The settlements were a compromise to reduce a swollen backlog of disputes over what hospitals argued they were owed. At one time, pending cases under appeal stretched more than two years.
They followed the government's offer in 2014 to pay the hospitals (PDF) 68% of the value of inpatient claims that had been caught in Medicare's hearings and appeals process, some for years.
The new CMS data show 35 hospitals received more than $5 million each, but most were paid far less. The median payment—meaning half the hospitals got more and half got less—was $307,642, according to a Kaiser Health News analysis. The data was released in response to a Freedom of Information Act request made last year by KHN.
Medicare pays private contractors known as recovery audit contractors, or RACs, to review hospital claims for improper payments. If hospitals disagree with the RACs' decisions, they can appeal. Most RAC reviews have focused on costly inpatient-status claims, questioning whether certain patients should have been admitted to hospitals. Many audits determine that short patient stays should have been billed at less-costly outpatient rates.
Last year's settlement indicated that many hospitals preferred to settle quickly for a discounted amount rather than keep claims tied up in appeals for what could have been months or even years. Hospitals that declined to settle with Medicare still had the option to continue their appeal.
Hospitals and RACs have long battled over audits and appeals. RACs—which are paid a fee for every audit that recovers money for Medicare—argue they are protecting taxpayer dollars and ensuring that hospitals are paid for appropriate patient services. Hospitals criticize the RAC process as burdensome and liken contractors to bounty hunters (PDF)focused on making money for themselves.
The CMS has said 18% of appealed claims were overturned (PDF) in favor of hospitals between Oct. 1, 2013, and Sept. 30, 2014, but the American Hospital Association reported in 2014 (PDF) that self-reported data by its members showed hospitals had won 66% of appeals since 2010.
The $1.5 billion paid in last year's settlements contrasts with more than $9.6 billion collected by RACs (PDF) from 2010 through September 2015. More than 90% of collections by RACs were from hospitals.