The 1997 Balanced Budget Act included a " Budget Neutral Provision " for CMS. This was to end decades of quarreling about how Medicare would equitably reimburse hospitals for uncompensated care. By 1998, CMS came out with the Budget Neutrality Adjustment. This eliminated the "Rural" vs. "Urban" reimbursement methodology and created fixed costs (DRG) for hospital in-patient programs, taking into consideration the Wage Index as well as many other factors. From 1999 through 2006, CMS increasingly understated the standardized amounts from the Budget Neutrality Adjustment. In 2007, CMS adjusted its payment schedule to correct the understatements, but did so only for that year - not admitting to underpayments from 1999 through 2006, nor for adjusting the schedule forward for years beyond 2007. In January of 2011, the US Court of Appeals decided in favor of the providers in Cape Cod Hospital et al, v. Kathleen Sebelius. And by September 2011, CMS stated that "Good Faith Settlement" negotiations may begin, and a schedule of incremental reimbursements was created to compensate hospitals for DRG underpayments from 1998 through 2011.

Who qualifies for RFBNA reimbursements?

All Medicare agencies in the US and Puerto Rico - except Critical Access Hospitals - qualify for this appeal. Sole Community Hospitals have a modified payment schedule, as does Puerto Rico. But all non-CA hospitals may appeal their DRG amounts from FY1998 - FY2011. Even hospitals that are no longer in service have recourse, as long as they show DRG between 1998 and 2011. Typically, they will have a law firm or accounting firm dealing with the estate and any funds that result from this appeal may go toward paying debt.

Conclusions and Recommendations.

Unlike many on-going reimbursement programs (like Disproportionate Share, Bad Debt, 340B, etc.), the RFBNA appeal is a "one-shot" windfall opportunity. Hospitals may file their own appeals with the Provider Reimbursement Review Board and later in Federal Court. However, given the backlog of cases in Federal Court the queue is several years long. Most hospitals that are appealing RFBNA are using law firms or consulting firms that gather many hospitals under the same appeal, so they can negotiate a settlement with CMS from a position of strength. If you are considering using a third party to handle this appeal for you, they should be able to give you a fairly accurate estimate of what your BNA (incremental reimbursements) should be. This is done by taking your DRG for the fiscal years in question, and multiplying these payments by the percentages developed by CMS, which defines the shortfall that is due to the provider for each year.

You should note that for all cost reports that have been closed by Notice of Program Reimbursement (NPR), the provider must appeal the BNA amounts within 180 days of filing the NPR. Quality Reimbursement Services, Inc. has been consulting hospitals on matters dealing with Medicare and Medicaid reimbursements since 1994. We work on a contingency basis, requiring no up-front or maintenance charges for our services. We would be happy to meet with you, and review your circumstances to see if we may be of service.