More than 935 days.  That’s the current average processing time for appeals decided by Administrative Law Judges (ALJ).  That doesn’t even include time spent at the first two levels of the appeals process, which means that it can take as long as three years on average for a claim to be adjudicated through the first three Medicare appeal levels.

Unfortunately, appeal data trends and ALJ workload suggest that processing times will continue to rise unless dramatic steps are taken to reduce the current backlog and to promote administrative efficiencies. 

CMS’s recent announcement that providers may once again be eligible to settle appeals using the Hospital Appeals Settlement process certainly qualifies as such a step.  Many in the Medicare stakeholder community welcome the opportunity for a second settlement, but any enthusiasm must be tempered by the understanding that acceptance of the CMS settlement limits providers’ appeal rights.  The settlement is a short-term fix born of necessity.  Safeguarding Medicare’s program integrity will require a long-term approach that reduces the need for a biannual settlement option.

CMS’s Sept. 28, 2016 announcement that there will be a second iteration of the Hospital Appeals Settlement left the provider community buzzing with questions.  What will the new settlement offer look like?  Which claims will be eligible for settlement? Which providers will be eligible to participate?  What can my facility do to prepare?  On Nov. 3, 2016, CMS began answering those questions.

Beginning on Dec. 1, 2016, eligible providers will be able to participate in an administrative settlement process to settle certain pending appeals in exchange for 66 percent of the net allowable amount.  As many will recall, CMS’s 2014 settlement offer was for 68 percent of the net allowable amount.  Though the method for determining the settlement percentage figure is unclear, if claim overturn rates factor into the calculation, even in part, the 2 percent decrease in the settlement offer is relatively minor compared to the 18.1 percent dip in appeal overturn rates from FY2013 and FY2016.  

This represents a near 41 percent net decrease from a 44.3 percent favorable rate in FY2013 to the 26.2 percent FY2016 figure based on data as of June 2016.

According to a Frequently Asked Questions document released in tandem with the CMS settlement announcement, this administrative settlement process will be different than CMS’s 68 percent settlement process in several meaningful ways.  Under the 2016 process, once providers submit an Expression of Interest, CMS, and not the provider, will create a list of potentially eligible claim appeals.  Rather than the provider compiling and submitting a list of claims to CMS for verification, providers will verify the list of potentially eligible claim appeals compiled by CMS. 

Previously, providers signed the administrative agreement first and then decided to proceed or abandon the process, but under the 2016 process providers will sign the administrative agreement when they agree to the list.  The Medicare Administrative Contractors (MACs) will price the claim appeals included in the agreement after both parties have signed the agreement whereas previously the claims were priced up front.  Finally, instead of two rounds of payment, under the 2016 settlement process only one payment will be made.

If providers have not already started, they should begin compiling lists detailing all their eligible claims currently pending in the Medicare appeals process.  Eligible claims include Part A inpatient hospital claims denied by a Medicare contractor on the basis of patient status with dates of admission prior to Oct. 1, 2013.

Additionally, claims are eligible for settlement only if, as of the date the provider signs and submits their first administrative agreement, the appeal decision was still pending at the ALJ or Departmental Appeals Board (DAB) or the provider had not yet exhausted their appeal rights at the ALJ or DAB.  The list should contain such pertinent information as the claim dates of service, the current level of appeal, and the denial basis.  

Additionally, providers should gather information related to how long their claims have been in the appeals process and to analyze trends in their appeals’ success rates.  This information could provide a valuable baseline for providers as they evaluate their settlement options.

The deadline for a hospital to submit the Expression of Interest is Jan. 31, 2017.  Each eligible provider must undertake a due diligence analysis to decide whether participation in the settlement is in their best interest.  The importance of this decision cannot be overstated.  Once Dec. 1, 2016 arrives, the next two months will move fast. 

Don’t wait until it’s too late.  

About the Author

Mr. Greenspan serves as vice president of regulatory affairs at Optum Executive Health Resources and is responsible for overseeing the firm’s regulatory research and hospital advocacy efforts.  He collaborates closely with the company’s appeals management teams to offer support on complex Medicare, Medicaid, and commercial appeals matters.

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