On August 29, 2014, the Centers for Medicare & Medicaid Services (CMS) released a statement that it is offering a settlement option to acute care and critical access hospitals with currently pending appeals of inpatient status claim denials. If hospitals elect to accept the settlement, then they will receive a lump payment for 68% of the net allowable amount on all eligible claims. The intent of this offer is to alleviate the administrative burden for both the provider and Medicare, and to reduce the current backlog of appeals that are being disputed due to inappropriate patient status determinations. CMS believes that the changes in Final Rule 1599-F, the “two-midnight rule,” will reduce future appeal volumes.
Background on Inpatient Status Reviews
Inpatient stays of two days or fewer have been a target by Medicare as it is believed that the services provided should be billed as an outpatient versus inpatient status. To clear up confusion, CMS issued a revision to the 2014 Inpatient Prospective Payment System (IPPS) Final Rule reimbursement criteria and instituted the two-midnight rule for Part A inpatient hospital claims, thus creating new guidelines for establishing the medical necessity of inpatient hospital admissions, as well as documentation requirements, inpatient admission orders, and certifications. The two-midnight rule clarifies that the decision to admit a patient should be based on an expectation that the patient will require a hospital stay with a duration of at least two midnights.
The enforcement of the two-midnight rule will not begin until October 2014. However, CMS initiated a pre-payment medical review program, known as the “probe-and-educate” medical review program, designed to identify improperly billed claims and provide education to hospitals implementing the requirements of the 2014 IPPS Final Rule. There is a current backlog of claims in the Medicare appeal process as a result of the audits initiated by the probe-and-educate medical review program. Pending claim appeals are backlogged to 2009 and in some cases, further.
Eligible claims must satisfy all the following criteria to be considered for the settlement offer:
- The claim has a date of admission prior to October 1, 2013.
- The claim was denied due to a patient status audit conducted by a Medicare contractor on the basis that services may have been reasonable and necessary, but treatment on an inpatient basis was not.
- The hospital timely appealed the denial, and the appeal was still pending at the MAC, QIC, ALJ or DAB in which the provider has not exhausted its appeal rights.
- The claim was denied by an entity that conducted a review on behalf of CMS.
- The hospital did not receive payment for the service as a Part B claim.
- The claim was not for items/services provided to a Medicare Part C enrollee.
- The facility is an acute care hospital or critical access hospital.
Hospitals that choose to accept the settlement must agree to settle all eligible claims and must complete and file with CMS an Administrative Agreement along with a spreadsheet containing all eligible claims by October 31, 2014.
Once the Administrative Agreement and Eligible Claim Spreadsheet are reviewed and confirmed by CMS, a copy of the signed agreement will be returned to the provider; all claims identified will be dismissed from the appeal process; and, a payment in the amount of 68% of the net allowable will be issued. Payment will be made 60 days after the execution of the Administrative Agreement by CMS. The agreement states that hospitals are not allowed to collect the remaining balance from the patient for the services included in the settlement, including their coinsurance.
Where there is a discrepancy between the claim information submitted by the hospital and CMS’ records, the hospital will have the opportunity to submit a revised spreadsheet and Administrative Agreement within two weeks of receiving notice of the discrepancy.
Hospitals should determine if they want to take advantage of this offer, as the deadline is quickly approaching. Providers may request an extension; however, if they take advantage of this settlement by the deadline, then they should be able to receive their settlement by the end of this year. Items to consider include:
- Do they have the resources to quickly apply for settlement and isolate all claims that are eligible for this settlement offer? If not, then do they want to consider requesting an extension?
- What is the current appeal success rate (net amount received less expenses compared to 100% payment for denied inpatient claims) for their organization relative to the 68% settlement being offered by CMS?
- Which is more advantageous—waiting out the appeal process for the payment turnaround vs. receiving payment within 60 days of filing the settlement agreement to CMS?
- Is the reduction of the administrative cost and burden worth the reduction in payment--which amounts to the difference of collecting 0.68 per each dollar on the denied inpatient claims compared to expected net payments based on historical or projected success of pursuing the pending denials?
Additional information can be located on CMS’ website here.