CMS Global Settlement Offer for Existing Appeals of Inpatient Claims

CMS Offers to Go “All In” for 68%

CMS is going “All In” on this program, AND insists that hospitals do the same.

CMS issued proposed settlement terms to acute care hospitals with pending appeals of denials for inpatient claims, on August 29, 2014. In an evident attempt to appease pressure from Congress and the provider community, CMS is now offering to settle all qualifying claims at 68 percent of the “net paid amount” of such claims, within 60 days of an “Administrative Agreement” signed by both CMS and the appellant hospital.

While this offer has the potential of freeing up hundreds of millions of dollars in appeals now “stuck” at the ALJ level of appeal, the calculations needed to decide the wisdom or folly of such settlement offers is at least difficult if not downright impossible, at this time. Given recent experience, many providers are skeptical that CMS can even answer their questions about this plan, much less assuage their doubts about what will really happen and when, if at all. Then, too, in order to qualify for these “settlement requests,” a hospital must submit their request by October 31, 2014.

Several questions arise on reading of the settlement offer:

  • Who qualifies for the offer?
  • Which claims qualify for settlement?
  • How are Settlement Requests made?
  • How are Settlement Requests paid to the provider?
  • When will these payments made to the provider?
  • What is the actual amount of the settlement? How is it calculated?
  • Are there other reimbursement considerations and implications?

Let’s take them one at a time, with what we now know.

What Kind of Facilities Can or Cannot Submit a Settlement Request?

At CMS, all hospitals are NOT equal...

At CMS, all hospitals are NOT equal…

These facilities can submit settlement request:

  • Acute Care Hospitals paid under IPPS, PIP and Maryland waiver
  • Critical Access Hospitals

These are not eligible:

  • Psychiatric hospitals paid under the IPFPS
  • Inpatient Rehabilitation Facilities
  • Long-Term Care Hospitals
  • Cancer hospitals
  • Children’s hospitals

Plus, any hospital under False Claims Act litigation or investigation may be precluded from submitting any request.

Which Claims Are or Are Not Eligible to be Included Under a Settlement Request?

At least you won't have THIS problem. Your only choice is IN or OUT

At least you won’t have THIS problem. Your only choice for this program is to be either IN or OUT.

IMPORTANT: Hospitals may not choose to settle some claims and continue to appeal others. This is all or nothing. Evidently, CMS wants a hospital to make the same move they are making… they are “All In” on this one.

These settlement requests and claims list must be submitted to CMS by October 31, 2014, to be considered at all.

Eligible claims must meet all of the following:

  • The claim was denied by a CMS contractor or review organization acting for CMS
  • The claim was not for items/services furnished under Medicare Part C
  • The claim was denied based on an “inappropriate setting determination” – i.e., billed as inpatient and determined to be outpatient.
  • Admission began before October 1, 2013
  • The provider filed a timely appeal
  • The appeal remains pending, on the date the Administrative Agreement was submitted to CMS
  • The provider did not already apply for and get paid via Part B Rebilling

How is a Settlement Request Submitted to CMS?

The hospital must submit an Administrative Agreement and include a spreadsheet of the eligible claims. CMS will use a three-step process to review and reconcile these agreements and the accompanying spreadsheets. The lists of claims in the spreadsheets will be compared to CMS’ records to make sure the lists match. Should there be any discrepancies between the lists of eligible claims, CMS intends to work with the hospital to resolve any discrepancies before the Administrative Agreement is finally signed and executed.

How Much Will a Provider Really Get?

Maybe the calculators used by CMS are fine, and it's simply Operator Error that gives these strange answers?

Perhaps the calculators used by CMS are fine, and it’s simply Operator Error that gives these strange answers?

We’ve already experienced some odd math coming out of CMS in past programs. Should we expect more of the same?

From what we now know, CMS will pay the provider 68 percent of the “net paid amount” of the (now verified and eligible) denied inpatient claims. The “net paid amount” is Medicare’s portion of the claim payment, not including co-pays (beneficiary deductibles and/or coinsurance payments).

If a co-pay was made to the hospital, and the hospital has not yet returned that co-pay to the beneficiary, the hospital may keep the co-pay. However, if the co-pay was never paid to the hospital, then the hospital has no recourse for that amount, and may not bill the beneficiaries for such unpaid amounts. If the hospital has not yet paid the denied claim back to CMS by the time of this agreement, then CMS will simply pay the difference between the retained/unpaid amount and the 68 percent settlement amount.

Provided that both parties sign and agree to the Administrative Agreement, CMS will make a single lump-sum payment to a provider within 60 days. CMS will not have to pay interest on these settled claims unless the agency does not make payment within the 60-day timeframe.

CMS will notify all relevant appeals contractors/agencies of the “settled” claims, and those contractors/agencies will then dismiss those claims with prejudice.  Should CMS fail to live up to its obligations under the Administrative Agreement, then the providers have the right to reinstate those appeals, and all timely filing deadlines for reinstated appeals will begin anew, on the date the appeals are reinstated.

Are There Other Reimbursement Considerations and Implications?

There are some other questions that a hospital should consider, before deciding to submit for this settlement offer or not.

Math Lessons by CMS

Math Lessons by CMS

The first that comes to mind is this: how much are we getting or giving up? We have seen it suggested that a Part B rebill will net roughly 30-40% of the original Part A bill – or even more, in some cases over 100% of the Part A bill. Therefore, a hospital needs to have at least a rough idea of what the claim might be worth under rebilling, since the 68% may be more than that, or less. Also, since a hospital is not allowed to pick and choose which claims will be “settled” in this way, it would be prudent to know if the list of denied claims included a high number of high-dollar claims. It may be more prudent to wait for the appeals, especially if the hospital has been historically successful at winning such appeals.

CMS is very good at handing out deadlines, but not very good at keeping them for themselves, now are they?

CMS is very good at handing out deadlines, but not very good at keeping them for themselves or their contractors, now are they?

The second question is about the timing of payment: when will CMS actually “sign” or “fully execute” an Administrative Agreement? As usual, CMS is very clear on deadlines for providers, but fails to provide any meaningful deadlines for their own actions. There is, so far, no timetable given for analysis of submitted agreements/spreadsheets. There is also no deadline given for how soon CMS must sign/execute the agreement, after said analysis is completed. Will it take CMS 28 months to do the analysis? How about 14 months? Even four months would be a long process, and a hospital should know this timetable, in order to make an informed decision about the value of giving up their appeal rights in order to receive a lower payment, sooner. How soon is sooner?

Finally, there are questions about how these payments will appear in various reports, and how will they be counted toward totals used in various payment provisions? Will settled claims count toward a provider’s Medicare Part A patient percentage for GME payments? Will they affect Medicare-dependent hospital status? How will these payments be counted for quality and readmission programs? Can unpaid co-pay amounts at least be written off as Medicare bad debts, since there is no recourse to go collect them, for settled claims?

Getting More Answers

Click to see details about the CMS MLN Call

Click to see details about the CMS MLN Call

Hopefully, some of these questions will be answered (hey – it could happen) on the MLN Connects conference call, scheduled for Tuesday, September 9, at 1:00 PM ET.

Join Us

Meanwhile, check out the Finally Friday! show scheduled for this week, Friday September 5, at a different time than usual, 2:30pm ET. We will be reviewing a webinar by King & Spalding on this topic, and then discussing and taking questions, joined by our own legal experts from The Health Law Partners.

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