Inpatient Rehabilitation Facility (IRF) Appeals Settlement Initiative

The History

When a Medicare contractor reviews a Medicare Part A or Part B claim and makes an initial determination that an overpayment has been made, dissatisfied healthcare providers and suppliers may pursue relief through a five-stage appeals process, created by Section 1869 of the Social Security Act (the Act) (42 U.S.C. §1395ff).  Implementing regulations are codified at 42 C.F.R. Part 405, Subpart I, and CMS sub-regulatory guidance is set forth in the Medicare Claims Processing Manual (MCPM) (CMS Internet-Only Manual 100-04), Chapter 29.  Each of these authorities mandates timely adjudication of appeals.²

With respect to the third stage of this administrative appeals process (i.e., the OMHA ALJ stage of appeal), the Act requires that an ALJ “conduct and conclude a hearing…and render a decision on such hearing by not later than the end of the 90-day period beginning on the date a request for hearing has been timely filed.”³  Notwithstanding this mandate, over the past several years OMHA has failed to issue most decisions related to Medicare Part A and Part B reimbursement appeals within 90 days.⁴  In the second quarter of FY 2019, the average processing time for appealed claims was 1,321.1 days, over 14 times more than the statutory mandate.⁵

On May 2, 2014, the American Hospital Association (AHA), together with three regional hospitals and healthcare systems, filed suit to compel the Secretary of Health and Human Services (HHS) to comply with the statutory deadlines imposed by the Act.⁶  Lengthy proceedings followed;⁷ ultimately, on November 1, 2018 the United States District Court for the District of Columbia ordered HHS to resolve the backlog of appeals pending at the OMHA ALJ stage of review by the end of FY 2022.⁸  However, for IRFs and other Medicare appellants awaiting resolution of their pending appeals, waiting three more years for a decision may be unpalatable.⁹  

IRF Appeals Settlement Initiative

Over the past few years, HHS and CMS have offered Medicare appellants numerous settlement opportunities in an effort to alleviate the backlog.¹⁰  Most successfully, in 2014 CMS proposed a process for resolving denied inpatient patient status claims that were either under appeal or within the timeframe to request an appeal at the OMHA ALJ level of appeal (the Hospital Appeals Settlement Process (HASP)).  CMS proposed to make a partial payment of 68 percent of the net payable amount of denied inpatient claims in exchange for a hospital agreeing to dismiss any associated appeals and accept the settlement as final resolution. Eligible claims were limited to those with dates of admission prior to October 1, 2013 (i.e., the effective date of the 2-Midnight Rule).¹¹ The 2014 HASP settlements removed 323,492 appeals from the backlog.¹²  In 2016, CMS reopened the HASP, but limited the partial payment given to appellants in exchange for their withdrawal of appeals to 66 percent of the net payable amount of the denied inpatient claim (versus 68 percent).  The 2016 HASP removed an additional 72,000 appeals from OMHA’s docket.¹³

The HASP settlements were not made available to IRFs.¹⁴  The lack of a settlement initiative specifically targeted to IRF appeals was one issue raised by the AHA as part of its lawsuit against HHS.¹⁵  In filings, HHS estimated that offering an IRF settlement process could remove 12,000 appeals from the backlog.¹⁶

“Expressions of Interest” to participate in the IRF appeals settlement process are required to be submitted between June 17, 2019 and September 17, 2019.¹⁷  The IRF appeals settlement process is more generous to appellants than the prior HASP settlement offers were.  For two categories of appeals related to the “Intensity of Therapy” provided, CMS is proposing to pay 100 percent of the net payable amount of the claims in exchange for the IRF withdrawing and/or not pursuing appeals of such claims:

• (1) Claims denied solely on a threshold of therapy time not being met (i.e., the claim did not undergo medical necessity review); and
• (2) Claims denied solely because justification for group therapy was not documented in the medical record.¹⁸

