CMS Identifies Hospitals Paid Nearly $1.5B in Medicare Billing Settlement

Recovery audit contractors are the new “bounty hunters,” hospitals say

A year after paying nearly $1.5 billion to more than a third of U.S. hospitals to resolve longstanding Medicare billing disputes, the Centers for Medicare and Medicaid Services (CMS) has disclosed who got paid, according to a report from Kaiser Health News (KHN).

NewYork–Presbyterian Hospital, one of the nation’s largest academic medical centers, received nearly $16 million, more than any other hospital.

The second-largest amount went to North Shore University Hospital in Manhasset, New York, which received $14.5 million. CHI Memorial Hospital in Chattanooga, Tennessee, ranked third at $10.9 million, but two other New York-area hospitals rounded out the top five. Long Island Jewish Medical Center received $10.8 million, and New York University Langone Medical Center was paid $10.5 million, the CMS data show.

In total, 2,022 hospitals shared in the government payout, which settled 346,000 claims for reimbursement for treating Medicare patients admitted on or before October 1, 2013. The largest payments resolved thousands of claims at once. For example, Memorial Hospital’s settlement covered nearly 3,000 claims.

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.

The resolutions followed the government’s offer in 2014 to pay hospitals 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 that 35 hospitals received more than $5 million each, but most were paid far less. The median was $307,642, according to a KHN analysis. The data were released in response to a Freedom of Information Act request made last year by KHN.

Medicare pays private contractors, known as recovery audit contractors (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 appeals.

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 that they are protecting taxpayer dollars and ensuring that hospitals are paid for appropriate patient services. Hospitals, in turn, criticize the RAC process as burdensome and liken contractors to bounty hunters focused on making money for themselves.

The CMS has said that 18% of appealed claims were overturned in favor of hospitals between October 1, 2013 and September 30, 2014, but the American Hospital Association reported in 2014 that self-reported data by its members showed that hospitals had won 66% of appeals since 2010.

The $1.5 billion paid in last year’s settlements contrast with the more than $9.6 billion collected by RACs from 2010 through September 2015. More than 90% of collections by RACs were from hospitals.

Source: Kaiser Health News; August 23, 2016.