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Settlement Offer Announced for Appealed Medicare Claims

November 30, 2016

 

Review of Appeals Process and Current Backlog

 

Medicare Administrative Contractors process an estimated 1.2 billion fee-for-service claims each year on behalf of the Centers for Medicare & Medicaid Services (CMS) for more than 33.9 million Medicare beneficiaries.  Of the 1.2 billion claims filed in 2015, 123 million or about 10 percent were denied, and 3.7 million of those (about three percent of total claims) were appealed.

 

As described in our eAlert dated July 13, 2016, there are five levels of appeal:

 

  1. Redetermination by a Medicare Administrative Contractor
  2. Reconsideration by a Qualified Independent Contractor (QIC)
  3. Hearing before an Administrative Law Judge (ALJ) at the Office of Medicare Hearings and Appeals (OMHA)
  4. Department Appeals Board (DAB) Review
  5. Judicial Review in U.S. District Court

 

For an ALJ appeal, the minimum amount in controversy is currently $150; the filing deadline is 60 days from date of receipt of a QIC determination; and there is a 90-day target to complete the process.  In 2015, the OMHA was receiving more than a year’s worth of appeals every 18 weeks at this level.  At the end of 2015, the pending workload exceeded 880,000 appeals, while annual adjudication capacity with the current level of resources was approximately 75,000 appeals.

 

For a DAB review, the minimum amount in controversy is currently $150; the filing deadline is 60 days from date of receipt of ALJ appeal determination; and there is a 90-day target to complete the process.  In 2015, the DAB was receiving more than a year’s worth of appeals every 11 weeks at this level.  At the end of 2015, the pending workload exceeded 14,000 appeals, while annual adjudication capacity with the current level of resources was approximately 2,300 appeals.

 

Settlement Offer and Eligibility

 

On June 28th of this year, the U.S. Department of Health and Human Services (HHS) issued a Notice of Proposed Rulemaking (NPRM) proposing changes to the Medicare claims appeal process and describing its strategy to improve the process.  At that time, it was estimated that the current backlog of appeals could be eliminated by FY 2021 if those strategies were implemented in conjunction with the proposed funding increases and legislative actions outlined in the FY 2017 President’s Budget.

 

However, in an effort to further accelerate reduction of the appeals backlog, CMS recently announced that beginning December 1, 2016, they will make available an administrative settlement process for certain inpatient claims currently under appeal.  This process will be open to eligible hospitals willing to withdraw certain pending appeals in exchange for timely partial payment at 66 percent of the net allowable amount.

 

The following facility types are eligible to submit a settlement request:

  • Acute care hospitals, including those paid via Prospective Payment System (PPS), Periodic Interim Payments (PIP), and Maryland waiver; and
  • Critical access hospitals

 

The following facility types are NOT eligible to submit a settlement request:

  • Psychiatric hospitals paid under the Inpatient Psychiatric Facilities Prospective Payment System (IPF PPS)
  • Inpatient Rehabilitation Facilities (IRFs)
  • Long-Term Care Hospitals (LTCHs)
  • Cancer hospitals
  • Children’s hospitals

 

Eligible claims are those denied by a Medicare contractor on the basis that services may have been reasonable and necessary but treatment on an inpatient basis was not.  Claims must be under appeal at Level 3 or Level 4 with dates of admissions prior to October 1, 2013.  To be eligible for settlement, all eligible appeals must be settled.  The hospital cannot choose to settle some claims and continue to appeal others.  Certain hospitals will be excluded from this settlement opportunity based on pending False Claims Act litigation or investigations.

 

Settlement Process

 

The settlement process is initiated by the hospital submitting an Expression of Interest to CMS at This email address is being protected from spambots. You need JavaScript enabled to view it. .  If the hospital is approved for participation, CMS then generates a proposed spreadsheet of eligible claims/appeals for the hospital’s review, along with the Administrative Agreement for the hospital to sign.  The hospital will validate the information and notify CMS of any discrepancies on the eligible claims list by submitting an Eligibility Determination Request to CMS at This email address is being protected from spambots. You need JavaScript enabled to view it. within 15 calendar days of receiving the Agreement.  CMS and the hospital have 30 days to resolve any discrepancies.  If discrepancies are resolved, the hospital will sign the Administrative Agreement, and then CMS will sign the agreement.  Once claims are validated, payment will be made within 180 days of a signed agreement from CMS.  At any time prior to the hospital signing the agreement, they may withdraw their Expression of Interest and will retain full appeal rights.

 

Summary

CMS encourages all hospitals with inpatient status claims currently in the appeals process at the ALJ or DAB levels to consider this process.  The deadline for hospitals to submit an Expression of Interest is January 31, 2017.

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