For all other IRF appeals, CMS is proposing to pay 69 percent of the net payable amount in exchange for the IRF withdrawing and/or not pursuing appeals of such claims.¹⁹

Appeals eligible for settlement include appeals of fully denied Medicare Part A IRF claims for which redetermination was sought no later than August 31, 2018, and (1) which are pending at any of the four administrative stages of appeal (MAC redetermination, QIC reconsideration, OMHA ALJ, or Council) as of the date CMS signs the settlement agreement; and (2) appeals for which the timeframe to appeal at any of the four administrative stages of appeal has not elapsed as of the date CMS signs the settlement agreement.  Categories of appeals that are ineligible for the IRF Appeals Settlement include: (1) appeals that were part of a statistical extrapolation; and (2) beneficiary-initiated appeals. 

The IRF appeals settlement process is voluntary on the part of an IRF appellant and CMS.  An IRF may either enter into the settlement process or remain in queue for appeals adjudication.  An IRF is not eligible to participate in the IRF appeals settlement process if:  it has filed, or expects to file, for bankruptcy; was or is involved in False Claims Act investigation or litigation; or has other program integrity concerns (including other pending civil, criminal or administrative investigations).  Medicare beneficiaries, Medicare Advantage Organizations, Medicare Advantage plan enrollees, family members or estates, and state Medicaid agencies all also constitute appellants ineligible to participate in the IRF appeals settlement process.²⁰

The IRF appeals settlement process is an all-or-nothing proposition.  Eligible IRFs must agree to withdraw, or not pursue, appeals of all eligible claims in exchange for the timely partial payment.  CMS will not agree to settle some eligible appeals and allow IRFs to continue to pursue eligible appeals for others.²¹

The procedure to enter into the IRF appeals settlement process includes the following:

• To initiate the process, an IRF must submit an Expression of Interest to CMS, which is available from the CMS IRF Appeals Initiative webpage at https://www.cms.gov/Medicare/Appeals-and-Grievances/OrgMedFFSAppeals/Appeals-Settlement-Initiatives/OFM-IRF-Appeals-Settlement-Expression-of-Interest-EOI.pdf.  The IRF must submit the Expression of Interest via email at MedicareAppealsSettlement@cms.hhs.gov on or before September 17, 2019.²²
• After CMS approves the IRF for participation, it will send the IRF (1) a list of potentially eligible appeals, and (2) a settlement agreement.²³
• The IRF will review and validate the spreadsheet.  If the list of potentially eligible appeals contains discrepancies in eligible appeals or includes Intensity of Therapy appeals eligible for settlement at 100 percent of the net payable amount, the IRF must complete an Eligibility Determination Request (EDR) and submit it to CMS at MedicareAppealsSettlment@cms.hhs.gov within 15 days from receipt of the list and settlement agreement from CMS.  CMS and the IRF have 30 days to identify any Intensity of Therapy appeals eligible for settlement and resolve any discrepancies.²⁴
• Once any discrepancies are resolved, the IRF will sign and return the settlement agreement to CMS.  CMS will countersign the agreement and return a fully executed copy of same to the IRF.²⁵
• CMS will effectuate payment within 180 days of its signature on the settlement agreement.²⁶

Conclusion

For IRF appellants that have been awaiting adjudication of appeals that have been pending for years, the IRF appeals settlement process places resolution within sight.  Other than receiving less than the full payable amount for certain eligible claims, the IRF Appeals Settlement has little downside for appellants.  CMS’s settlement offer is robust, and it has the potential to alleviate some of the backlog of pending appeals that are still awaiting adjudication at the OMHA ALJ and Council stages of appeal.   Eligible providers and their legal counsel should thoughtfully consider whether to enter into the IRF appeals settlement process, taking into account the types of IRF appeals that are pending, the IRF’s historic appeals success rate, and the estimated time remaining to await resolution if the IRF appeals settlement process is not chosen.

