Pressure to Settle Medicare Appeals Mounting

Hospitals are weighing their options on whether to accept settlement deals on Medicare claim denial appeals as the Oct. 31 deadline nears.

The heat is on.

In the weeks approaching the Oct. 31 deadline for hospitals to cut settlement deals on Medicare claim appeals estimated to total more than a billion dollars, there has been a burst of activity among providers.

Officials at the Centers for Medicare & Medicaid Services were peppered with questions after a conference call presentation Oct. 9 on the proposed settlement deal, which offers hospitals 68 cents on the dollar to resolve disputed claims. It was the second of two presentations on the topic.

Providers Skeptical of Medicare Appeals Deal

A handful of thorny questions stumped the four-member panel of CMS officials, who promised to post new information on the federal agency's settlement offer web page or to call hospital officials individually with responses. But the panel was able to provide clarity on several issues.

A couple of callers raised issues related to the potential for two rounds of settlement review and payment.

Under CMS's settlement offer, hospitals are required to submit spreadsheets that list all of their pending appeals, which are then matched to CMS records. "If everything is in agreement, there won't be a second round," said Melanie Combs-Dyer, director of the Provider Compliance Group in the CMS Office of Financial Management.

If the records do not match, the CMS panel advised the callers about issues related to settlement payment and patient privacy. If there is a second round in a hospital's settlement process, the hospital would receive two lump-sum payments to settle its claims instead of one.

On the privacy front, hospitals were advised that there is no need to encrypt the electronic files containing their spreadsheets and other settlement initiation documents. If a second round to a hospital's settlement process is necessary, however, any supporting documents that contain confidential patient information should be encrypted, Combs-Dyer said.

She also advised hospitals on the legibility of their claims agreement documents and spreadsheets.

"We really need to be able to read the settlement agreement, particularly the name of your hospital," she said, noting an early version of the CMS settlement agreement form cuts off long hospital names and an updated version of the form should be used.

Combs-Dyer also urged hospital officials "to complete the spreadsheet in its entirety," noting failure to fill out the header fields at the top of the CMS spreadsheet form could lead to rejection of a settlement deal. She said hospitals can use their own spreadsheet forms, but noted that doing so would lead to processing delays.

No Help with Third-Party Payers
The panel also answered questions about the impact hospital settlement deals will have on related claims involving third-party payers such as commercial insurers. Hospitals apparently will have to fend for themselves.

"The claims will remain as 'denied' in the Medicare system," said Mark Korpela, acting deputy director of the Financial Service Group at the CMS Office of Financial Management. "We will not be advising other payers on how to process claims."

Appeals Backlog CaseStill in Court 
AHA et al. v. Burwell, filed against the federal Department of Health and Human Services, claims "unlawful delays" in the adjudication of Medicare claims appeals. Filed in May, it seeks a court order that would compel HHS to clear the Medicare appeals backlog.

In a US District Court legal motion filed Oct. 2, the American Hospital Association asks the court to deny HHS's motion to dismiss the case and seeks summary judgment in favor of the hospital association and several co-plaintiff healthcare providers.

"HHS's failure to adjudicate appeals timely has led to an immense backlog of close to a million appeals of claim denials worth more than a billion dollars in Medicare reimbursement. As a result, the system is broken," the AHA motion states.

The hospital association casts the federal government's response the lawsuit in a dim light.

"...Has responded to this lawsuit by throwing up its hands, denying blame, and asking for forgiveness based on two central arguments: First, that the ninety-day deadlines for deciding claims at the ALJ and DAB levels are not, in fact, deadlines that can be enforced; and, second, that 'this action does not involve the sort of delays that are so egregious as to warrant exercise of the Court's discretion to enter the extraordinary remedy of [ordering HHS to clear the backlog].

CMS officials did not respond to a request for comment on the AHA legal motion.

Fuming Over RAC Fees
In a Sept. 25 letter to CMS Administrator Marilyn Tavenner, the AHA raises a red flag over federal Recovery Audit Contractor contingency fees paid for previously denied claims that are eligible to be included in the Medicare appeals settlement deal.

"Specifically, we are inquiring about whether the RACs will be required to forfeit any of the contingency fee they received for those denials," AHA Executive VP Rick Pollack wrote. "As you are aware, when a hospital prevails in its appeal of a denied claim, the RAC must return the entire fee paid for that denial."

A "Frequently Asked Questions" document posted on the CMS website, says: "Recovery Auditor contingency fees are governed by contract requirements and will be handled accordingly."

RAC contingency fees can range as high as 17.5% .

A CMS spokesman, responding to a request for comment, said that the agency is engaged in an open dialogue with providers about the proposed settlement deal. "CMS has made extensive outreach efforts regarding this settlement offer, including posting detailed information on its website. CMS has also established a mailbox to facilitate communication with the healthcare provider community. Questions submitted to the mailbox are responded to and posted to CMS' website."

Ronald Hirsch, MD, VP of the regulations and education group at Chicago-based Accretive Health, says RACs are a festering sore point for hospital officials across the country.

"The RAC fee is important to hospitals because they consider the audit process where everything is in favor of the RAC and the government to be patently unfair," he says. "If a hospital misses a deadline, there is no recourse, but yet the [qualified independent contractors] and ALJs have been allowed to miss their deadlines by weeks, months and years without as much as an apology."