CMS Offers Partial Payment for Certain Part A Hospital Claims Under Appeal

CMS is offering to pay hospitals 68 percent of the allowable amount for all claims that are currently in the appeals process in which the inpatient status of the patient is being appealed, according to a CMS web post. CMS hopes that this will alleviate the long backlog of cases awaiting a hearing before an administrative law judge (ALJ). The majority of these cases involve recovery audit contractors’ (RACs’) decisions that an inpatient claim was not reasonable or necessary, as the service could have been better provided in an outpatient setting. The American Hospital Association (AHA) believes that nearly $1.5 billion in claims are currently being appealed because of this issue.


Hospitals have until October 31, 2014 to email CMS a signed administrative agreement and an Excel spreadsheet of the claims on appeal that would be eligible for the settlement. Directions for submitting the email are available on a CMS website. Eligible hospitals include acute care hospitals paid under the inpatient prospective payment system (IPPS) or that receive periodic interim payments (PIP), hospitals operating under a waiver in Maryland, and critical access hospitals. Claims from psychiatric hospitals, inpatient rehabilitation facilities, long-term care hospitals, cancer hospitals, and children’s hospitals are not eligible for the settlement

CMS will review the administrative agreement and the claims spreadsheet. It will pay 68 percent of the allowable amount for each claim on the spreadsheet that it can verify is currently being appealed for inpatient status. For those claims, CMS will sign the administrative agreement, make a payment, and the appeals will be dismissed. Hospitals will get a chance to discuss with CMS the claims it could not verify to be on appeal for inpatient status. An additional agreement will be signed and an additional payment will be made for those claims if the discussion leads to the conclusion that those claims, as well, were on appeal for inpatient status.


It is estimated that there are currently 375,000 appeals waiting to be heard, according to a memo from Nancy Griswold, Chief Administrative Law Judge for HHS’ Office of Medicare Hearings and Appeals (OMHA). “In just under two years, the OMHA backlog has grown from pending appeals involving 92,000 claims for services and entitlements to appeals involving over 460,000 claims for services and entitlements,” said Griswold. In a January 14, 2014 letter to the CMS Administrator, the AHA claimed that nearly 70 percent of appeals of Part A claims are overturned in the hospitals’ favor.

Two-Midnight Rule

Only claims with dates of admission prior to October 1, 2013 will be eligible for the settlement offer, as CMS believes that the institution of the two-midnight rule in the Final rule updating the IPPS payment system for Fiscal Year 2014 has alleviated the problem. In that Final rule, CMS instructed RACs not to dispute any inpatient claims if the inpatient stay is more than one beneficiary day or spans two midnights. In either case, the inpatient stay is reasonable and necessary. The starting point for the two-midnight clock is when the patient is moved from any outpatient area of the hospital to an inpatient bed, and the patient’s physician or other qualified practitioner orders an inpatient stay.

Fingerprinting of High-Risk HHA and DMEPOS Owners to Begin

CMS is continuing to implement program integrity measures on home health agencies (HHA) and durable medical equipment prosthetics, orthotics and supplies (DMEPOS) suppliers as authorized under the Affordable Care Act (ACA).  Beginning on August 6, 2014, any individual with a 5 percent or greater ownership share of an HHA or DMEPOS supplier enrolled in Medicare as of  March 25, 2011 must have his or her fingerprints taken and a criminal background check conducted based on those fingerprints.  In a Final rule issued on February 2, 2011 these providers were categorized as “high-risk” by CMS.  In addition, CMS is extending moratorium on the opening of new home health agencies in Chicago, Dallas, Miami, Houston, Detroit and Fort Lauderdale and moratorium on new Part B ambulance suppliers in Houston and Philadelphia until December 31, 2014.

Fingerprinting. The fingerprinting will be conducted in stages, according to a Medicare Learning Network (MLN) Matters posting published by CMS.  Not all high-risk HHAs and DEMPOS will part of the first phase of the fingerprinting and background check requirements.  Medicare Administrative Contractors (MACs) will be sending out a notice to those HHAs and DEMPOS owners that will need to be fingerprinted.  All of the owners of an HHA or DEMPOS that are notified will have 30 days from the date of the notice to be fingerprinted.  Individuals being fingerprinted have the responsibility to ensure that their fingerprints are accurately and correctly forwarded to the FBI, which will be conducting the background check. Individuals can contact the provider administering the fingerprinting program via the web at to learn how to accurately and correctly get this information to the FBI.