Endnotes

1.       https://www.cms.gov/Medicare/Appeals-and-Grievances/OrgMedFFSAppeals/Appeals-Settlement-Initiatives/Inpatient-Rehabilitation-Facility-Appeals-Initiative.html.

2.     Generally, the five-stage Medicare Part A and Part B appeals process is as follows:

• Stage 1:  Following receipt of an initial determination, a dissatisfied party may file a request for “redetermination.”  A request for redetermination must be submitted in writing to the Medicare Administrative Contractor (MAC) that issued the initial determination.  A request for redetermination must be submitted within 120 days following the date of receipt of notice of initial determination (a party will be presumed to have received the notice of initial determination five days after the date of the notice, unless there is evidence to the contrary).  The MAC is required to conclude its redetermination review no later than the 60-day period beginning on the date the MAC receives the request for redetermination.  See Section 1869 (a) (3) (C) of the Act (42 U.S.C. § 1395ff (a) (3) (C)), 42 C.F.R. §§ 405.942 and 405.950, and MCPM, Ch. 29, § 310, available at http://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/Downloads/clm104c29.pdf.
• Stage 2:  If a party is dissatisfied with a redetermination decision, it may file a request for “reconsideration.”  A request for reconsideration must be submitted in writing to the qualified independent contractor (QIC) identified in the redetermination decision.  A request for reconsideration must be submitted within 180 days from the date the party receives notice of a partially favorable or unfavorable redetermination decision (a party will be presumed to have received the redetermination decision five days after the date of the notice, unless there is evidence to the contrary).  The QIC is required to conclude its reconsideration review no later than 60 days following the date it receives the reconsideration request.  If the QIC fails to abide by this timeframe, a party may “escalate” its appeal to the ALJ stage of appeal, in essence bypassing the QIC reconsideration review.  See Sections 1869 (b) and (c) of the Act (42 U.S.C. §§ 1395ff (b) and (c)), 42 C.F.R. § 405.970 and MCPM, Ch. 29, § 330. 
• Stage 3:  If a party is dissatisfied with a reconsideration decision, it may file a request for an OMHA ALJ hearing.  An appellant’s request for ALJ hearing must be submitted within 60 days of the date of a party’s receipt of reconsideration decision (a party will be presumed to have received the reconsideration decision five days after the date of the notice, unless there is evidence to the contrary).  An amount in controversy requirement applies. The Social Security Act expressly requires that an ALJ “conduct and conclude a hearing on a decision of a qualified independent contractor…and render a decision on such hearing by not later than the end of the 90-day period beginning on the date a request for hearing has been timely filed.”  If the ALJ fails to abide by this timeframe, a party may “escalate” its appeal to the Council for review.  See Sections 1869 (b) (1) and (d) (1) of the Act (42 U.S.C. §§ 1395ff (b) (1) and (d) (1)), 42 C.F.R. §§ 405.1000-1016, and MCPM, Ch. 29, § 330.
• Stage 4:  If a party is dissatisfied with an ALJ’s decision, it may file a request for Medicare Appeals Council (Council) review.  A request for Council review must be submitted within 60 days of the date of a party’s receipt of the ALJ decision (a party will be presumed to have received the ALJ decision five days after the date of the notice, unless there is evidence to the contrary).  The Council is required to conduct and conclude a review of the decision on an ALJ hearing and make a decision (or remand the case to the ALJ) in 90 days.  If the Council fails to issue its decision within this timeframe, a party may “escalate” its appeal to federal district court.  See Sections 1869 (b) (1) of the Act (42 U.S.C. §§ 1395ff (b) (1)), 42 C.F.R. §§ 405.1100-1132, and MCPM, § 340.
• Stage 5:  If a party is dissatisfied with the Council decision, it may file a request for federal district court review.  An amount in controversy requirement applies.  See Section 1869 (b) (1) of the Act (42 U.S.C. § 1395ff (b) (1)), 42 C.F.R. § 405.1136 and MCPM, Ch. 29, § 345.

