Medicare Part A and B providers and suppliers should review their pending Medicare claims and determine whether the claims are eligible for resolution through the Office of Medicare Hearings and Appeals (OMHA) Settlement Conference Facilitation Pilot Program (SCF).
Through SCF, Medicare Part A and B providers are invited to voluntarily resolve eligible claims pending at the administrative law judge (ALJ) level of appeal through mediation with the Centers for Medicare & Medicaid Services (CMS). An OMHA employee serves as facilitator for the mediation process and one-day settlement conference. If eligible claims are settled at the conference, the appeals will be withdrawn and dismissed from the ALJ docket. If no settlement is reached, the appeals will return to queue for an ALJ hearing in the order OMHA originally received the ALJ hearing requests. SCF is an alternative and non-mutually exclusive process offered as an alternative to an ALJ hearing.
SCF was launched in June 2014 to curb the backlog of pending Medicare Part B appeals in the Medicare appeals process. The Medicare appeals backlog began in 2012 when OMHA’s adjudication efforts could not keep pace with the volume of new Medicare Part A and B appeal filings. In fiscal year 2012, OMHA adjudicated just over 52 percent of approximately 115,000 appeals received. In fiscal year 2013, OMHA adjudicated approximately 22 percent of 387,500 appeals received. While Part B appeals accounted for the majority of OMHA’s workload in fiscal years 2009 through 2012, Medicare Part A appeals accounted for the majority of OMHA’s workload in fiscal years 2013 and 2014. OMHA’s growing workload of Medicare appeals continues to be unsustainable. Current estimates suggest that there are approximately 770,000 backlogged appeals, and the average processing time for appeals at the ALJ and Medicare Appeals Council levels of appeal is approximately 800 days for each level.
The initial phase of SCF was available to Medicare Part B providers, and claim eligibility was restricted to ALJ appeals filed in 2013 that were not already assigned to an ALJ for hearing. The initial phase of SCF successfully settled over 2,600 unassigned Medicare Part B appeals, representing the work of more than two ALJ teams in one year. SCF was expanded in a Phase II program in the fall of 2015. Although SCF remained restricted to Medicare Part B providers, claim eligibility was expanded to ALJ hearing requests filed on or before Sept. 30, 2015 and cases not yet scheduled for an ALJ hearing. To participate in Phase II, which is currently ongoing, a provider must have at least 20 eligible claims each worth $100,000 or less. If a provider has fewer than 20 eligible claims, at least $10,000 collectively must be in controversy. Statistically extrapolated overpayments cannot exceed $100,000 to be eligible. The most recently released stage, Phase III, announced in February 2016, expanded SCF to all Medicare Part A providers.
To be eligible for Phase III, a Medicare Part A provider must have an assigned national provider identifier number and meet the following eligibility criteria, which include but are not limited to:
- The request for a hearing must involve an appeal of a Medicare Part A qualified independent contractor (QIC) reconsideration decision (i.e. Part C claims and QIC dismissals are not eligible);
- All jurisdictional requirements for a hearing before an ALJ must be met on all appealed claims;
- The request for a hearing must have been filed by Dec. 31, 2015, and the claims must not yet be scheduled for an ALJ hearing (i.e. the provider must not have received a notice of hearing);
- The amount of each individual claim must be $100,000 or less (for purposes of an extrapolated statistical sample, the extrapolated overpayment must be $100,000 or less);
- There must be at least 50 claims and $20,000, collectively, in controversy; and
- The request must include all of the provider’s pending appeals for the same item or service at issue that meet SCF criteria (i.e. a provider may not request SCF for some but not all of the items or services included in a single appeal).
