Hospitals Receive a Reprieve from CMS Recovery Audits

September 12, 2014

In a new ruling, CMS agrees to partially pay pending hospital claims in exchange for withdrawal of claims appeals.

On Sept. 9, CMS provided guidance on the administrative request procedures for pending RAC appeals. For acute care hospitals (ACH) and critical access hospitals (CAH) this means that in certain instances, a settlement agreement can be reached in exchange for the hospital's withdrawal of pending claims denials, which they appealed. "To more quickly reduce the volume of patient claim denials currently pending in the appeals process, CMS is offering an administrative agreement to any acute care hospital or CAH willing to withdraw their pending appeals (or waive their right to request an appeal in exchange for timely partial payment (68 percent of the net payable amount)." This option is available for admissions prior to October 1, 2013. Administrative agreement requests are due by October 31, 2014.

CMS is, in essence, offering a mechanism to reduce the burden on the Medicare appeals process and improve the revenue cycle for hospitals. The revenue cycle is affected in two major ways: (1) cash is received within 60 days of a fully executed agreement, and (2) money is not being spent on the appeal either through outside representation or full-time employee hours.

This decision relates to the Hospital Participant-Settlement Instructions, which were released in the Federal Register and became effective on Aug. 29. There are several caveats that must be met in order to request a waiver:

1. A qualifying provider must meet the statutory requirements under the Social Security Act §§ 1886(d) or 1820(c) and hospitals paid under 1815(e) and 1814(b)(3). Inpatient Psychiatric Facilities Prospective Payment System, inpatient rehabilitation facilities, long term care hospitals, cancer hospitals, and children's hospitals do not qualify.

2. The patient must not be a Medicare Part C enrollee.

3. The claim was denied by an entity CMS utilized (i.e., RAC, MAC, ZPIC or CERT).

4. The claim was based upon inappropriate patient status (i.e., did not meet the parameters for in-patient, but the service was valid) and payment was not received under Part B as a "re-bill."

In order to be considered, a completed administrative agreement and an eligible claims sheet must be submitted. In sum, this may be a good option for providers who need a positive cash flow and want to reduce expenses.