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CMS Offers Labor Day “Sale” on Audit Appeals

Know your rights in Debt Collection(September 3, 2014): Well, it appears that the Centers for Medicare & Medicaid Services (CMS) has decided to get involved in the nationwide Labor Day sale phenomenon. As part of its ongoing efforts to alleviate the backlog in Medicare claim appeals, CMS has quietly offered to pay any hospital 68% of their appealed claims. The catch? The hospital must withdraw its appeal.

This latest move is part of an ongoing fight between CMS, its contractors, and hospitals over reimbursement amounts for short-term inpatient stays.

I.  Increased RAC Audits Lead to Increase in Appeals:

As Medicare providers are well aware, CMS hired Recovery Audit Contractors, or “RACs”, to identify and recover improper payments paid to health care providers. RACs are paid on a contingency fee basis, so that they receive a certain percentage amount of each improper payment they assess. This payment model has led many providers to claim that RACs are simply “bounty hunters” in search of any alleged overpayment, whether realized or not. Providers insist that RACs are incentivized to deny claims with little regard for the accuracy of their denials.

With hospitals, RACs have focused their audits on short-term inpatient stays. In particular, RACs have claimed that hospitals are over-billing the Medicare program when patients undergo simple operations or receive lengthy evaluations in the emergency room. Instead of billing Medicare at the higher reimbursement rate for a full hospital stay, RACs contend that the hospitals should be paid at a lower outpatient rate. The difference between these two rates can add up to thousands of dollars per patient.

As expected, hospitals argue that they are correctly billing for these types of stays. As a result, they are fiercely appealing adverse claim determinations through the Medicare appeals process. This has led to a substantial 18 month backlog of hospital appeals before Administrative Law Judges in the Office of Medicare Hearing and Appeals.

To alleviate this buildup, CMS was forced to suspend the assignment of new appeals for at least two years. Congress, health care industry leaders, and providers alike have criticized the delays leading to CMS’s decision to suspend the appeals process.

II.  CMS Offers to Pay Hospitals to Withdraw Appeals:

CMS hopes that, by offering these “administrative agreements,” it can more quickly reduce the number of inpatient status claims currently pending review in the appeals process. As part of its statement last Friday, the Agency “encourages hospitals with inpatient status claims currently in the appeals process to make use of this administrative agreement mechanism to alleviate the administrative burden of current appeals on both the hospital and Medicare system.”

However, not all hospitals are eligible for the new settlement offers. Eligible facility types include acute care and critical access hospitals. However, psychiatric hospitals, Inpatient Rehabilitation Facilities (IRFs), Long-Term Care Hospitals (LTCHs), cancer hospitals, and children’s hospitals are not eligible to apply for the administrative agreement.

Under the proposed settlement offers, hospital claims involving inpatient stays that are now under appeal would be paid 68 cents for every dollar billed. Furthermore, it would only apply to hospital claims with dates of admission prior to October 1, 2013. Eligible hospitals have until October 31, 2014 to decide whether to accept the settlement.

III.  Hospitals Have Been “Lukewarm” to CMS’ Offer:

The new settlement offer has received only a “lukewarm reception” from the American Hospital Association (AHA). The large hospital trade associations such as AHA have been forceful in their lobbying efforts to get CMS to overhaul its audit process. In a prepared statement, AHA notes that the proposed offer “fails to address the underlying cause of the problem – overzealous RAC reviewers.”

As we have highlighted previously, the AHA is part of an ongoing lawsuit – in conjunction with three independent hospital systems – against the Department of Health and Human Services over the arduous Medicare appeals process.

IV.  Conclusion:

It will be interesting to see if any large hospital systems accept CMS’s “Labor Day Sale” offer. Hospitals will be forced to conduct a cost-benefit analysis: Will it make more financial sense to take the 68% payment in order to divulge itself of time-consuming appeals that may take two years (or more) to resolve? Or, will hospitals continue to appeal and fight based on principal and their long-standing claim that they are billing short-term inpatient stays at the appropriate levels?

Even with a resolution, hospitals may be handed an adverse ruling at the ALJ or Medicare Appeals Council level and be left empty-handed. However, if hospitals they take CMS on its new deal, the agency insists that it will pay the claims subject to the offer within 60 days.

However, it is also interesting to note that CMS is providing this “sweetheart” deal only to certain types of providers – i.e., the types of providers best able to financially support and fight adverse determinations throughout the onerous Medicare appeals process. However, small practice groups of all types of providers are shut out of this deal. They are the types of providers with the least financial ability to fight RACs through the administrative appeal process.

For now, most providers are not able to take advantage of this new offer, whether it’s lucrative or not. As result, we insist that Medicare providers subject to a RAC audit immediately seek experienced legal representation to assist you through the appeals process. If you have any questions or concerns dealing with a RAC audit, please feel free to call us today and we would be more than happy to assist you.

Saltaformaggio, RobertRobert Saltaformaggio, Esq., serves as an Associate at Liles Parker, Attorneys & Counselors at Law.  Liles Parker attorneys represent health care providers and suppliers around the country in connection with Medicare audits by RACs, ZPICs and other CMS-engaged specialty contractors.  The firm also represents health care providers in HIPAA Omnibus Rule risk assessments, privacy breach matters, State Medical Board inquiries and regulatory compliance reviews.  For a free consultation, call 1 (800) 475-1906

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