Update on CMS settlement offer with hospitals to resolve inpatient status appeals

October 2014
BY Mary M. Bearden and Lisa K. Smith, Brown & Fortunato, P.C.

The October 31, 2014 deadline is quickly approaching for hospitals that want to take advantage of the settlement offer made by the Centers for Medicare & Medicaid Services (CMS) to pay 68 percent of the “net paid/ payable amount” to resolve the appeal of eligible claims denied based on inpatient status. “Net paid/payable amount” equals the original inpatient Part A claim DRG payment plus Add-on Payments (DSH & IME interim payments, etc.), minus deductible and co- insurance.

A hospital interested in the settlement, but unable to submit the initial required documents by the October 31st deadline, should request an extension from CMS prior to that date. The settlement offer is completely voluntary, and a hospital will continue with the normal appeals process if it either (i) does not submit an initial settlement request, or (ii) chooses not to proceed with settlement after receiving the spreadsheet prepared by the Medicare Administrative Contractor (MAC) of validated eligible claims.

The ONLY facility types eligible for this settlement offer are Acute Care Hospitals (including those paid via the Prospective Payment System (PPS), Periodic Interim Payments, and the Maryland waiver) and Critical Access Hospitals (paid under both Method I and II).

The following facility types are NOT eligible for this settlement offer: (i) psychiatric hospitals paid under the Inpatient Psychiatric Facilities PPS; (ii) inpatient rehabilitation facilities; (iii) long- term care hospitals; (iv) cancer hospitals; and (v) children’s hospitals.

All claims that meet the settlement eligibility criteria must be included in the settlement. A hospital cannot choose to exclude some claims from settlement. A claim meets settlement eligibility if it matches all of the following criteria: (i) the claim has a date of admission prior to October 1, 2013; (ii) the claim was Medicare fee-for-service, and not for items/services provided to a Medicare Part C enrollee; (iii) the claim was denied by any entity that conducted a review on behalf of CMS on the basis that services may have been reasonable and necessary, but treatment on an inpatient basis was not; (iv) as of the date the hospital submits its first Administrative Agreement with its initial settlement request, an appeal of the claim is pending at the MAC, a Qualified Independent Contractor (QIC), an Administrative Law Judge (ALJ), or the Departmental Appeals Board (DAB) level, or it is still within the timeframe to be appealed to such level; and (v) the hospital did not receive payment for the services as a Part B claim.

The settlement offer is open to all inpatient status denials, including minor surgery admissions denied because although the surgery was necessary, an inpatient stay was not. It does not matter which CMS review entity made the denial, whether the denial was made on a prepayment or post-payment basis, or whether the denial was part of an extrapolated audit.

Much information regarding the settlement process is available from the CMS website at Data-and-Systems/Monitoring-Programs/ Medicare-FFS-Compliance-Programs/ Medical-Review/InpatientHospitalReviews. html. According to the Hospital Participant Settlement Instructions, a hospital interested in pursuing the settlement offer must send a single email (per Provider Number) to MedicareAppealsSettlement@ that contains: (i) a subject line that reads “Request for Settlement Agreement from [insert provider name] ([insert 6 digit provider number]); (ii) a single signed Administrative Agreement in pdf format (file name: PROVIDER NAME--6 DIGIT PROV NUM--ROUND ONE.PDF); and (iii) a single, completed excel spreadsheet of eligible claims (e.g., xls format) (file name: PROVIDER NAME--6 DIGIT PROV NUM--ROUND ONE.XLS).

If the hospital has multiple National Provider Identifications (NPIs) under one 6-digit Provider Number, the participant must submit a single Administrative Agreement and a single spreadsheet that includes all NPIs. If the participant has multiple Provider Numbers, they must submit a separate settlement request (including the Administrative Agreement and Eligible Claim Spreadsheet) for each Provider Number that chooses to settle the claims. The Administrative Agreement to be executed by the hospital can be found at Research-Statistics-Data-and-Systems/ Monitoring-Prog ram s/Medicare-FFS- Compliance-Programs/Medical-Review/ Downloads/AdminstrativeAgreement. pdf. The formatted excel spreadsheet to be completed by the hospital detailing all eligible claims can be found at http://cms. gov/Research-Statistics-Data-and-Systems/ Monitoring-Prog ram s/Medicare-FFS- Compliance-Programs/Medical-Review/ Downloads/EligibleClaimSpreadsheet_ updated09092014.xlsx. There is no minimum or maximum number of claims that can be included in a settlement request.

After receipt of a settlement request, CMS and its contractors will validate all eligible claims at the MAC and QIC appeal levels and a sample of the claims at the ALJ and DAB levels. As part of the validation process, recoupments will be suspended. CMS expects the following maximum timeframes will apply from the date the hospital submits a settlement request: (i) 31 days for Medicare “round one” review and validation; (ii) 14 days for a hospital to make a decision to abandon/ proceed with settlement; (iii) 3 days for CMS to sign the Initial Administrative Agreement (signature date starts 60-day payment clock); (iv) 3 days for Medicare to issue an email to the hospital containing a pdf of the fully executed Initial Administrative Agreement and list of claims included in the initial payment; (v) 31 days for Medicare “round two” review of discrepant claims; (vi) 14 days for the hospital to decide if a discussion period is needed; (vii) 3 days for CMS to sign the Secondary Administrative Agreement (signature date starts 60- day payment clock); and (viii) 3 days for Medicare to issue an email to the hospital containing the pdf of the fully executed Secondary Administrative Agreement and list of claims included in second payment.

After the settlement payments are issued, the ALJ and the DAB will conduct a full review on all cases at their level. If the ALJ or DAB identify errors in the settled claims, CMS will direct the MACs to take recovery actions for claims that were ineligible for settlement that were inadvertently included in an agreement or pay providers the settlement amount for claims pending appeal that were inadvertently omitted from an agreement.

Although the parties will make no admission of fault or liability with regard to the settled claims, claims included in the settlement will remain categorized as “denied”, no claim-level adjustments will take place, and a Medicare Summary Notice (MSN) will not be sent to the beneficiary. Instead, the MAC will issue one or two lump-sum payments, and before each lump- sum payment, CMS will send the hospital an email with a pdf file containing a list of all claims settled by that payment. Each claim will be calculated individually, and the payment status will be aggregated in order to determine the lump sum payment. Any interest paid by the hospital related to settled claims will be refunded, and any accrued and unpaid interest owed by the hospital for settled claims will be adjusted to zero. Hospitals will not be paid interest for the claims under appeal. Settlement payment of 68 percent of the net paid/ payable amount will be “payment in full.” However, if payment is not made within 60 days of the Administrative Agreement being signed by CMS, interest will accrue and be paid from day 61 to the date of payment.

The settling hospital is not required to submit withdrawals for the appeals related to settled claims. The finalized Administrative Agreement serves as a request for withdrawal of appeals of all settled claims and the MAC/QIC/ALJ/DAB will dismiss any applicable cases based on the finalized Administrative Agreement.

Lastly, hospitals will be able to keep co- insurance amounts from the beneficiary for settled claims if the funds have been collected at the time CMS signs the Administrative Agreement. If a beneficiary repayment plan has been executed at the time CMS signs the Administrative Agreement, the hospital may continue to collect the co-insurance in accordance with the repayment plan. If the beneficiary co- insurance has not been collected and there is no executed beneficiary repayment plan at the time CMS signs the Administrative Agreement, the hospital must cease collections. The hospital may not claim the uncollected deductible/co-insurance from these settled claims as Medicare Bad Debt for cost reporting purposes.