Health Law Alert: CMS Offers 68 Cents on the Dollar for Inpatient Denials

September 03, 2014

On August 29, 2014, CMS issued notice that it will provide a process for resolving claims denied based on patient status with admission dates before October 1, 2013. For cases denied during postpayment review, CMS will pay 68% of the net paid amount of the denied claim; for cases denied during prepayment review, CMS will pay 68% of the approximate amount that would have been paid to the provider. CMS will pay the full settlement amount within 60 days of the provider entering into a fully executed Administrative Agreement, which constitutes the settlement agreement between CMS and the provider. Hospitals must submit their requests by October 31, 2014, or otherwise request an extension from CMS.


The following conditions must be met for claims to be eligible for settlement:

  1. The provider is a hospital as defined in 1886(d) or 1820(c) of the Social Security Act, which includes Critical Access hospitals and hospitals paid under the Medicare Inpatient Prospective Payment System, but excludes psychiatric hospitals, Inpatient Rehabilitation Facilities, Long-Term Care Hospitals, cancer hospitals, and children’s hospitals.
  2. The claim was not for items or services provided to a Medicare Part C enrollee, otherwise known as Medicare Advantage Plans.
  3. The claim was denied by an entity that conducted review on behalf of CMS—for example, MACs, CERTS, RACs, and ZPICs.
  4. The claim was denied based on inappropriate patient status (inpatient versus outpatient, as opposed to a denial based on the services not being reasonable and necessary).
  5. The first day of admission was before October 1, 2013.
  6. The hospital timely appealed the denial.
  7. The provider did not receive payment for the services as a Part B claim (in other words, the provider did not receive payment under the rebilling program).


There are three important caveats to settlement, however. First, CMS notes that a hospital “may not choose to settle some claims and continue to appeal others.” This language suggests that a hospital must include all eligible claims within its settlement spreadsheet, including both prepayment and postpayment denials. Second, CMS will not pay any interest that has accrued on the claim. Third, and noted only within the Administrative Agreement itself, providers will not be allowed to seek additional payment from a beneficiary or collect  any deductible or coinsurance amount for any claim resolved through the settlement. The only exceptions are if the provider has a repayment plan existing with a beneficiary as of the effective date of the settlement, or if the hospital has already retained any deductible or coinsurance amount before the effective date of the settlement.


CMS will conduct a National Provider Call on September 9, 2014 at 12:00pm CST regarding the settlement offer. We have provided a link below to the registration page for the call, along with links to other notable publications regarding the settlement offer.

For additional information related to the contents of this alert, please contact Larry McCarty at or Jeff Moore at