rates.
The settlement looks to be costly for the government in the short term. As of March 31, the total value of hospitals’ appealed claims exceeded $1.8 billion, according to the American Hospital Association. Data from the association and HHS vary on their estimates of how many hospital appeals involve disputes over whether a patient was appropriately admitted. But the settlement offer is likely to pay hundreds of millions of dollars to providers if a significant number of them take the deal.
For many hospitals, it could be too good to pass up. Millions of reimbursement dollars are tied up in appeals for individual hospitals and systems, and accepting partial payment would alleviate some financial uncertainty. Organizations and state hospital associations contacted for this article said they were aware of the CMS deal but were
“The backlog of appeals is unsustainable. You cannot continue the RAC program without coming to some resolution on the appeals process.” EMILY EVANS, REGULATORY ANALYST OBSIDIAN RESEARCH GROUP
not yet sure what they would do.
“If it comes at a pretty good payment (for an individual hospital or system), it makes a lot of sense,” said Chris Crosswhite, a healthcare lawyer with the firm Duane Morris.
For example, Baxter Regional Medical Center, a 209-bed hospital in Mountain Home, Ark., had $4.6 million tied up in the Medicare appeals process as of December 2013. Taking the settlement would yield $3.1 million from Medicare. Covenant Health, a ninehospital system based in Knoxville, Tenn., is waiting on more than $7.6 million in contested claims. Covenant would receive almost $5.2 million with the deal. Rutland (Vt.) Regional Medical Center, a 139-bed facility, has almost $600,000 pending in Medicare’s appeals court.
All three of those providers, along with the AHA, are also plaintiffs in a suit against HHS over the issue. They sued HHS in May, demanding the government abide by the 90-day statutory deadline to decide hospitals’ Medicare appeals. Hospitals typically wait 16 months for an appeal hearing, according to statistics from 2013, and they wait even longer for a decision.
Rick Pollack, an executive vice president at the AHA, said he doesn’t believe the offer would exist if it weren’t for the litigation. The CMS has been asked to respond to the AHA’s lawsuit by Sept. 11. The AHA has consulted with its legal team and determined it will keep its lawsuit despite the CMS proposal.
Pollack acknowledged the deal could provide relief for many hospitals and health systems, but said the pro- posal was narrowly tailored overall and didn’t address the larger issue of aggressive RAC reviews and an inefficient appeals process.
Other industry observers agreed. “The backlog of appeals is unsustainable,” said Emily Evans, a regulatory analyst with Obsidian Research Group who follows RACs. “You cannot continue the RAC program without coming to some resolution on the appeals process.”
Another unaddressed issue is how the offer will affect RACs. The CMS did not say if the contractors would have to return their contingency fees, which could leave the public on the hook for those payments.
Hospitals have until Oct. 31 to submit settlement documents. The CMS will host a teleconference Sept. 9 to discuss the offer in more detail.