Providers can initiate participation in Phase III by filing an SCF expression of interest form. Alternatively, CMS can initiate participation in Phase III or OMHA can initiate the process on its own. Once CMS confirms its intent to participate, OMHA will prepare a spreadsheet of a provider’s eligible claims. At this point, claim eligibility is determined and OMHA will notify ALJ teams to cease processing the claims. Upon receipt of the spreadsheet from OMHA, a provider has 15 calendar days to complete the spreadsheet and return it to OMHA with a completed request for SCF package. Following receipt of a completed SCF package from a provider, OMHA will issue a confirmation notice to the provider and CMS. Approximately four weeks after issuance of the confirmation notice, OMHA facilitators will schedule a pre-settlement conference call with the provider and CMS. The settlement conference will be scheduled approximately three to four weeks after the pre-settlement conference call. Any settlement reached must be structured as a percentage-based settlement that applies to all of a provider’s eligible SCF claims. In other words, CMS will not perform claim-by-claim adjustments or reprocessing. Any settlement reached will be subject to CMS’s usual practices, which may include offset or recoupment.
Hospitals claims that were eligible for CMS’s Part A hospital appeals settlement (68-percent settlement) are not eligible for Phase III regardless of whether the hospital participated in the 68-percent settlement. Conversely, hospital claims that were ineligible for CMS’s 68-percent settlement may be eligible for Phase III. This would include DRG denials, denials due to insufficient documentation of conservative treatment prior to a surgical procedure, and other non-“patient-status” denials. Hospitals that were ineligible for the 68-percentsettlement are eligible for Phase III, such as psychiatric hospitals paid under the Inpatient Psychiatric Facilities Prospective Payment System, inpatient rehabilitation facilities, long-term care hospitals, cancer hospitals, and children’s hospitals. Additionally, acute-care hospitals and critical access hospitals with pending False Claims Act litigation or investigations were ineligible for the 68-percent settlement but are eligible for Phase III. Hospital claims and hospitals that were excluded from the 68-percent settlement should reevaluate their pending Medicare appeals for Phase III eligibility.
Home health agencies with technical denials on grounds of insufficient brief-narrative documentation should consider participation in Phase III. Many home health agencies received technical denials from Medicare contractors “when the narrative portion of the face-to-face encounter documentation did not sufficiently describe how the clinical findings from the encounter supported the beneficiary’s homebound status and need for skilled services.” Although the U.S. Department of Health and Human Services has largely eliminated the brief-narrative requirement for certification periods beginning on or after Jan. 1, 2015, CMS declined to retrospectively change the regulations. In a recent ruling by the United States District Court for the District of Columbia, the Court restricted the authority of Medicare contractors to issue denials due to the brief narrative requirement. Specifically, the Court found that when a physician’s medical records support a patient’s homebound status and the need for skilled services, but the brief narrative alone does not, Medicare contractors cannot issue a technical denial on grounds of an insufficient brief-narrative. The Court specified that a Medicare contractor cannot second-guess the clinical findings or medical reasoning of a physician that support the medical necessity of home health services rendered. The Court’s holding provides important legal guidance for home health agencies with technical denials due to alleged insufficient brief-narrative documentation for certification periods between April 1, 2011 (the effective date of the brief-narrative requirement) and Jan. 1, 2015. Home health agencies would be wise to leverage the Court’s holding in the less adversarial and more informal setting of mediation to negotiate a favorable resolution on their technically denied claims.
There are a number of reasons why all Medicare Part A and B providers would be wise to consider participation in SCF. First, and as stated above, SCF is not mutually exclusive from an ALJ hearing. If settlement is unsuccessful, providers do not waive any hearing rights and can automatically return to the ALJ hearing process in the order in which OMHA originally received the ALJ hearing requests. Secondly, SCF is designed to be an expedited resolution process through which claims may be resolved as quickly as 10 weeks after a provider receives OMHA’s spreadsheet identifying the provider’s list of eligible SCF claims. Compared to the Medicare appeals process, SCF may enable providers to resolve claims years before the claims would be heard and resolved through ALJ hearing. Furthermore, a thorough preparation for mediation, which might include preparation of a position paper and expert testimony, will better prepare a provider for an ALJ hearing if facilitation is unsuccessful. Lastly, where favorable rulings on appeal range among ALJs from 18 to 85 percent, SCF enables providers to negotiate an agreeable percentage-based settlement sum on their pending appeals without the inherent financial uncertainties of proceeding to an ALJ hearing.
