It’s no secret that CMS is drowning in appeals from denials of Medicare claims for inpatient care.  The number of pending appeals was estimated at half a million back in February, and it’s only grown since then.  One reason for the huge number is the hated “two-midnight rule”—the rule that says that a hospital can’t get paid at inpatient rates unless a doctor documented at the time of admission that the patient needed to stay over the span of two midnights.

Hospitals are furious at the snail’s pace of appeals and at the mountainous backlog.  A number of them have sued CMS over the issue.  So at the end of August CMS quietly posted an announcement that it would pay hospitals 68 cents on the dollar if they would withdraw their pending appeals in favor of a new, expedited process.  Last Tuesday CMS posted more details.

The offer applies only to acute care and critical access hospitals—not specialty hospitals.  The application process starts with submission of a spreadsheet showing all claims.  A Medicare contractor then has 30 days to review the submission and delete claims it deems ineligible (and theoretically add claims the hospital overlooked), and the hospital has 14 days to react to that.  Certain limitations apply to patient deductibles and copayments.  For example, a hospital can’t continue collection efforts unless it already has a payment plan in place with the patient.

Hospitals considering the offer need to be sure they know all its implications.  Because Medicare rules are so complex and interrelated, there’s more to it than balancing 32 cents against the cost, delay and uncertainty of the appeal process.  For example, graduate medical education and disproportionate share payments are based on levels of inpatient care, and CMS has indicated that claims settled through this expedited process won’t count toward the former.

CMS acknowledges that it doesn’t yet have an answer to a fundamental issue:  If an inpatient bill is ultimately rejected, can the hospital submit an outpatient bill for that stay?  CMS says stay tuned for the answer.