CMS Announces New Settlement Options for Medicare Appellants

A low volume appeals settlement and an expanded Settlement Conference Facilitation process are two initiatives to improve the Medicare claims appeal process.

On Friday, the Centers for Medicare & Medicaid Services (CMS) and the Office of Medicare Hearings and Appeals (OMHA) announced two new settlement options for Medicare providers and suppliers: a low-volume appeals settlement (LVA) and an expanded Settlement Conference Facilitation (SCF) process.

CMS and OMHA indicated that these initiatives are “part of the broader Department of Health and Human Services (HHS) commitment to improving the Medicare claims appeals process.”

The LVA settlement provides eligible appellants an opportunity to settle eligible appeals at 62 percent of the net allowed amount, and it is available to appellants with a low volume of appeals pending at OMHA and the Medicare Appeals Council. CMS defines “low volume” as fewer than 500 Medicare Part A or Part B claim appeals pending at OMHA and the Council, combined, as of Nov. 3, 2017. To be eligible, the billed value of each appeal must be $9,000 or less. CMS notes on its website that “certain other conditions” will need to be met for appeals to be eligible, but does not describe these conditions. Instead, CMS instructs interested appellants to continue to monitor its website for specific details in the coming weeks.

While no further details are currently available on the LVA settlement, it is expected that it will be similar to the previous hospital appeals settlements offered by CMS in October 2014 (colloquially known as the “68 percent settlement”) and September 2016 (the “66 percent settlement”). These prior settlements were offered to certain hospitals with eligible inpatient status claims pending in the Medicare appeals process. According to CMS’s website, the 68 percent settlement successfully cleared 346,000 claims from the Medicare appeals system through agreements between CMS and hospitals. As a result of this success, CMS offered the second round (at 66 percent) to eligible hospitals at a minor reduction in the settlement percentage. Despite that, CMS intended the second round to be an attractive alternative to awaiting administrative law judge (ALJ) hearings in the backlogged Medicare appeals process.

While some eligible hospitals did accept the 66 percent settlement, other hospitals rejected the offer on principal (or in hopes of a more attractive alternative dispute resolution option) and maintained their position in queue for ALJ hearings. It is anticipated that CMS may adopt similar eligibility criteria and settlement procedures for the most recently announced 62 percent settlement. Whether eligible appellants should participate in this settlement depends on a variety of factors and the specific details of the settlement, which, again, have yet to be released. However, when evaluating the costs and benefits to participation, there are a few general principles to keep in mind. First, appellants should know their history of ALJ wins and losses and understand the recent trends in favorable Part A rulings on appeal by ALJs. Specifically, in years past, Part A providers and suppliers enjoyed more favorable rulings on appeal than those heading to ALJ hearings today. Also, there is a wide range in favorable rulings on appeals from ALJs, from as low as 18 percent to as high as 85 percent. Therefore, although as a matter of principle some appellants may not be willing to settle their claims at 62 percent of the net payable amount, there is value to a guaranteed payout in today’s appeals climate. Medicare providers and suppliers should periodically review CMS’s website for additional details on this program in the coming weeks.

Medicare providers and suppliers likewise should monitor OMHA’s website in the coming weeks for additional details on the expanded SCF process. Little detail is currently available on this process, only that “certain appellants that are not eligible for the LVA option” can participate in the expanded SCF. This program is an alternative to an ALJ hearing that allows eligible participants to negotiate a settlement percentage with CMS in a non-binding mediation process. Claim-by-claim determinations on an appellant’s eligible claims are not made, but an appellant does have the opportunity through SCF to present the strengths of its claims generally. Based upon information from national provider organizations, CMS has settled appeals through SCF for more and less than the 62 percent settlement offer.

The voluntary nature of the prior SCF process was attractive to Medicare appellants who could explore a settlement with CMS, and if it was not reached, their claims would simply return to the ALJ appeals process in the order in which they were originally received. By participating in SCF, appellants forfeited neither their hearing rights nor the time already invested in awaiting an ALJ hearing. Because OMHA and CMS are incentivized to reduce the appeals backlog at the ALJ level of appeal, it is expected that the expanded SCF will be voluntary as well.

Although additional details of each program are forthcoming, the LVA and expanded SCF are promising additions to the many alternative dispute resolution programs offered by CMS and OMHA in recent years. While past programs primarily targeted appellants with high-volume appeals, the recently announced programs reveal that OMHA and CMS are now looking to include appellants with lower-volume appeals in the alternative resolution processes. The expansion of alternative resolution programs is necessary, as the current average processing time for an ALJ appeal is in excess of 1,082 days, according to recent statistics published by the U.S. Department of Health and Human Services. In context, today’s average processing time is 12 times longer than the 90-day adjudication timeframe allowed under federal law. And despite the many alternative resolution programs offered in the past three years, the average processing times for ALJ appeals has steadily risen. OMHA’s and CMS’s announcements of the expansion of the SCF and the 62 percent settlement are another step in the right direction, but to make substantial movement at stopping the deluge of newly filed appeals while meaningfully reducing the appeals backlog, CMS and OMHA will need to continue offering new and expansive resolution programs with attractive terms to Medicare providers and suppliers.

A low volume appeals settlement and an expanded Settlement Conference Facilitation process are two initiatives to improve the Medicare claims appeal process