Why one congressman wants to scrap Medicare's hospital appeals deal

The CMS has been pretty quiet about its Medicare appeals settlement for hospitals, and now a congressman wants the agency to retract the offer altogether.

Rep. Kevin Brady (R-Texas), who serves as chairman of the House Ways and Means Subcommittee on Health, sent a letter to HHS Secretary Sylvia Mathews Burwell (PDF) this week urging her, at a minimum, to explain how the government developed the settlement process. Brady said the committee was “shocked” to learn about the settlement through the press, and he'd prefer HHS and the CMS scrap the deal and work with Congress to come up with a “fair, transparent and conclusive settlement process.”

On Aug. 29, the CMS surreptitiously announced it would pay hospitals and health systems 68% of their inpatient-status claims sitting in Medicare's backlogged appeals process. But providers would have to agree to withdraw all of their appeals. Hospitals are able to appeal claims that recovery auditor contractors deem were improperly billed, and a majority of inpatient appeals involve patients who were treated in an inpatient setting but auditors conclude should have been treated as outpatients.

In his letter, Brady questioned if HHS had the legal authority to wipe out the appeals backlog with this settlement. He also demanded to know how the CMS arrived at its 68% figure, something the agency has not addressed.

Further, Brady said the “all-or-nothing” approach appears to be “based on what would be easiest to implement” and does not factor in the circumstances of each patient discharge in question.

“While the backlog of Medicare appeals is at an unacceptable high, settling all appeals without reviewing the merits of the appeals or coming up with any plan to address the backlog is just throwing money at a problem to make it go away,” Brady said in a statement. “It hurts the integrity of Medicare and is a waste of taxpayer dollars.”

HHS did not immediately respond to requests for comment.

At least four providers have agreed to take the offer, as of Sept. 9, and industry observers say it may be difficult for hospitals to turn down the offer. The American Hospital Association said Friday that each hospital “should evaluate carefully the terms of the offer and the hospital's own situation” before making a decision. The AHA also issued a checklist (PDF) to providers to help determine if the settlement would benefit them.

The CMS disclosed a few more details related to the settlement offer this week. An updated document on the agency's website (PDF) said hospitals would receive 68% of the net paid amount on each claim. The base amount includes the DRG payment plus add-on payments (like disproportionate share hospital funds) minus patient deductibles and coinsurance. The CMS also doubled down on the timeliness of payments back to hospitals, saying if Medicare does not pay within 60 days of approval, it will accrue interest.

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