WASHINGTON--(BUSINESS WIRE)--Citizens Against Government Waste (CAGW) today slammed the Center for Medicare and Medicaid Services (CMS) for engaging in a nebulous settlement agreement with 1,900 hospitals, paying 300,000 hospital claims that had already been denied by two levels of CMS auditors as medically unnecessary. Hundreds of thousands of denied claims were stuck in the Department of Health and Human Services (HHS) Office of Medicare Hearings and Appeals (OMHA) and the settlement, which offered a partial payment of 68 cents for every $1 on a denied inpatient claim in exchange for hospitals agreeing to the dropping their appeals, was CMS’s solution to breaking that logjam. The payments of $1.3 billion as of June 1, 2015 will be withdrawn from the Medicare Trust Fund, which is facing insolvency. In keeping with the Obama administration’s abysmal record on transparency, the CMS statement on the settlements fails to identify which hospitals received money.
The settlement process was murky from its inception. On August 29, 2014, CMS announced the global financial settlement for hundreds of thousands of Medicare fee-for-service claims that had been denied twice and then appealed by providers to the third level of appeals, the administrative law judges (ALJ). The vast majority of these claims were related to short inpatient hospital stays (an area that had been identified by CMS as highly vulnerable to improper payments), and had been denied at two lower levels, including by Recovery Audit Contractors (RACs). The appeals backlog had brought OMHA to a standstill. At an April 28, 2015 Senate Finance Committee hearing, OMHA Chief ALJ Nancy Griswold testified that between fiscal year (FY) 2009 and FY 2014 OMHA’s workload had jumped by 543 percent, the number of appeals the agency received rose from approximately 384,000 in FY 2013 to 474,000 appeals in FY 2014, and adjudication times increased to 572 days. As a result of the hospitals “appeal everything” strategy, OMHA was forced to suspend new requests for hearings, a hiatus that is expected to last two years.
The Medicare fee-for-service program has the highest level of improper payments of any federal program, $46 billion in 2014 alone. In its 2015 annual report on “Opportunities to Reduce Fragmentation, Overlap, Duplication, and Improper Payments and Achieve Other Financial Benefits,” the Government Accountability Office identified Medicare as one of the biggest drivers of the increase in improper payments government wide, noting that “For the first time in recent years, the government-wide improper payment estimate significantly increased—to $124.7 billion in fiscal year 2014, up from $105.8 billion in fiscal year 2013. This increase of almost $19 billion was primarily due to estimates for Medicare, Medicaid, and the Earned Income Tax Credit, which account for over 76 percent of the government-wide estimate.”
“This $1.3 billion settlement is indicative of how endangered program integrity efforts are at CMS,” said CAGW President Tom Schatz. “The lack of transparency in the hospital settlement process should be a cause of major concern to taxpayers, members of Congress, and Medicare beneficiaries. Furthermore, the suspension of RAC audits, coupled with this settlement, means that a portion of the $9.7 billion in improper payments that have been recovered by RACs for the Trust Fund over the last several years has now been sent back to the very providers who systematically flooded the OMHA with appeals over denied claims. Providers have not only managed to fend off oversight of hundreds of thousands of potentially improper claims, they have been rewarded financially for doing it. This is a terrible precedent and deserves a full investigative hearing before jurisdictional committees.”
Citizens Against Government Waste is a nonpartisan, nonprofit organization dedicated to eliminating waste, fraud, mismanagement and abuse in government.