3.     See Section 1869 (d) (1) (A) of the Act (42 U.S.C. § 1395ff (d) (1) (A)). See also 42 C.F.R. § 405.1016 and MCPM (CMS Pub. 100-04), Ch. 29, § 330.1, available at www.cms.gov/ Regulations-and-Guidance/Guidance/ Manuals/Downloads/clm104c29.pdf.

Limited exceptions to the 90-day appeals adjudication timeframe include the following:

• Where an appeal is escalated to the ALJ stage of appeal from the QIC reconsideration stage of appeal, the ALJ is required to issue its decision no later than 180 calendar days following receipt of the appellant’s request for escalation (42 C.F.R. § 405.1016 (c));
• Where CMS or a CMS contractor participates in an ALJ hearing as a party and requests discovery (42 C.F.R. § 405.1016 (d));
• If an appellant submits additional evidence not included with a request for ALJ hearing later than 10 calendar days after receiving the notice of hearing, “the period between the time the evidence was required to have been submitted and the time it is received is not counted toward the adjudication deadline…” (42 C.F.R. § 405.1018); and
• If an appellant fails to send a notice of its ALJ hearing request to the other parties, the 90-day adjudication period is tolled until all parties are notified of an appellant’s request for ALJ hearing (42 C.F.R. § 405.1014 (b) (2)).

4.    See https://www.hhs.gov/about/agencies/omha/about/current-workload/average-processing-time-by-fiscal-year/index.html.

5.    Id.

6.    The three plaintiff hospitals included Baxter Regional Hospital, Inc. d/b/a Baxter Regional Medical Center, Covenant Health, and Rutland Hospital, Inc., d/b/a Rutland Regional Medical Center.  See Complaint filed May 22, 2014, Civil Action No. 14-cv-851, available at www.aha.org/content/14/ 140522complaint-appeals.pdf.

7.    See generally, https://www.aha.org/legal/litigation-aha-hospitals-sue-require-hhs-meet-deadlines-deciding-appeals.

8.    See Memorandum Opinion dated November 1, 2018, available at https://www.aha.org/system/files/2018-11/181101-aljdelay-remedyopinion.pdf.

For additional analysis regarding Medicare appeals adjudication delays, see "Medicare Appeals Adjudication Delay Update:  Lawsuit Decided in Favor of Appellants (For Now)," by Jessica L. Gustafson, Esq. and Abby Pendleton, Esq.,  The Health Lawyer, Vol. 29, No. 3, February 2017; "Medicare Appeals Adjudication Delays: Implications for Healthcare Providers and Suppliers," by Jessica L. Gustafson, Esq. and Abby Pendleton, Esq., The Health Lawyer, Volume 26, Number 5, June 2014; and “District Court Rules OMHA Appeals Backlog to be Eliminated by 2022,” by Jessica L. Gustafson, Esq. and Abby Pendleton, Esq, The Health Lawyer, Vol. 31, No. 3, Feb. 2019.

9.    The delay in appeals adjudication can cause significant cash flow issues for appellants.  Following issuance of a partially favorable or unfavorable reconsideration decision, CMS begins recoupment activities.  While awaiting an ALJ hearing and decision, withholding of the monies allegedly owed commences and the MAC recoups the alleged overpayment.  42 C.F.R. § 405.379.

10.        For example, HHS operates a Settlement Conference Facilitation (SCF) process, which is an alternative dispute resolution process.  The SCF process can be used to resolve Medicare Part A and Part B appeals pending at the OMHA ALJ hearing and Council stages of appeal as of March 31, 2019.  https://www.hhs.gov/about/agencies/omha/about/special-initiatives/settlement-conference-facilitation/index.html.

OMHA also operates a statistical sampling initiative (SSI), which has been in place since 2014.  Under SSI, appellants with 250 or more of certain categories of claims pending at the OMHA ALJ stage of appeal may choose to have OMHA adjudicate their claims using statistical sampling and extrapolation.  https://www.hhs.gov/about/agencies/omha/about/special-initiatives/statistical-sampling/index.html.

