Providers Skeptical of Medicare Appeals Deal

An appeals backlog for Medicare claims decisions has prompted CMS to offer providers a settlement, but hospitals and health systems consider it insufficient.

Healthcare providers are raising concerns about a Medicare claims appeals settlement offer from federal officials.

From a hospital or health system's perspective, the 68-cents-on-the-dollar deal is neither a fair resolution nor an adequate step toward addressing providers' concerns over Recovery Audit Contractor reviews of healthcare service claims to Medicare, a New York-based healthcare CFO says.

"I believe that our [appeal] success rate is over 50 percent and that from my understanding many hospitals have had similar success when taking appeals to the administrative law judge," said Mark Bogen, CFO and senior VP of finance at South Nassau Communities Hospital in Oceanside, NY. 

"Additionally, we use outside consultants to help us prepare and submit theses ALJ appeals and they usually get a contingency rate based on the successful adjudication of an ALJ appeal. Therefore, I do not agree that the 68 cents on the dollar is fair when you also take into consideration the time-value of money given the length of time these cases have been at the ALJ as there is no interest given."

In December 2013, Chief Administrative Law Judge Nancy Griswold issued a memorandum that details the claims appeals backlog at the federal Office of Medicare Hearings and Appeals. She reported the backlog had mushroomed dramatically.

"In just under two years, the OMHA backlog has grown from pending appeals involving 92,000 claims for services and entitlement to appeals involving over 460,000 claims for services and entitlement, and the receipt level of new appeals is continuing to rise."

Bogen questioned the motives behind the appeals settlement offer from the federal Centers for Medicare & Medicaid Services.

"This 'offer' is solely being done, in my opinion, by CMS to address the public relations nightmare of trying to defend their inability to timely adjudicate the appeals process and as a way to thwart the threatened/pending lawsuits from the AHA and hospital providers," he said. 

"The settlement may reduce the backlog," he added, "but it will not resolve what probably has caused it. The RAC audits have gone from a focus on medical necessity/physician judgment to a place of service (inpatient versus outpatient) argument, and, as a result, the number of accounts on appeal has grown significantly and the success rate of the appeals has declined as well. The RAC process still needs to be overhauled."

The American Hospital Association is equally unimpressed.

"RACs are not neutral judges," says Alicia Mitchell, senior VP for communications at the AHA. "Their overzealous denials broke the appeals system. This offer addresses the symptoms and does not provide a solution to the underlying problems."

She added the appeals offer does nothing to address hospital officials' concerns over the two-midnight rules cutting into one of their most lucrative lines of business: inpatient care. "This offer does not apply to appeals for admissions after October 1, 2013, when the two-midnights policy became effective," Mitchell said.

CMS officials defended the settlement offer in an email to HealthLeaders: "CMS examined and evaluated multiple matters when making its determination. As is conventional practice during settlements, CMS developed a balanced value that considered both the best interest of the government, and rendering an obtainable settlement. Based on the data and CMS's analysis, we determined 68 percent was an appropriate offer for resolving these cases."

CMS says it is trying to improve the performance of the RAC program. "This settlement is only intended to address pending appeals related to place of setting," they say. "Our goal with the Recovery Audit program is to strike the right balance between our responsibility to ensure all beneficiaries maintain access to care and ensuring all Medicare claims are paid accurately. Based on feedback received, CMS made improvements to the Recovery Audit program. CMS now has in place a Recovery Auditor Validation Contractor to measure the accuracy of the Recovery Auditor determination."

The reaction to the proposed appeal deal at the American Association of Medical Colleges ranged from lukewarm to chilly last week.

AAMC spokesperson Ivy Baer said it was "hard to say" whether the offer from CMS is fair. "Each institution must weigh the cost of continuing the appeal, and the uncertainty of how the appeal concludes, against a certain amount," she said. 

"However, the CMS notice mentions a 'reconciliation process' in the event of discrepancies, so it's not clear when this would be a done deal. A hospital doesn't just submit and get paid."

Baer says RAC audits and the two-midnight rule remain problematic for providers. "The RAC process remains deeply flawed. This [settlement deal] merely addresses the enormous backlog of appeals," she said. "The settlement may help some hospitals, but the problems with RAC audits and the unreasonableness of the two-midnight rule are not addressed."

Medicare Beneficiary Perspective
A patient group that has filed two lawsuits against federal Department of Health and Human Services over the Medicare appeals backlog, the Willimantic, CT-based Center for Medicare Advocacy, is pressing for an overhaul of the Medicare claims review and appeals process.

"The goal of the lawsuit we just filed on August 26 (Lessler et al. v. Burwell) is to ensure that Medicare follows the law and provides timely decisions on beneficiaries' Administrative Law Judge appeals," Alice Bers, a lawyer at CMA, said last week. 

"Congress mandated that ALJ decisions be issued within 90 days of the request for a hearing being filed, but the system is far out of compliance with that standard. Beneficiaries should not have to wait so long for answers on Medicare coverage when they are on the hook financially for the services in question and may be going without needed care."

Bers says patients are paying a price for an ongoing squabble between CMS and providers over Medicare reimbursement reforms. "From the beneficiary's point of view, reimbursement to providers should be logical and efficient. Tremendous backlogs for providers in the appeal system affect beneficiaries because they use the same appeal system and are necessarily affected by the overburdened system."

The CMA attorney said the two-midnight rule, which is in effect but yet to be strictly enforced, is contributing to the appeals backlog.

"Confusion over inpatient/outpatient billing and RAC appeals do seem to be significant contributing factors to the backlog in the appeal system," Bers said.

"CMA does not believe that the two-midnight rule is clarifying inpatient/outpatient billing issues nor is it helping beneficiaries who have been caught up in the confusion."

Appeal Deal's Complicated Calculation
CMS is set to hold a conference call Tuesday to brief hospital officials on the Medicare appeal settlement offer.

"We will participate in the CMS phone call," Dartmouth-Hitchcock Medical Center officials said last week in a prepared statement. "Our questions are about the process and procedure that will need to be followed to process these claims; and what costs will be associated with filing for the settlement.

"Once we have the information we need on the offer, we will assess the appeals in our pipeline, determine those eligible and conduct a financial analysis. Our analysis will consider the cost to continue the appeal or the risk of losing the appeal versus the benefit of accepting the 68-cents-on-the-dollar settlement offer. While we don't know the final outcome, we expect there will be cases where the settlement may be the best option."