In recent weeks, hospice providers have been receiving revised cap demands for fiscal years 2012 and earlier. Although the initial demands in these cases were issued more than three years earlier, CMS now claims that it can reopen and revise cap demands for up to three years from the most recent demand. Based upon this construction, CMS could actually reopen every year, forever and ever.

In 2011, when CMS adopted the revised cap rule, commenters asked CMS to specify the reopening time period, noting the need for hospices to manage their finances with certainty. CMS stated plainly that it was revising its proposal to “make it clear that there is a 3-year time frame for reopening.” 76 F.R. 47302, 47311-12 (August 4, 2011). Providers took comfort from this plain statement.

Reopening authority is claimed by CMS in 42 C.F.R. § 405.1885, which provides, “reopening is timely only if the notice of intent to reopen…is mailed no later than 3 years after the date of the determination or decision that is the subject of the reopening.” Although the regulation itself has never expressly provided that the 3-year reopening window runs from the date of the initial demand, providers, the PRRB, and courts alike have long interpreted it this way. See e.g. State of Oregon v. Bowen, 854 F.2d 346, 348, n. 2 (9th Cir.1988) (“A request for reopening can be made for three years following the initial determination.”).

While logic and fairness align with providers, CMS will say that nothing in the regulation refers strictly to the initial determination. In this world, statutes of limitations are designed to bring things to an end, to settle things, to bring things to rest. While courts might (and should) ultimately reject CMS’ broad claim of reopening authority, it would be a long battle.

As evidenced by its belated 2012 cap reopenings, providers could be on the hook for shifting allowances much longer than previously anticipated.

The effect of this interpretation will be somewhat muted by the fact that few patients live more than three years past their initial year of hospice service. And, those patients that do live so long will likely have allowances spread over many years, resulting in smaller changes to allowances in any given year. Still, for large programs, the effect could be material.

If presented with such a belated reopening, providers should take a close look at the cap calculation to see if the revenue side numbers have changed. Specifically, because hospice providers have been facing material post-payment audits, and because such audits result in CMS reclaiming revenue, overpayment demands should result in a corresponding reduction in revenue. Any reopening that makes micro-adjustments to allowances must in fairness also adjust changing revenue numbers.

While the PS&R system is now better at capturing post-payment adjustments, earlier such adjustments may not have been incorporated into the PS&R system. As a result, providers should run current PS&R reports, but also separately consider whether there have been unaccounted for post-payment audit adjustments to revenue for any given year. If providers believe that CMS has failed to account for a change in revenue, they should start with an inquiry to the MAC, but should also keep in mind that there is a 180 day deadline to file an appeal to force the revenue adjustment.