The fingerprinting requirements were included in sec. 6401(a)(3) of the ACA, and the high-risk categorization was adopted in the February 2011 Final rule. In that Final rule CMS adopted 42 C.F.R. 424.518 which established the categories of risk.  The same section of the ACA gave CMS the authority to place moratoria on the enrollment of new providers in categories designated as higher risk.

Moratoria. The moratoria on the enrollment of new HHAs or Part B ambulance suppliers in a number of counties across the U.S. were extended until December 31, 2014 by a Final rule issued by CMS on August 1, 2014. Originally the moratoria  on enrollment of new  HHAs in the Chicago and Miami metropolitan areas and  new Part B ambulance suppliers in Houston with a Notice issued on July 31, 2013.  The moratoria in those counties were extended  and expanded to include HHA suppliers in Detroit,  Fort Lauderdale, Dallas, Houston and surrounding counties and Part B ambulance suppliers in Philadelphia by a Notice published on February 4, 2014.

In each case CMS consulted with local law enforcement to make its determination. In both Chicago and Miami the number of HHAs was found to be much higher than in other parts of the country.  In addition, there had been extensive fraud and abuse prosecutions of HHAs in Miami.  Similar types of patterns were observed in areas where new moratoria were applied in the February 4, 2014 Notice.

CMS was granted these authorities as way to reduce fraud and abuse in the Medicare program in areas of the country where there has been a high incidence of fraud and abuse.  In each instance CMS consulted with state Medicaid authorities to ensure that beneficiaries in areas where moratoria were applied would not be jeopardized.

Highlight on Maryland: New Hospital Payment System Being Implemented

Maryland is in the process of transitioning how hospitals are paid under its waiver from the Medicare program to a five-year demonstration program approved by CMS’ Center for Medicare and Medicaid Innovation in January 2014. The payment system will continue to be an all-payer system in which all hospitals will be paid the same rate for the same service.  The difference is that the new payment system will be a global budgeting system in which hospitals will be paid based on their total expected revenues for the year as opposed to being paid a specific fee for each service.

Medicare Waiver

The waiver from Medicare and Medicaid payment rates went into effect on July 1, 1977. Since that time all hospitals in Maryland have been paid the same rate for the same service no matter if the payer is Medicare, Medicaid or a private insurer.  The Health Service Cost Review Commission (HSCRC) was created by the Maryland legislature in 1971.  That law gave the HSCRC the authority set hospital payment rates for all payers.  Federal law took precedent to the Maryland law and it took several years to negotiate with the federal government to participate in the all-payer system, according to a report from the HSCRC. No hospital in Maryland has ever been paid under Medicare’s inpatient prospective payment system (IPPS) or the outpatient prospective payment system (OPPS).

Global Payment System

CMS wanted to move Maryland away from a fee-for-service payment system and towards a payment system similar to IPPS and OPPS and began negotiating with Maryland to do so.  On January 10, 2014 a 5-year demonstration program was approved that would replace the waiver.   Under the demonstration program, Maryland will institute a global payment model within five years. House bill 298, approved on May 5, 2014, requires the HSCRC to develop guidelines for the establishment of global budgets for each hospital and may (1) establish hospital levels and rate increases in the aggregate or on a hospital specific basis and (2) promote and approve alternate methods of rate determination and payment of an experimental nature, according to a legislative synopsis.  Under the global payment model each hospital enters into contract with HSCRC.  Each hospital’s total annual revenue is known at the beginning of each fiscal year and annual revenue is determined from a historical base period that is adjusted to account for inflation updates, infrastructure requirements, population volume increases, performance in quality-based or efficiency-based programs, changes in payer mix and changes in levels of uncompensated care. As of July 16, 2014, the HSCRC reports that 13 hospitals have completed global revenue contracts. Under the demonstration program Maryland is required to limit its annual per-capita total hospital growth to 3.58 percent per year.   The new program will be required to reduce Medicare expenditures by $330 million over the five years of the demonstration. Savings will be measured by comparing the state’s Medicare per-capita total hospital growth to the national Medicare per-capita total hospital cost growth.