When utilizing SCF to negotiate payment with CMS, providers should consider their past and anticipated future ALJ success rates and appeal philosophy. A provider with a discriminate appeal philosophy that appealed factually and legally sound claims should leverage the strength of its cases and past success rates when negotiating settlement. Providers should also consider the value of 935 interest that has accrued on their post-payment overpayment claims when determining an acceptable settlement percentage on the facilitated claims. Although CMS will not pay 935 interest on claims settled through SCF, because there is no favorable ALJ determination entitling the provider to interest, the value of 935 interest can be substantial and providers should nevertheless consider it when negotiating settlement. For example, if a provider awaited a favorable ALJ ruling for three years while CMS involuntarily recouped an alleged overpayment of $100,000 at the current rate of 935 interest at 9.75 percent, the provider would be entitled to approximately $29,250 in interest in addition to the $100,000 principal amount of the claim. A provider with a pre-payment claim denial in the amount of $100,000 would not be entitled to 935 interest, nor would a provider with an alleged overpayment of $100,000 that elected to repay the overpayment through an extended repayment plan during the pendency of the Medicare appeals process. Therefore, a provider entitled to 935 interest should consider the value of such interest that has accrued in its favor when negotiating the percentage-based settlement sum. Also, providers should consider the practical effects of settling claims through SCF. Because the facilitator will not act as an adjudicator and accordingly will not make findings of fact or law, any claims settled through SCF will remain denied in CMS’s system. Providers cannot seek further reimbursement from a beneficiary and may forfeit payment from a secondary payor on denied claims. Also, future “downstream” claims may be denied as a result of the settled claim. For example, if an initial claim for a surgery is settled but remains denied with CMS, the “downstream” anesthesia claim related to the surgery may also be denied.
Many providers with voluminous Medicare Part A and B claim denials are simply unable to financially withstand the Medicare appeals backlog and extended recoupment periods while they await hearing. SCF offers providers a practical alternative to the appeals process whereby they are invited to negotiate a meaningful settlement on their pending appeals without forfeiting hearing rights. CMS’s and OMHA’s previously released alternative adjudication programs either required providers to forfeit hearing rights in exchange for a non-negotiable settlement payment (i.e. the 68-percent settlement) or provided no settlement opportunity but afforded a faster (and likely riskier) resolution through a statistically extrapolated ALJ determination (i.e. the statistical sampling initiative). OMHA’s SCF program enables providers to explore a mutually agreeable settlement with CMS without waiving any hearing rights and therefore is a low-risk and practical alternative resolution option for Medicare providers.
Providers are encouraged to not wait and facilitate their pending eligible Medicare Part A and B appeals as soon as is practicable.
About the Authors
Andrew B. Wachler is the principal of Wachler & Associates, P.C. He graduated Cum Laude from the University of Michigan in 1974 and was the recipient of the William J. Branstom Award. He graduated Cum Laude from Wayne State University Law School in 1978. Mr. Wachler has been practicing healthcare and business law for over 25 years and has been defending Medicare and other third party payor audits since 1980. Mr. Wachler counsels healthcare providers and organizations nationwide in a variety of legal matters. He writes and speaks nationally to professional organizations and other entities on a variety of healthcare legal topics.
Erin Diesel Roumayah is an associate attorney at Wachler & Associates, PC. Ms. Roumayah represents healthcare providers and suppliers in Medicare, Medicaid, and third party payer audits. She devotes a substantial portion of her practice representing healthcare providers and suppliers in the audit administrative appeals process. In addition, Ms. Roumayah represents healthcare providers in regulatory compliance matters and healthcare litigation. Ms. Roumayah graduated from Wayne State University Law School.
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