On August 29, 2014, the Centers for Medicare and Medicaid Services (“CMS”) announced that certain providers with pending appeals of specified inpatient-status claims denied by Medicare contractors may elect to receive partial payment on those claims in exchange for the withdrawal of their appeals. CMS’s announcement states that it is now “offering an administrative agreement to any hospital willing to withdraw their pending appeals in exchange for timely partial payment (68% of the net allowable amount).” This settlement rate is roughly equivalent to the rate at which Administrative Law Judges (“ALJs”) have historically rendered favorable decisions on appealed claims.

This announcement is part of an effort by CMS, in conjunction with the US Department of Health and Human Services Office of Medicare Hearings and Appeals (“OMHA”), to reduce a backlog of pending appeals. On December 24, 2013, OMHA announced that, effective July 15, 2013, it temporarily suspended the assignment of most new requests for a ALJ hearings in order to permit OMHA Field Offices to reconcile a backlog of 357,000 claims. OMHA cited a 184% growth in ALJ-level appeals from 2010 to 2013 as the source of the backlog. This backlog was created, in large part, by an exponential increase in appeals of inpatient reimbursement denials resulting from Recovery Audit Contractor (“RAC”) audits.

In its August 29 guidance, CMS directs that only certain providers and only certain claims will be eligible for settlement by Administrative Agreement. Acute care hospitals paid under the prospective payment system and critical access hospitals will be eligible to submit settlement requests; hospitals paid under the inpatient psychiatric facility prospective payment system, inpatient rehabilitation facilities, long-term care hospitals, cancer hospitals and children’s hospitals will not be eligible to participate in this initiative.

“Eligible claims are currently pending appeals of inpatient-status claim denials by Medicare contractors on the basis that services may have been reasonable and necessary but treatment on an inpatient basis was not.” To be eligible for settlement, claims for services must have an admission date prior to October 1, 2013. Claims for services provided to beneficiaries enrolled in the Medicare Advantage program are not eligible for settlement.

In order to take advantage of this initiative, an eligible hospital must submit an Administrative Agreement identifying the claims to be settled. Once CMS receives the Administrative Agreement, it will review and validate the claims to be settled through what CMS describes as potentially a three-step process:

  • First, proceedings on all eligible pending appeals will be stayed while CMS reconciles with the hospital any discrepancies from the Medicare contractor’s eligible claims list. If CMS does identify discrepancies, CMS will enter into an initial agreement with the provider for the reimbursement of agreed-upon claims and render payment on those claims at that time. Appeals of any claims for which CMS has made payment will be dismissed.
  • Second, if CMS has identified discrepancies on the claims to be settled, the provider must submit a revised Administrative Agreement correcting any outstanding issues. If CMS and the provider have agreed upon the remaining claims to be settled, CMS will finalize the original Administrative Agreement and payment will be provided within 60 days of finalization. If discrepancies remain outstanding, CMS and the provider will engage in discussions until both parties are in agreement on the claims to be settled. Again, appeals of any claims for which CMS has made payment will be dismissed.
  • Third, if an ALJ or the Departmental Appeals Board (“DAB”) later identifies any errors with the settlement between CMS and the provider, either the ALJ or the DAB will request that CMS either recoup payments on claims that were ineligible or otherwise inadvertently included in the settlement or render payment on any claims inappropriately omitted from the settlement.

Importantly, CMS instructs that providers may not request settlement of certain eligible claims but not others. In other words, providers interested in entering into an Administrative Agreement must agree to settle all eligible claims and must abandon pursuit of appeals on all such claims.

More information regarding CMS’s settlement program, including materials to be submitted to CMS in consideration of settlement, may be found here. Requests for settlement must be submitted by October 31, 2014. Providers who are unable to meet this deadline can submit a request for extension to CMS. If you have any questions or would like assistance in negotiating settlement of Medicare appeals, please let us know.

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