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November 2016


Five Things to Know About CMS's Second Round of Settlements for Hospital Appeals







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R. Ross Burris, III


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Raymond J. Lindholm


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The Centers for Medicare and Medicaid Services (CMS) announced that beginning December 1, 2016, it is offering to settle certain inpatient-status claims to eligible hospitals willing to withdraw from the administrative appeals process in exchange for a one-time partial payment of 66% of the net allowable amount. This second round of settlement for hospital inpatient claims is fundamentally similar to CMS's first round, which was made available to providers in August, 2014, but does notably differ from the first round offering in several important regards.

Five important takeaways:

  • Providers have until January 31, 2017, to file an Expression of Interest form to initiate the process.

  • CMS will compile a list of eligible claims which will be sent to the hospital to verify

  • Once in agreement, the hospital and CMS will sign an Administrative Agreement

  • The claims will be priced by the Medicare Administrative Contractors after the Administrative Agreement has been executed by both parties

  • CMS is offering to settle eligible claims for 66% of the "net allowable amount"

Round 2 Eligibility

In a conference call on November 17, 2016, CMS described the details of this second round of hospital appeals settlements. Similar to the first round, in order for hospitals to participate in the second round they must agree to withdraw their appeals of eligible claims pending at that ALJ and DAB levels. Eligible claims must have been timely appealed, the initial denial must have been based on "patient status," and the claims must have dates of admission before October 1, 2013. Furthermore, the appeals, as of the date that it submits the initial agreement, must still be pending or else the hospital must still have appeal rights, and the hospital cannot have received payment for the services as a Part B claim. Also, CMS stated that it may exclude some hospitals that would otherwise qualify to participate in this process based on pending False Claims Act cases or other investigations.

Changes From the First Round

Unlike the first round settlement offer from 2014, CMS, rather than the providers, will compile the list of potentially eligible appeals, which the provider will then verify. Once this list is verified, providers will sign the administrative agreement, after which the Medicare Administrative Contractors (MAC) will price the claims on appeal. This means that the hospitals will not know the total amount of the settlement until after they have signed the agreement. Importantly, CMS will only pay 66% of the net allowable amount, and as with the first round, all co-payment, deductible, and co-insurance amounts will be removed before the net allowable amount is calculated. Furthermore, the settled claims, as with the first round, will still be reflected as "denied" in CMS's systems; therefore, providers will not be able to collect the 20% copay/deductible amounts or any coinsurance or secondary payor payments. CMS also stated that it is offering 66% of the net allowable amount in this second round, as opposed to the 68% it offered in the first round, due to the additional administrative costs it has incurred on these claims because providers opted not to participate in the last round.

CMS claimed that it executed settlements with 2,022 hospitals in the first settlement round, representing approximately 300,047 claims, and paid out $1.47 billion to providers who agreed to the settlement process. CMS is now offering this second round based on the success of the first program. Providers wishing to participate must complete an Expression of Interest form and email it to CMS at on or before January 31, 2017.

For More Information

If you have questions regarding this alert, please contact one of the authors, a member of Polsinelli's Health Care Practice, or your Polsinelli attorney.







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