On August 29, 2014, the Centers for Medicare and Medicaid Services (CMS) released a statement notifying eligible hospitals that it is offering to enter into an administrative agreement to resolve certain claims for inpatient services denied by CMS or its Contractors because CMS believes the claims should have been billed as outpatient services.  Eligible hospitals include Acute Care Hospitals paid through the prospective payment system, periodic interim payments, and Maryland waiver, and Critical Access Hospitals.  Most specialty hospitals, including psychiatric hospitals, inpatient rehabilitation facilities, long-term care hospitals, cancer hospitals, and children's hospitals are not eligible for the program.

As part of the Administrative Agreement, hospitals will withdraw their pending appeals at any level of appeal for eligible claims.  Eligible claims are those that were for medically necessary services but that were denied by CMS based upon the inpatient setting in which the services were rendered.  Claims must have been for dates of admission before October 1, 2013, and must either currently be at any level of the appeals process, or still be eligible for appeal.  In return for signing the Agreement, CMS will allow 68% of the net paid amount payable on the claims; this number likely corresponds to hospitals' self-reported success rates of around 66 - 72% in obtaining favorable determinations through the appeals process for these types of claims.  In other words, CMS will reimburse the hospital at 68% of what it originally paid the provider for the claim, or would otherwise allow as payment for the claim.  If the provider has not yet repaid, or if CMS has not yet recouped, the full amount originally paid on the claims, then the hospital will be responsible for repaying all overpayment amounts in excess of 68% of the net allowable amount.  The Agreement further states that CMS will refund any interest the hospital has paid on the claims subject to the Agreement; however, CMS's payment will be considered payment in full for the claims, meaning that CMS will not pay any interest to the hospital on the claims that it might otherwise have been required to pay under federal regulations and the hospital may not seek any other payment for the claims from any other party.

CMS has likely instituted this program in an attempt to mitigate the growing backlog of appeals that have resulted in massive delays in the appeals process.  As of the beginning of this year, the backlog of cases awaiting assignment to an ALJ was 450,000 and growing. CMS is hosting a teleconference on September 9, 2014 at 1:00 pm EST to provide more information on the program and to answer provider questions.

Other programs to reduce the appeals backlog were previously announced by the Office of Medicare Hearings and Appeals (OMHA). You can read more about those programs here.