August 31, 2016

Sixty-Eight Percent Settlement Recipients Announced: What Does it Tell Us?

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RACmonitor recently published an article detailing a proposal by authors Steven Greenspan and Andrew Wachler through which they advocated reopening the 68-percent settlement offer for providers who chose not to accept the settlement the first time for pending appeals.

As you may recall, this was a one-time offer from the Centers for Medicare & Medicaid Services (CMS) to try to reduce the growing backlog of appeals at the administrative law judge (ALJ) level. For hospitals agreeing to participate in the settlement, all appeals of inpatient admissions awaiting hearings were withdrawn and the hospital was reimbursed 68 percent of the DRG payment.

We don’t have any official information indicating why some hospitals chose to accept the settlement and some chose not to take it. Many hospitals that accepted the settlement were likely driven by the desire for an influx of cash now rather than later. In some cases, I suspect that hospitals declined to participate because they looked at their historic ALJ win rate and did the math, realizing that they were better off waiting the two years it would take to get in front of an ALJ. Others probably did not accept the settlement purely to send a message that the law allows hospitals to have their day in court to defend their physicians’ admission decisions – and accepting the settlement would mean they were admitting they were partially guilty. And others may have declined to participate hoping that CMS would make another settlement offer with a higher-percent payoff – which, of course, did not happen, at least yet.

Until last week we had no data on which providers took the settlement and how much they were paid. But thanks to Kaiser Health News and a Freedom of Information Act (FOIA) request that the government did not ignore, we now have that information. A little more than 2,000 hospitals accepted the settlement and received a combined total of $1.5 billion.

Of course, most of the headlines reported this as if these hospitals were given a gift from CMS, virtually ignoring the fact that this was money recouped from hospitals years ago as the result of what some feel were grossly incompetent Recovery Audit Contractor (RAC) activities.

What information can be gleaned from this new data? I found a few things interesting. First, remember that if a hospital accepted the settlement, it was all or none. And there were a large number of hospitals that had very few RAC denials; almost 500 had 20 or fewer claims denied. At the other end of the spectrum, 46 hospitals had more than 1,000 denials, with a two-hospital system in Tennessee sharing an NPI with a total of 400 beds taking top honors, with 2,935 claims – that system received almost $11 million. This hospital system actually had almost 50 percent more claims than No. 2 on the list, North Shore University Hospital in New York City, which has twice as many beds. But financially speaking, the most heavily reimbursed hospital was New York Presbyterian, which was paid almost $15.9 million for 1,750 claims (this hospital has more than 2,000 beds).   

So, can this data be used to help hospitals decide whether to accept a settlement if CMS decides to renew the offer? Without knowing the total number of records that were audited and the types of records that were audited, the total number of claims paid and the total payment received by hospitals is interesting, but virtually useless. What is important is that the Office of Medicare Hearings and Appeals (OMHA) now does not anticipate eliminating the backlog until 2021. That’s a heck of a long time to wait for your money. Furthermore, recent data on ALJ appeals suggests a declining win rate by hospitals, which may make a 68-percent payment more appealing. Now we just have to wait and see if CMS will act.

The publisher of RACmonitor is anxious to hear from those who want CMS to reopen the settlement offer – and those who might not. If you have input, email cbuck@panaceainc.com 

About the Author

Ronald Hirsch, MD, FACP, CHCQM is vice president of the Regulations and Education Group at Accretive Physician Advisory Services at Accretive Health. Dr. Hirsch’s career in medicine includes many clinical leadership roles at healthcare organizations ranging from acute-care hospitals and home health agencies to long-term care facilities and group medical practices. In addition to serving as a medical director of case management and medical necessity reviewer throughout his career, Dr. Hirsch has delivered numerous peer lectures on case management best practices and is a published author on the topic. He is a member of the Advisory Board of the American College of Physician Advisors, a member of the American Case Management Association, and a Fellow of the American College of Physicians.

Contact the Author

RHirsch@accretivehealth.com 

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