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Rural Floor Settlements and Medicare Advantage Plans
May 15, 2012

Dear Clients and Friends:
We are writing to alert you to a potentially large source about underpayments by Medicare Advantage plans.

By now many of you have heard about the large settlement that hospitals entered into a few weeks ago with the federal government to fix underpayments to hospitals for inpatient services caused by CMS’ failure to properly determine the rural floor budget neutrality adjustment over the past several years. These settlements cover amounts owed by the federal government under traditional Medicare – i.e., Part A.
However, these settlements did not address similar problems with payments by Medicare Advantage plans – i.e., Part C.

Nationally, the Medicare Advantage plans represent roughly 20% of the patient population of Medicare. In some areas the percentage is larger. Moreover, the error that CMS settled was repeated over the course of several years; specifically, for discharges from October 1, 2006 through September 30, 2011. Therefore, for most hospitals this is a potentially sizable category of underpayments by Medicare Advantage health plans.

If you have a hospital that has contracts with any Medicare Advantage plans that paid for inpatient services during the affected years based on a percentage of the rates owed by traditional Medicare under the Inpatient Prospective Payment System (IPPS), then the payments made by those Medicare Advantage plans could have been underpaid on Part C claims to the same extent that Medicare underpaid on Part A claims. This issue also can affect payments for noncontracted services paid by Medicare Advantage plans.

We have been evaluating for hospitals their respective Medicare Advantage contracts with various Medicare Advantage plans for the potential to pursue corrections of affected Part C claims.

We also have extensive experience handling the rural floor issues through our work on the settlements for the traditional Medicare program, having represented several hundred hospitals nationally, accounting for around $700 million of the settlement amounts being paid by the government.

If you would like more information about this issue, please contact John Hellow at 310-551-8155 or Nina Adatia at 310.551.8153.

For media assistance, please contact Maura Fisher at 202-580-7714.