Health Law Daily CMS calculation of overpayments does not double dip payments to hospice providers
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Friday, November 20, 2020

CMS calculation of overpayments does not double dip payments to hospice providers

By Wolters Kluwer Editorial Staff

Medicare contractor correctly calculated overpayments to hospice providers in years with official orders to sequester Medicare funds.

The Provider Reimbursement Review Board (PRRB) found that a Medicare contractor properly determined the overpayments made to hospice providers for fiscal years 2013 and 2014. The PRRB noted that the contractor correctly calculated the providers’ aggregate cap overpayments for cap years with a presidential order for sequestration and an alternate finding would result in the providers paying no sequestration amounts under the order (Affinis Hospital v. Palmetto GBA, c/o National Government Services, Inc., PRRB Hearing, Dec. No. 2021-D01, Case Nos. 16-2000GC, 16-2002, August 25, 2020).

Appeal. Affinis Hospice, LLC (Affinis) operates hospice providers in numerous Georgia counties. Affinis appealed the determination of the Medicare Contractor that there were overpayments of $71,821.45 and $10,338 for fiscal years 2014 and 2013, respectively. Affinis asserted that the contractor improperly included a portion of sequestered monies in calculating the payments received in excess of the statutory cap for the Affinis hospice providers. The providers alleged that the overpayment must be recalculated without including any of the sequestration reductions, per statute and regulation. Affinis asserted, pursuant to 42 U.S.C. § 1395f(i)(2)(A) and 42 C.F.R. § 418.308, only payments made to a hospice can be assessed as a refundable cap overpayment. Further, it argued that the CMS System Manual references "total actual Medicare payments made" which means their cap overpayment is the amount by which the aggregate payment made exceeds annual aggregate cap, and any demand for more or less is contrary to law. The dispute specifically centered on how the aggregate cap is applied within the hospice prospective payment system and sequestration.

Hospice Benefit. The hospice benefit, which was created by Congress in 1982, is an election that terminally-ill Medicare beneficiaries can make in lieu of other traditional Medicare benefits. The benefit is capped, per statute, to ensure that hospice care payments do not exceed what would have been expended by Medicare had the patient been cared for in a more traditional setting.

Hospice Caps. CMS used discretion provided by statute and chose to implement the benefit using a prospective payment system for hospice care as a proxy for costs. Per-day amounts for four categories of hospice services was established. The hospice cap on payments, referred to as the "aggregate cap amount" limits the total Medicare payments made to a hospice during a given 12-month period. The aggregate cap amount is calculated by multiplying the number of Medicare beneficiaries cared for by that hospice in that time period by the statutory per-beneficiary cap amount. Participating hospices must refund any Medicare payments received that exceed the aggregate cap amount.

The Medicare program conducts a year-end reconciliation and accounting process in which it calculates each hospice’s aggregate cap amount and determines whether to assess each hospice an overpayment based on the total payments made to that hospice for that cap year. At that time, CMS also determines if the hospital exceeded another cap, the inpatient care cap, which limits the total inpatient days reported for both general inpatient care and inpatient respite care to not more than 20% of the total Medicare days reported by the hospice for a cap year. Each hospice receives a "determination of program reimbursement letter" which provides the results of the reconciliation and identifies an overpayment repayment due, if any.

SequestrationThe Budget Control Act of 2011 includes a provision that requires the President to reduce discretionary spending across the board by certain fixed percentages when budgeted expenditures exceed certain limits. The sequestration provision applicable to Medicare is capped at 2 percent for a fiscal year. On March 1, 2013 a report released by the March 1, 2013, the Office of Management and Budget (OMB) issued a report that triggered 2 percent sequestration reduction to Medicare spending. In keeping with this report, Medicare contractors were instructed to reduce Medicare payments with dates of services or discharge on or after April 1, 2013 by 2 percent.

Appropriate methodology. The PRRB finds that CMS’ implementation of sequestration has not brought about any statutory or regulatory changes in hospice payments. In fact, the PRRB states that CMS ensured that the cap calculations would not be altered by sequestration and that sequestration is applied after the aggregate cap.

The sequestration order was carried out by directing Medicare contractors to reduce Medicare payments by 2 percent beginning with dates of service or discharge on or after April 1, 2013. In their quest to not overpay providers, CMS chose not to wait until the close of the cap year to apply sequestration to the Medicare allowable amount. Rather, CMS applies sequestration up front throughout the cap year to any interim hospice payments made prior to the cap-year end. Despite being fairly complex, the Board finds that the CMS process does not result in "double dipping" from the participating hospice providers.

Even though it is more complex, the PRRB found that this process does not "double dip" from any hospices. This methodology reverses and adds back any sequestration amounts already deducted during the year to ensure that the aggregate cap is applied separately from sequestration. This prevents sequestration from affecting or interfering with the application of the aggregate cap in the first instance. The Medicare program then effectively reapplies sequestration after the aggregate cap so that both the overpayment amount and the amount of sequestered Medicare payment are properly stated.

Finding. The PRRB found that the Medicare Contractor properly applied sequestration to the Affinis Providers’ aggregate cap payments at issue and correctly calculated the Affinis Providers’ aggregate cap overpayments for the cap years at issue. The board stated that a finding for Affinis would have allowed for the Medicare Contractor to reduce the Affinis providers’ debts by the full sequestered amounts resulting in the providers paying no sequestered amounts in violation of the President’s sequestration order.

Cost reporting periods ending October 31, 2013, and October 31, 2014.

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