HHS operated a low-volume appeals (LVA) settlement initiative.  A provider was eligible for LVA if it had less than 500 pending appeals at the OMHA ALJ stage of appeal as of November 3, 2017, and the appeals were for no more than $9,000.  CMS agreed to provide eligible appellants 62 percent of the net allowable amount of all eligible appeals in return for the appellant withdrawing all pending appeals.  The LVA settlement initiative closed on June 8, 2018.  https://www.cms.gov/Medicare/Appeals-and-Grievances/OrgMedFFSAppeals/Appeals-Settlement-Initiatives/Low-Volume-Appeals-Initiative.html.     

11.       See Settlement Instructions, available at https://www.cms.gov/Research-Statistics-Data-and-Systems/Monitoring-Programs/Medicare-FFS-Compliance-Programs/Medical-Review/Downloads/HospitalParticipantSettlementInstructions_updated09092014.pdf.  See also “(Partial) Relief in Sight:  CMS Proposes Settlement of Pending Inpatient Hospital “Status” Appeals,” by Jessica L. Gustafson, Esq. and Abby Pendleton, Esq., ABA Health eSource, Vol. 11 No. 2, October 2014, available at http://www.americanbar.org/publications/aba_health_esource/2014-2015/october/partial.html.

On August 2, 2013, CMS released its 2014 Inpatient Prospective Payment System (IPPS) Final Rule (the Final Rule), which became effective on October 1, 2013.  78 Fed. Reg. 50496 et seq. (August 19, 2013) available at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/FY-2014-IPPS-Final-Rule-Home-Page-Items/FY-2014-IPPS-Final-Rule-CMS-1599-F-Regulations.html?DLPage=1&DLSort=0&DLSortDir=ascending.  The Final Rule revised CMS’s reimbursement criteria for Part A inpatient hospital claims, creating new guidelines to establish the medical necessity of inpatient hospital admissions (i.e., establishing the “2-midnight rule”) and clarifying CMS’ documentation requirements related to physician inpatient admission orders.  One purpose of the 2-midnight rule was “[t]o reduce uncertainty regarding the requirements for payments to hospitals…under Medicare Part A related to when a Medicare beneficiary should be admitted as a hospital inpatient.”  Id. at p. 50506.

12.    https://www.aha.org/system/files/2018-02/171103-AHAvHargan-MSJStatementofFacts.pdf.

13.    https://www.cms.gov/Medicare/Appeals-and-Grievances/OrgMedFFSAppeals/Hospital-Appeals-Settlement-Process-2016.html.

14.    https://www.cms.gov/Medicare/Appeals-and-Grievances/OrgMedFFSAppeals/Downloads/FAQs-HASP-2016-FAQs-HASP-2016-508-CW.pdf.  Note, however, that IRFs are eligible to participate in SCF and SSI.

15.    See e.g., AHA’s Reply Memorandum of Law in Support of Plaintiffs’ Cross Motion for Summary Judgment dated February 15, 2018, available at  https://www.aha.org/system/files/2018-02/180215-ahavazar-msj-reply-brief.pdf.

16.    See Defendants’ Status Report and Response to Plaintiff’s Proposed Non-Deadline Remedies at page 20, available at https://www.aha.org/system/files/2018-08/180803-ahavazar-secy-remedy-brief.pdf.

17.        https://www.cms.gov/Medicare/Appeals-and-Grievances/OrgMedFFSAppeals/Appeals-Settlement-Initiatives/Inpatient-Rehabilitation-Facility-Appeals-Initiative.html

18.       https://www.cms.gov/Medicare/Appeals-and-Grievances/OrgMedFFSAppeals/Appeals-Settlement-Initiatives/Inpatient-Rehabilitation-Facility-Appeals-Initiative.html.

