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Inpatient Hospital Reviews

Update 10/26/2015

On July 1, 2015, CMS released proposed updates to the “Two Midnight” rule regarding when inpatient admissions are appropriate for payment under Medicare Part A. The fact sheet detailing the proposed changes can be located at:

At the same time, CMS notified the public of upcoming changes in our education and enforcement strategies. Those changes are detailed below:

Quality Improvement Organizations (QIOs)

Beginning on October 1, 2015, the QIOs assumed responsibility for conducting initial patient status reviews of providers to determine the appropriateness of Part A payment for short stay inpatient hospital claims. These reviews were previously conducted by the Medicare Administrative Contractors (MACs). From October 1, 2015 through December 31, 2015, short stay inpatient hospital reviews conducted by the QIOs will be based on Medicare’s current payment policies. Beginning on January 1, 2016, QIOs and Recovery Auditors will conduct patient status reviews in accordance with any policy changes finalized in the OPPS rule and effective in calendar year 2016.

Medicare Administrative Contractors (MACs)

As of October 1, 2015, MACs have completed the third round of Inpatient Probe and Educate reviews (although some provider education may continue beyond this date). After October 1, 2015, MACs may continue to conduct CMS-approved claim reviews unrelated to patient status (e.g., coding reviews, reviews to determine the medical necessity of the procedure conducted, etc.).

Recovery Auditors

The congressionally-imposed prohibition on Recovery Auditor patient status reviews expired on October 1, 2015 (Section 521 of the Medicare Access and CHIP Reauthorization Act of 2015, (Pub. L. 114-10)). However, CMS will not approve Recovery Auditors to conduct patient status reviews for dates of admission of October 1, 2015 through December 31, 2015.

Beginning in January 2016, Recovery Auditors may conduct patient status reviews only for those providers that have been referred by the QIO as exhibiting persistent noncompliance with Medicare payment policies, including, but not limited to: having high denial rates and consistently failing to adhere to the Two Midnight rule (including repeatedly submitting inappropriate inpatient claims for stays that do not span one midnight), or failing to improve their performance after QIO educational intervention. Recovery Auditors may continue to conduct reviews of short stay inpatient claims for other reasons, including CMS-approved claim reviews unrelated to patient status (e.g., coding reviews, reviews to determine the medical necessity of the procedure conducted, etc.).

Note: These changes in enforcement and education strategies will not affect the reviews conducted by the Comprehensive Error Rate Testing (CERT) contractor or those reviews conducted for the purpose of identifying fraudulent behaviors, such as Zone Program Integrity Contractor reviews.


Summary of Inpatient Status Reviews

Date of Admission

Contractor Type(s)

Through September 30, 2015

MACs conducting probe and educate.

October 1, 2015 through December 31, 2015

QIOs conducting reviews. MACs completing some remaining provider education.

January 1, 2016 and beyond

QIOs conducting initial reviews. RACs conducting further reviews upon referral by QIOs.


Hospital Appeals Settlement Updated 6/11/2015

What's New:   As of June 1, 2015, CMS has executed settlements with more than 1,900 hospitals, representing approximately 300,000 claims.  CMS has paid approximately $1.3 billion to providers.  

March 26, 2015- The Centers for Medicare & Medicaid Services (CMS) is in the process of completing Round 1 of the settlement process. Round 2 validations have begun. Settlement participants are encouraged to see the revised "Critical Steps for Providers in the Appeals Settlement Process" found in the Downloads section below for additional Round 2 instructions. 

February 25, 2015- CMS hosted an informational call with Hospital Appeals Settlement Participants. The call provided information on the Round 2 process and allowed for a question and answer session. The transcript from this call can be found in the Downloads section below.


As noted in a Federal Register Notice released by the Office of Medicare Hearings and Appeals (OMHA) in January 2014, “the unprecedented growth in claim appeals continues to exceed the available adjudication resources to address [such] appeals…” CMS supports OMHA’s efforts to bring efficiencies to the OMHA appeals process.

