June 15, 2015

$1.3 Billion Paid by Centers for Medicare & Medicaid Services Clouds True Scope of Payout

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On Thursday, June 11 the Centers for Medicare & Medicaid Services (CMS) quietly announced that as part of its 68-percent solution, it had paid out about $1.3 billion to 1,900 hospitals that had agreed to the settlement. 

The announcement appeared as a two-sentence update on the agency’s website describing inpatient hospital reviews. This report suggests the average payment to a hospital was about $684,000. There was no data given about the range in size of payments, although assuming that a mix of large and small hospitals participated, it is likely that the range was substantial. 

Similarly, the announcement did not indicate the number of claims that were resolved or the percentage of pending administrative law judge (ALJ) appeals that are now out of the lengthy appeal queue. 

However, Modern Healthcare reported that the settlement involved 300,000 claims. The U.S. Department of Health and Human Services (HHS) website indicates that in the 2013 fiscal year, the latest year for which data is available on the website, appeals were filed for 654,580 claims. During the prior fiscal year, an additional 293,000 claims were appealed. 

While some of those claims have already been ruled upon, this suggests that even following the 68-percent solution, the ALJs will have a significant number of cases to resolve. 

To put the numbers in perspective, in 2010 there were 169,111 claims filed. Even if we assumed that all 300,000 resolved cases were from 2012 and 2013, it would mean that there is an average of 323,000 unresolved cases from those years, or about double the number filed in 2010. In short, the delays at the ALJ level may subside, but it appears that the ALJs will continue to have a very large caseload.

According the American Hospital Association (AHA), there are just under 5,000 community hospitals in the U.S, so it appears that under 40 percent of the nation’s hospitals agreed to the 68-percent settlement. 

While much of the media coverage of the settlement focused on the $1.3 billion that was paid to hospitals, since this sum was only 68 percent of the full Medicare reimbursement, the settling hospitals surrendered $611 million, an average of about $321,000 per hospital, to resolve the cases.   

With this settlement, CMS trimmed over half a billion dollars from the money it initially paid to the hospitals. Since Medicare’s guidance about the proper standard for determining inpatient status was quite vague, lowering the reimbursement by $611 million seems like a significant victory for CMS.  

About the Author

David M. Glaser, Esq., is a shareholder in Fredrikson & Byron’s Health Law Group. David helps clinics, hospitals, and other healthcare entities negotiate the maze of healthcare regulations, providing advice about risk management, reimbursement, and business planning issues. He has considerable experience in healthcare regulation and litigation, including compliance, criminal and civil fraud investigations, and reimbursement disputes. David’s goal is to explain the government’s enforcement position and to analyze whether the law supports this position. David is a popular panelist on Monitor Mondays and is a member of the RACmonitor editorial board.

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David M. Glaser, Esq.

David M. Glaser, Esq., is a shareholder in Fredrikson & Byron’s Health Law Group. David helps clinics, hospitals, and other healthcare entities negotiate the maze of healthcare regulations, providing advice about risk management, reimbursement, and business planning issues. He has considerable experience in healthcare regulation and litigation, including compliance, criminal and civil fraud investigations, and reimbursement disputes. David’s goal is to explain the government’s enforcement position and to analyze whether the law supports this position. David is a popular panelist on Monitor Mondays and is a member of the RACmonitor editorial board.

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