Oct 8 Update: CMS has updated the FAQ regarding the 68% settlement of appealed claims on 10/8/14. The new website link for the updated FAQ can be found at: http://cms.gov/Research-Statistics-Data-and-Systems/Monitoring-Programs/Medicare-FFS-Compliance-Programs/Medical-Review/Downloads/Hospital_Appeals_SettlementFAQs_10082014_508.pdf As covered in an earlier post, CMS has set the deadline for hospitals to decide whether to take the 68% settlement offer on claims held up in appeal as Oct 31, 2014.

• Here’s a well-researched summary of the offer written by Accretive’s Dr. Steven Meyerson (found via Ronald Hirsch‘s website).
• There’s been an explosion of talk on industry news sites, including Modern Healthcare, and Healthcare Finance News, and RAC Monitor.
• AHA has released a helpful checklist tool (login required) and the to help determine whether the settlement is in your hospital’s best interest.

In a similar vein, Craneware has created a 68% Settlement Scorecard which covers the major factors we believe hospital financial staff should consider before deciding to settle. Download Craneware’s 68% Settlement Scorecard Before taking the settlement, we recommend hospitals ask and answer the following questions:

Does your hospital have significant dollars at risk or a high volume of outstanding appeals?

Hospitals with a large number of appeals and/or a significant amount of revenue tied up in the appeals process may benefit from seeing the appeals through the ALJ process. Interest payments alone could outweigh any reason to settle.  

Was your hospital’s appeal strategy based on an internal review process that appealed only strong cases, writing-off weaker cases?

Hospitals that had a denial review strategy and chose to appeal only those cases with a reasonable likelihood of success may not want to agree to a 32% reduction in payment and forfeit the Limitation on Recoupment 935 interest.  On the other hand, hospitals that appealed cases indiscriminately are promised 68% of the net payable amount.  In the end, this may result in a higher payment for these facilities.  

What was your recoupment strategy? Is your expected interest on a successful appeal financially substantive, or marginal?

If your facility allowed immediate recoupment of overpayments following receipt of Demand Letters, then your claims are not subject to 935 interest. Conversely, 935 interest is owed when claims were involuntarily recouped and you prevail at the ALJ level. For claims that wait years for an ALJ Hearing, this payment could be substantial. See Andrew Wachler’s post on interest at RACmonitor for more details.  

How badly do you need your money?

Strong appeals and long wait times will likely result in payments with greater than 100% value but it may be a very long time before you see that money.  But can you afford to wait? Hospitals that accept the settlement can expect reimbursement within 60 days of a fully executed agreement.  

What is the cost associated with pursuing your appeals?

Hospitals with high cost associated with the pursuit of appeals may want to consider the settlement.  Those costs might include consultants, attorneys and expert witnesses. The cost of internal personnel time and resources should also be considered.  

What was your prior ALJ success rate, and do you expect it to continue?

Hospitals with strong cases and a prior history of success at the ALJ level may not want to accept the settlement but; all organizations need to evaluate their past experience against what we know currently. According to AHA’s RACTrac, the average appeal success rate has dropped from 72% (Q1 2013) to 66% (Q1 2014).  In our experience representing clients we have seen the ALJs becoming increasingly savvy in relation to level of care determination and the success of cases vary depending on the judge assigned. In the future, the RACs may also be presenting to the ALJ more often.  

 Is time a factor?

The average processing time for appeals decided at the ALJ in fiscal year 2014 is 407 days.  Can your facility afford to wait that long for an outcome on your appeals?  

Is there significant value in part B payments, with a high level of surgical implants?

The value of surgical implant claims rebilled to Part B is likely higher than 68% of the net value of the DRG.  Hospitals with a high volume of surgical implant claims may not want to settle.  

What is your hospital’s volume of Medicare inpatient-only denials in appeal?

It is still hard to imagine that the RACs have denied claims for procedures on the Medicare inpatient-only list, but they have. It is even harder to imagine that the claims have remained in a denied status after appeal. Inpatient-only claims presented to ALJs have been overturned, typically with a reference that the procedure is “on the inpatient-only list.” Hospitals with a large number of these denials may not want to accept the settlement.  

Will taking the settlement have a substantial impact on your hospital’s Medicare Cost Report (DSH/IME/GME Payments)?

Accepting the 68% settlement leaves all of the claims in a denied status. The claims will not appear as Medicare paid inpatient claims in a provider’s Provider Statistical & Reimbursement (PS&R) report. Leaving the claims in a denied status will impact graduate medical education (GME), indirect medical education (IME), and disproportionate share (DSH) payments.  

Are you able to meet the 10/31/14 deadline for settlement?

You need to decide quickly. If you’ve answered the previous questions and have decided that the short-term of benefits of knowing you will receive the 68% is in your hospital’s best interest, you’ll need to get working to meet the CMS requirements to file. Visit the most recent CMS page on the 68% settlement, download the Eligible Claim spreadsheet and the Administrative agreement. If you are completing CMS’s Settlement spreadsheet remember to include any cases you have withdrawn from the Appeal process but that have not yet been paid.  Those claims are eligible to be included in the Settlement. As you can tell, whether or not this settlement is in your hospital’s best interests depends on many factors, and hospitals may weigh the importance of these factors differently. All of us at Craneware hope that if you do take the settlement, it is from a position of financial strength and a strategic choice, rather than a short-term stopgap out of necessity.