August 10, 2016

Providers Favor Reopening the 68-Percent CMS Inpatient Settlement

By Andrew B. Wachler, Esq. and Jessica C. Forster, Esq.


Andrew B. Wachler, Esq.


Jessica C. Forster, Esq.

The growing Medicare appeals backlog at the administrative law judge (ALJ) level of appeal has recently been the focus of reports, proposed administrative rules, and proposed legislation released by various federal government agencies.

On Tuesday, Aug. 9, Andrew B. Wachler and Steven Greenspan presented a special edition broadcast for RACmonitor listeners proposing potential action to assist with reducing the current backlog. Specifically, Mr. Wachler and Mr. Greenspan discussed the possibility of lobbying the Centers for Medicare & Medicaid Services (CMS) to reopen the 68-percent settlement that previously was available to hospitals with inpatient claims pending in the Medicare appeals process that had been initially denied because a Medicare contractor concluded that the services should have been rendered in an outpatient setting instead of an inpatient setting. Reopening the 68-percent settlement could significantly reduce the pending appeals backlog; however, whether or not it can be reopened may depend largely upon the level of interest expressed by industry stakeholders.

During their special edition broadcast, Mr. Wachler and Mr. Greenspan specifically outlined the aforementioned recent reports, proposed administrative rules, proposed legislation, and case law that all support the conclusion that immediate action is needed to reduce the appeals backlog. For example, the Government Accountability Office (GAO) recently released a report titled Medicare Fee-For-Service: Opportunities Remain to Improve Appeals Process, which outlined significant data regarding the effects the backlog has been having. The report noted stated that in the 2014 fiscal year, 96 percent of ALJ appeals were resolved outside the 90-day statutory time period for review. In the same year, 93 percent of ALJ decisions were issued 180 days or more after an ALJ appeal request was filed. Furthermore, between 2010 and 2014, appeals filed at the ALJ level of appeal increased by 936 percent. The GAO report also found that in the 2015 fiscal year, three times the number of ALJ appeals were filed than could be adjudicated in that time. 

In addition to the GAO report, legislative proposals have also been published to encourage reform to the Medicare appeals process. For example, in December 2015, the U.S. Senate Committee on Finance released its report on the Audit & Appeals, Fairness, Integrity, and Reforms in Medicare (AFIRM) Act of 2015. The Committee recommended that AFIRM, a bipartisan bill, be further considered by the U.S. Senate and the House. AFIRM proposes such reforms as raising the amount-in-controversy requirement for ALJ appeals and creating Medicare magistrates that could render decisions when the amount in controversy is less than the proposed revised amount for ALJ appeals. Furthermore, AFIRM would require the Office of Medicare Hearings and Appeals (OMHA) to initiate alternative dispute resolution processes.

Currently, OMHA has implemented the Settlement Conference Facilitation (SCF) pilot program, which permits providers to settle eligible claims rather than waiting for an ALJ hearing. Although many claim types are eligible for the SCF pilot, inpatient status claims that were eligible for the 68-percent settlement are not. While AFIRM’s reforms could represent promising steps toward reducing the backlog, the bill was proposed in December 2015, and as of August 2016 it had not experienced further substantial forward movement.

Recent case law also supports the need for action. The American Hospital Association (AHA) sought a writ of mandamus compelling the U.S. Department of Health and Human Services (HHS) to act within the statutory Medicare appeal time frames, specifically by mandating that it render decisions within 90 days from the date a request for an ALJ hearing is filed. The United States Court of Appeals for the District of Columbia remanded the case and instructed the district court to determine whether grounds now exist to warrant mandamus. The Court further advised that the lengthy delays for adjudication of appeals, and thus the delay in payment, will affect hospitals’ willingness and ability to provide patient care. The Court continued to note that given the unique circumstances of the case and the clear statutory duty, a writ of mandamus will likely be appropriate if HHS fails to make meaningful progress within a reasonable time period, defined by the Court as by the end of the next full appropriations cycle.

So the legislative reforms, case law, and data all support the notion that the Medicare appeals process is in crisis due to the overwhelming number of appeals pending. Reopening the 68-percent settlement is a plausible solution. The GAO report found that prior to the initial 68-percent settlement, there were 786,507 ALJ appeals pending, and the settlement resolved 243,389 appeals, making for a 31-percent reduction in the ALJ workload. There are purportedly 200,000 inpatient status appeals still pending that were not resolved through the initial 68-percent settlement. While hospitals with these pending appeals initially may have decided not to proceed with the settlement, the prospect of settling these claims now may be more attractive. The value of resources and time associated with the delays in payment while waiting for an appeal is an important consideration for hospitals.

During the Aug. 9 special edition broadcast, RACmonitor conducted a poll asking participants whether their organization would consider participating in the 68-percent settlement if it were reopened. The poll results from the respondents were interesting; 48 percent indicated that their organization would consider it. Another 48 percent were unsure of their organization’s position regarding participation. Only 4 percent indicated that their organization would not participate. 

These results demonstrate that there is considerable interest in the provider community for reopening of the 68-percent settlement. The information gathered should assist CMS in concluding that doing so would reduce the backlog of appeals, thus allowing other providers to move through the appeals process more easily. Furthermore, it will help CMS reduce the amount of interest that would potentially have to be paid on the pending appeals. The 68-percent settlement is consistent with the currently active Settlement Conference Facilitation (SCF) pilot program, and it will help hospitals with pending appeals to resolve these claims in a more expedient matter, without waiting for an ALJ hearing.

If you are interested in the reopening of the 68-percent settlement, voice your support. Hospitals should organize to present a unified voice to CMS. Providers are invited to discuss this matter with their leadership and send an inquiry to Chuck Buck with RACmonitor at cbuck@panaceainc.com and Andrew Wachler at awachler@wachler.com.

 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 topic

Jessica Forster is an associate at Wachler & Associates, P.C.  She dedicates a considerable portion of her practice to defending healthcare providers and suppliers in the defense of RAC, Medicare, Medicaid and third party payer audits.  Her practice also includes the representation of clients in Stark, anti-kickback, and fraud and abuse matters.

Contact the Authors

awachler@wachler.com

jforster@wachler.com

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