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CMS offers holiday sale on audit appeals


By Modern Healthcare
Posted: August 30, 2014 - 9:45 am ET
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(Story updated at 1:00 p.m. ET)

In a pre-Labor Day weekend bid to lower its backlog of contentious payment disputes, the CMS late Friday offered to pay hospitals 68% of all medical claims appealed by the service providers after having been rejected by outside auditors.

Most of the claims rejected by recovery auditor contractors – so-called RACs – involved disputes over the validity of short inpatient stays, which the RACs say should have been billed at outpatient rates. The process puts the entire payment on hold. There is now a two-year backlog of hospital appeals before the Office of Medicare Hearings and Appeals.

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“CMS encourages hospitals with inpatient status claims currently in the appeals process to make use of this administrative agreement mechanism to alleviate the administrative burden of current appeals on both the hospital and Medicare system,” the agency said in its late Friday statement. Acute care and critical access hospitals are eligible for the settlement offer; psychiatric, inpatient rehab, long-term care, cancer and children's hospitals are not.

All hospital trade associations have been vigorously lobbying the CMS to revamp its audit process. They claim paying outside contractors on commission creates an incentive to dispute claims “with little regard for the accuracy of their denials.”

The American Hospital Association, which has filed suit challenging the appeals-driven delays in payments, admitted the CMS offer “could provide some temporary relief.” But it called the deal narrow.

It “fails to address the underlying cause of the problem – overzealous RAC reviewers,” the AHA said in a prepared statement.

Yet many hospitals may take CMS up on the Labor Day holiday offer, calculating that getting paid 68% of a claim soon – Medicare says it will pay claims subject to the offer within 60 days – beats waiting two years for an appeal that could go either way.

Hospitals have until the end of October to file settlement offers. They also can request an extension, the CMS statement said.

"I anticipate that many FAH members will take advantage of this voluntary settlement," said Chip Kahn, president of the Federation of American Hospitals.


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