Quality Targets

In addition to meeting these fiscal goals, Maryland hospitals will have to meet quality of care targets as well.  Hospital readmissions will have to be reduced from the aggregate 30-day unadjusted all-cause, all-site readmission rate over the 5 year period.  Maryland hospitals will have to achieve a 30 percent reduction in 65 potential preventable conditions over the five-year period; with a goal of an annual reduction of 6.89 percent per year. Maryland’s Governor Martin O’Malley recently announced an 11.5 percent reduction in preventable hospitalizations per 100,000 Marylanders since 2011.  Governor O’Malley credited this reduction to the use of the Chesapeake Regional Information System for our Patients (CRISP) which is a secure health information exchange that all 46 hospitals in the state and a large number of other providers use. CRISP allows physicians to access a patient’s medical records from any participating provider in CRISP in real-time. Using CRISP physicians have access to prior medical records, lab results, radiology results, and other data. The use of CRISP has greatly improved coordination of care and reduced the need to repeat costly diagnostic tests resulting in $65 million in savings according to Governor O’Malley. Maryland is making strides in implementing its new payment and quality of care systems under the new demonstration. Progress is essential because if these goals are not met within 5 years the demonstration will not be extended and hospitals in Maryland will revert to being paid under IPPS and OPPS for Medicare services.

Former Attorney Sentenced for Role in Medicare Fraud

A former attorney from Florida was sentenced to nearly six years in prison for her participation in a Medicare fraud scheme. Margarita Grishkoff purchased and owned physical rehabilitation facilities that she used to submit false claims to Medicare; she split the proceeds of the false claims with co-conspirators, according to Department of Justice press release. This case was investigated and prosecuted under a special Medicare Fraud Strike Force, the Health Care Fraud Prevention and Enforcement Team (HEAT), that is operating in Miami and eight other cities.

On January 24, 2014, Grishkoff pleaded guilty to conspiracy to commit health care fraud. Grishkoff and others submitted approximately $28.3 million in fraudulent claims to Medicare from 2005 to 2009, of which Medicare paid approximately $14.4 million. Grishkoff had a license to practice law in Florida but was disbarred in 1997.

Fraudulent Activities

Grishkoff was president and a director of Ulysses Acquisitions, Inc., which was a company she used to purchase comprehensive outpatient rehabilitation facilities and outpatient physical therapy providers. Grishkoff and her co-conspirators submitted false claims to Medicare on behalf of clinics they owned in exchange for a portion of the Medicare reimbursement received. Grishkoff and her co-conspirators kept 20 percent and the remaining 80 percent went to other clinic owners and co-conspirators. Grishkoff and her co-conspirators used patient recruiters to obtain identifying information on Medicare beneficiaries and physicians. The patient recruiters were paid kickbacks for this information. This information was then used to submit claims through the clinics Grishkoff and others owned. To distance herself from these activities, Grishkoff and her co-conspirators sold the clinics to nominee or straw owners, all of whom were recent immigrants to the United States with no background in health care.

Grishkoff was sentenced to 70 months in jail with three years’ supervised release upon the ending of her prison term and ordered to pay restitution of $14.4 million. The sentence was handed down by U.S. District Judge Susan C. Bucklew of the Middle District of Florida and investigated and prosecuted by members of the U.S. District Attorney’s office for the Middle District of Florida, HHS Office of Inspector General (OIG) and the FBI’s Tampa Field Office.


This case was investigated as part of the special Medicare task force known as HEAT. Special HEAT task forces are operating in Brooklyn, N.Y.; Los Angeles, Calif.; Chicago, Ill.; Miami-Dade, Fla.; Tampa Bay Fla.; Houston Tex.; Dallas Tex.; Detroit Mich.; and Baton Rouge, La. HEAT teams are multi-agency teams comprised of federal, state, and local investigators designed to combat Medicare fraud. To date nearly 1,900 individuals have been charged who collectively billed Medicare for more than $6 billion since March of 2007 when HEAT began, according to the Department of Justice’s press release.