CMS believes that the changes in Final Rule 1599-F (published in August 2013) will not only reduce improper payments under Part A, but will also reduce the administrative costs of appeals for both hospitals and the Medicare program.

To more quickly reduce the volume of inpatient status claims currently pending in the appeals process, CMS offered an administrative agreement to any hospital willing to withdraw their pending appeals in exchange for timely partial payment (68% of the net allowable amount). The deadline for hospitals to request settlement was October 31, 2014. CMS encouraged hospitals with inpatient status claims currently in the appeals process or within the timeframe to request an appeal to make use of this administrative agreement mechanism to alleviate the administrative burden of current appeals on both the hospital and Medicare system.   

The following facility types were ELIGIBLE to submit a settlement request:

  • Acute Care Hospitals, including those paid via Prospective Payment System (PPS), Periodic Interim Payments (PIP), and Maryland waiver; and
  • Critical Access Hospitals.

The following facility types were NOT eligible to submit a settlement request:

  • Psychiatric hospitals paid under the Inpatient Psychiatric Facilities Prospective Payment System (IPF PPS);
  • Inpatient Rehabilitation Facilities (IRFs);
  • Long-Term Care Hospitals (LTCHs);
  • Cancer hospitals; and
  • Children’s hospitals.  

A full definition of each of these facility types can be found at §1886(d) or §1820(c) of the Social Security Act. This agreement applies to all eligible claims from eligible providers. Eligible claims are those denied by a Medicare contractor on the basis that services may have been reasonable and necessary but treatment on an inpatient basis was not, that are either under appeal or within their administrative timeframe to request an appeal review, with dates of admissions prior to October 1, 2013, and where the patient was not a Part C enrollee. The hospital could not choose to settle some claims and continue to appeal others. Certain hospitals could be excluded from this settlement opportunity based on pending False Claims Act litigation or investigations.

To request such an agreement, hospitals followed the process in the Downloads section below "Hospital Participant Settlement Instructions".

Settlement Process

Round 1:  Hospital submits their proposed spreadsheet of eligible claims/appeals for CMS review, along with a signed Administrative Agreement.  CMS validates the information and notifies the hospital if there are any discrepancies from the contractor eligible claims list.  Proceedings on all eligible pending appeals will be stayed. 

  • If CMS has identical information to that submitted, the original agreement is countersigned by CMS, and payment will be provided.  The impacted appeals will be dismissed.
  • If discrepancies are identified, the subset of agreed upon claims are made the subject of an initial agreement signed by both parties, payment is provided, and the impacted appeals will be dismissed.  The subset of claims in which there is disagreement regarding eligibility will continue on to the second round of review.  Appeals will continue to be suspended as the settlement is reviewed.

Round 2:
 Hospital will review the discrepancies  from the first round validation process and resubmit a revised spreadsheet and Administrative Agreement for CMS validation within 2 weeks of receipt.

  • If CMS has identical information to that submitted, the original agreement will be countersigned by CMS, and payment will be provided within 60 days. The included appeals will be dismissed.
  • If discrepancies are identified, CMS and the hospital will conduct Round 2 discussions until both parties are in agreement, and a new agreement  will be signed for payment. The impacted appeals will be dismissed.

Reconciliation Process

All Settled claims are subject to additional review at a later date to verify eligibility to be included in this settlement.  As stated in the Administrative Agreement, CMS retains the right to recoup any duplicate or incorrect payments made for claims that were, but should not have been, included under this Agreement. 

Additional Information

Hospitals seeking general information regarding the process can listen to a recording of a teleconference held on September 9. The recording is posted here.  

See the downloads section below for the most recent frequently asked questions. Email any questions to

CMS posted a REVISED Eligible Claim Spreadsheet on September 9.

CMS posted a REVISED Administrative Agreement on September 19, which resolved an issue with the fillable hospital name field being too short for some hospital names. 

Effective 10/15/2014, if a hospital was unable to produce a list of all eligible claims in a timely manner, the hospital could submit a request for a "Potentials List".  For more information on this process, see "Hospital Participant Settlement Instructions" in the Downloads section below.