In an attempt to clear the backlog of appeals of short inpatient stays, the Centers for Medicare and Medicaid Services (CMS) recently announced a settlement offer for hospitals with claims currently pending in the appeals process. In exchange for withdrawal of their appeals, CMS is offering these hospitals 68 percent of the net payable sum to resolve these disputed claims.

Both acute care hospitals and critical access hospitals are eligible to submit a settlement request. However, otherwise eligible hospitals with pending False Claims Act litigation or investigations may be excluded from the settlement offer. Additionally, the following facility types are ineligible to participate in this settlement offer:

  • Children’s hospitals;
  • Cancer hospitals;
  • Psychiatric hospitals paid under the Inpatient Psychiatric Facilities Prospective Payment System; and
  • Long-term care and inpatient rehabilitation facilities.

Participating hospitals must agree to settle all eligible outstanding claims. Eligible claims are those denied by a Medicare contractor on the basis that services may have been reasonable and necessary but treatment on an inpatient basis was not, that are either under appeal or within their administrative timeframe to request an appeal review. Eligible claims cannot have been withdrawn and resubmitted for a Part B payment, and the settlement payment would exclude payments for beneficiaries enrolled in Medicare Part C. It is important to note that the settlement payments would apply only to patient admission dates prior to October 1, 2013.

Hospitals have until October 31, 2014, to submit a settlement request, although eligible hospitals may request an extension from CMS. CMS has specified that participating hospitals would be paid within 60 days of agreeing to the settlement. However, hospitals should be aware that the settlement proposal has attracted attention in Congress and may face some hurdles before payments are made.

While CMS believes that the offer will “alleviate the administrative burden of current appeals on both the hospital and Medicare system,” critics argue that the proposed arrangement fails to address the fundamental dispute between the parties and is, at best, a temporary solution.

Additional information, including an overview of the settlement request process, is available on the Inpatient Hospital Reviews section of the CMS website. As the deadline draws near, hospitals should be carefully evaluating the amount available under CMS’s offer and what they might eventually recover if they continue to pursue their appeals.