On August 29, 2014, CMS issued settlement terms to acute care hospitals with pending appeals of denials for inpatient claims. CMS is offering to settle all qualifying claims at 68 percent of the “net paid amount” of such claims within 60 days of CMS’s execution of an “Administrative Agreement.” The global settlement offer has the potential to unclog the massive backup in claims appeals that has tied up hundreds of millions, if not billions, of dollars in hospital reimbursement. However, the terms of the global settlement pose additional reimbursement questions that hospitals must carefully consider before proceeding. This Client Alert addresses the terms of CMS’s offer and its key implications. King & Spalding will also host a Healthcare Roundtable on September 5, 2014 to address these issues in greater detail. A copy of the Administrative Agreement and other relevant documents can be found here. CMS provides that hospitals should submit their settlement requests by October 31, 2014.

The King & Spalding RAC Coalition, comprised of hospital and health system clients, has been lobbying CMS and Congress for more than a year to reform the Recovery Audit Contractor (RAC) programand to take aggressive steps to address the systemic backlog of inpatient claims on appeal caused by RAC auditors. The global settlement offer appears to be CMS’s response to the pressure the agency has faced from the provider community and Congress to fix a broken system.