The Medicare Benefit Policy Manual (MBPM) (CMS Internet-Only Publication 100-02), Chapter 1, Section 110, available at https://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/Downloads/bp102c01.pdf, provides guidance related to coverage of IRF services.  Section 110.2.2 states that:

A primary distinction between the IRF environment and other rehabilitation settings is the intensity of rehabilitation therapy services provided in an IRF. For this reason, the information in the patient’s IRF medical record (especially the required documentation described in section 110.1) must document a reasonable expectation that at the time of admission to the IRF the patient generally required the intensive rehabilitation therapy services that are uniquely provided in IRFs. Although the intensity of rehabilitation services can be reflected in various ways, the generally-accepted standard by which the intensity of these services is typically demonstrated in IRFs is by the provision of intensive therapies at least 3 hours per day at least 5 days per week. However, this is not the only way that such intensity of services can be demonstrated (that is, CMS does not intend for this measure to be used as a “rule of thumb” for determining whether a particular IRF claim is reasonable and necessary).

The intensity of therapy services provided in IRFs could also be demonstrated by the provision of 15 hours of therapy per week (that is, in a 7-consecutive day period starting from the date of admission)…

The standard of care for IRF patients is individualized (i.e., one-on-one) therapy. Group therapies serve as an adjunct to individual therapies. In those instances in which group therapy better meets the patient’s needs on a limited basis, the situation/rationale that justifies group therapy should be specified in the patient’s medical record at the IRF….

In 2017, certain Medicare contractors began to deny IRF claims where the IRF provided group therapies (as well as one-on-one therapies) to a beneficiary, and the IRF counted the group therapy time to meet the intensity of therapy requirement outlined above.  In a Frequently Asked Questions document previously housed on Noridian Healthcare Solutions (Noridian)’s website, Noridian advised that CMS had provided “clarification” to it regarding the intensity of therapy requirement.  The FAQ was previously available here:  https://med.noridianmedicare.com/web/jea/education/event-materials/inpatient-rehabilitation-facility-irf-services-q-a.  Despite this language on Noridian’s website, CMS had not published anything expressly stating that group therapies could not be counted to meet the intensity of therapy requirement.

19.    https://www.cms.gov/Medicare/Appeals-and-Grievances/OrgMedFFSAppeals/Appeals-Settlement-Initiatives/Inpatient-Rehabilitation-Facility-Appeals-Initiative.html.

20.    Id.

21.    Id.

22.    Id.

23.    Id.

24.    Id.

25.    Id.

26.     See External FAQ, available at https://www.cms.gov/Medicare/Appeals-and-Grievances/OrgMedFFSAppeals/Appeals-Settlement-Initiatives/OFM-IRF-Appeals-Settlement-External-FAQs.pdf

About the Authors

Jessica L. Gustafson is a founding shareholder with the healthcare law firm of The Health Law Partners, P.C. Ms. Gustafson co-leads the firm’s Recovery Audit (“RAC”) and Medicare appeals practice group, and specializes in a number of areas, including Medicare, Medicaid and other payor audit appeals; healthcare regulatory matters; compliance matters; reimbursement; and contracting matters. She is a member of the editorial board of the ABA Health eSource, the American Bar Association Health Law Section’s online magazine. She can be reached at jgustafson@thehlp.com.

Abby Pendleton is a founding shareholder with the healthcare law firm of The Health Law Partners, P.C. The firm represents hospitals, physicians, and other healthcare providers and suppliers with respect to their healthcare legal needs. Ms. Pendleton co-leads the firm’s Recovery Audit (“RAC”) and Medicare appeals practice group, and specializes in a number of areas, including Medicare, Medicaid and other payor audit defense and appeals; healthcare regulatory matters; compliance; HIPAA privacy and security compliance matters; overpayment refunds; reimbursement and contracting matters; and payor de-participation matters. Ms. Pendleton can be reached  at apendleton@thehlp.com.