Representatives for the Centers for Medicare and Medicaid Services (CMS) held a conference call on October 9, 2014 to address ongoing questions and clarify the requirements for hospitals that want to settle the inpatient-status claims whose denials they have appealed. As discussed in a recent Arent Fox client alert,1 the CMS settlement offer will pay hospitals 68 percent of the amount at issue. The additional clarifications may impact the evaluation of whether to settle.


CMS reiterated that the claims eligible for settlement must meet all of the following requirements:

  • Denied by a MAC, RAC, CERT, OIG, or ZPIC;
  • For Fee-for-Service Medicare;
  • Denied based on “patient status”;
  • Date of Admission prior to October 1, 2013;
  • The hospital timely appealed the denial;
  • As of the date the hospital submits the initial request for settlement to CMS, the appeal is  still pending or the hospital has not yet exhausted its appeal rights;
  • The hospital did not receive payment for the service as a Part B claim.

New CMS Guidance: Since Settled Claims Will be Treated as “Denied,” Dealings with Other Payors and Beneficiaries Could be Complicated

There were questions during the call from numerous hospitals who said they planned to use the settlement. CMS clarified that claims which are paid through the settlement process will remain “denied” in the CMS system. This is particularly important, because a claim’s denial status could impact whether the hospital receives any additional reimbursement for the claim from a secondary payor. CMS stated that it would not notify secondary payors when claims are settled as part of the settlement process, so hospitals will need to work with other payors to determine whether any further payments are owed to them.

CMS also acknowledged that claims that are settled, but remain “denied” in the CMS system, could impact beneficiaries and their entitlement to certain benefits. Specifically, CMS noted that (in some cases) having a claim listed as “denied” could impact whether a beneficiary had a qualifying stay for purposes of a subsequent skilled nursing facility admission. CMS stated that they are working to address this potential problem and hope to issue guidance in the near future. Moreover, the claim’s “denied” status also could impact the beneficiary’s potential liability for co-pays and deductibles. CMS stated that its current position is that hospitals do not have to refund co-pays and deductibles previously collected from beneficiaries, but they cannot bill beneficiaries for any co-pays and deductibles once a claim is settled. CMS acknowledged that it may need to revisit this issue.

Deadline Fast Approaching — October 31, 2014; Limited Extension Opportunities

Finally, CMS urged hospitals to submit their settlement requests as quickly as possible and to take advantage of the resources available on the CMS Inpatient Hospital Reviews website.2 While CMS acknowledged they will accept requests for extension of the October 31, 2014 filing deadline based on “extenuating circumstances,” CMS noted that they consider “extenuating circumstances” to typically be limited to scenarios such as flood, fire, or other natural disasters.

Deciding Whether to Settle; or Not

As previously discussed in another recent Arent Fox client alert,3 determining whether it would be advantageous for your hospital or health system to participate in the Settlement involves various complex considerations, including the scope of claims at issue, the likelihood of success on appeal, and the time value of money. As a result, in addition to reviewing CMS’s Frequently Asked Questions4 and other CMS resources, hospitals should work closely with their financial departments and legal counsel in order to determine to what extent they would benefit from accepting the settlement. All requests for settlement or extension must be submitted to CMS by October 31, 2014.