CMS Offers Partial Payment for Medicare Denials; Hospitals Should Eye Options Carefully

CMS Offers Partial Payment for Medicare Denials Hospitals Should Eye Options Carefully

The global settlement offer announced by the Centers for Medicare and Medicaid Services (CMS) on August 29,2014 has given acute care and critical access hospitals an opportunity to recoup some losses from earlier claim denials under Medicare Part A. But each hospital will have to weigh its options carefully before deciding whether to take part.

Under the settlement, CMS is offering to pay 68 cents on the dollar for claims currently under appeal that were denied prior to October 1, 2013 on grounds that involved short stays or level-of-care determinations. To secure that partial payment, hospitals must submit an accounting of all relevant cases in spreadsheet form by October 31, 2014. After a validation process, CMS will determine the final payment amounts and make them within 60 days or face interest charges.

CMS regards the settlement as a way to clear its backlog of almost 800,000 appeals at a single stroke. For the hospitals, however, this is a mixed opportunity. It will take careful analysis for each hospital to decide whether it will benefit by taking part.

To participate in the settlement, a hospital must submit all its level of care denials, currently in the appeals process, or none. It cannot cherry-pick them. In each hospital’s roster of denials, however, there are cases with different likely outcomes. Some may never be reversed, in which case a 68 percent reimbursement is far preferable to zero. Some retain the potential to be reversed on appeal — which would result in 100 percent payment, but only if successful, and then only after a wait of several years.

It will be a complex task for each institution to analyze those facts, in addition to the time and labor that will go into satisfying the settlement submission request, to determine whether taking the settlement offer represents a net gain or a net loss.

One helpful factor is that hospitals will not commit themselves simply by submitting their denied case spreadsheets by the end of October. They can do so — preserving their settlement rights in the process — then withdraw later if they decide to. This means that for most hospitals, it’s advisable to submit the form and at least consider the settlement.
But it’s also advisable for them to begin a detailed analysis of their denied cases right away. The analysis requires an estimate of each case’s likelihood for a reversal on appeal. The time value of “some money now” versus “all or nothing later” plays a part as well. For hospital administrations already under stress, the extra analytics that come with the CMS settlement may not be welcome. But with large sums at stake, this is no time for guesswork.

Posted by Kelly Sauders, Partner, Deloitte & Touche LLP and Nancy Perilstein, Senior Manager, Deloitte & Touche LLP

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