2024-23195. Medicare Program: Appeal Rights for Certain Changes in Patient Status

Table 1—National Occupational Employment and Wage Estimates

Occupation title	Occupation code	Mean hourly wage ($/hr)	Fringe benefits and other indirect costs ($/hr)	Adjusted hourly wage ($/hr)
Registered Nurse	29-1141	45.42	45.42	90.84

As indicated, we are adjusting our hourly wage estimate by a factor of 100 percent. This is necessarily a rough adjustment, both because fringe benefits and other indirect costs vary significantly from employer to employer, and because methods of estimating these costs vary widely from study to study. Nonetheless, we believe that doubling the hourly wage to estimate the total cost is a reasonably accurate estimation method.

2. Beneficiaries

We believe that the cost for beneficiaries undertaking administrative and other tasks on their own time is a post-tax wage of $23.18/hr.

The Valuing Time in U.S. Department of Health and Human Services Regulatory Impact Analyses: Conceptual Framework and Best Practices ^[26] identifies the approach for valuing time when individuals undertake activities on their own time. To derive the costs for beneficiaries, a measurement of the usual weekly earnings of wage and salary workers of $1,117 ^[27] for 2022, divided by 40 hours to calculate an hourly pre-tax wage rate of $27.93/hr. This rate is adjusted downwards by an estimate of the effective tax rate for median income households of about 17 percent or $4.75/hr ($27.93/hr × 0.17), resulting in the post-tax hourly wage rate of $23.18/hr ($27.93/hr−$4.75/hr). Unlike our State and private sector wage adjustments, we are not adjusting beneficiary wages for fringe benefits and other indirect costs since the individuals' activities, if any, would occur outside the scope of their employment.

B. Information Collection Requirements (ICRs)

This final rule sets forth new appeals procedures as required by the court order in the case Alexander v. Azar, 613 F. Supp. 3d 559 (D. Conn. 2020)), aff'd sub nom., Barrows v. Becerra, 24 F.4th 116 (2d Cir. 2022). Certain beneficiaries in Original Medicare, who are initially admitted to a hospital as an inpatient by a physician or otherwise qualified practitioner but whose status during their stay was changed to outpatient receiving observation services by the hospital, thereby effectively denying Part A coverage for their hospital stay, may pursue an appeal under this final rule. The appeal is filed with Medicare to decide if the inpatient admission meets the relevant criteria for Part A coverage.

1. ICRs Regarding Retrospective Appeals Requests (§ 405.932)

The provisions in new § 405.932 were submitted to OMB for review under control number 0938-1466 (CMS-10885). OMB will issue the control number's expiration date upon their approval of the final rule's collection of information request. The issuance of that date can be monitored at www.Reginfo.gov.

As discussed in section III.A.3. of this final rule, § 405.932 establishes that eligible parties may file in writing an appeal related to a change in patient status which resulted in the denial of Part A coverage. A written appeal request must be received by the eligibility contractor no later than 365 days after the implementation date of the final rule. Details regarding the deadline to file an appeal and where such appeals should be filed would be posted to Medicare.gov and/or CMS.gov once the retrospective appeals process is operational. The written request must include the following information:

• Beneficiary name.
• Beneficiary Medicare number (the number on the beneficiary's Medicare card).
• Name of the hospital and dates of hospitalization.
• Name of the SNF and the dates of stay (as applicable).

If the appeal includes SNF services not covered by Medicare, the written request must also include an attestation to the out-of-pocket payment(s) made by the beneficiary for such SNF services and must include documentation of payments made to the SNF for such services.

We estimate that it would take an individual approximately 30 minutes (0.5 hr) to complete the appeal request including the attestation and documentation of out-of-pocket payments for SNF services and submit the completed information to the eligibility contractor. Because this is a new appeal right and associated process, CMS does not have precise data and cannot meaningfully estimate how many individuals may request an appeal under the new appeals process. However, we believe that the closest equivalent is using the rate of individuals who appeal denials of initial claim determinations under the claim appeals process at the first level of appeal to a MAC (which is 3 percent) and aligning it with the appeal rates of higher levels of appeal (ranging from 21 percent to 27 percent) to arrive at an estimate of 20 percent. This estimate reflects our expectation that eligible parties in this process will be more motivated than in the claim appeals process to avail themselves of this unique opportunity for a retrospective appeal on potentially high dollar claims.

Based on these data, we estimate that the total number of eligible beneficiaries is 32,894.^[28] Assuming that 20 percent of ( print page 83281) individuals (6,579 = 32,894 × 0.20) who are eligible to appeal will file a request, we estimate a one-time burden of 3,290 hours (6,579 requests × 0.5 hr/request) at a cost of $76,262 (3,290 hr × $23.18/hr).

2. ICRs Regarding Notifying Beneficiaries of Appeal Rights When Hospital Inpatient Coverage Is Reclassified to Coverage as an Outpatient Receiving Observation Services (§ 405.1210)

The provisions in new § 405.1210 were submitted to OMB for review under control number 0938-1467 (CMS-10868). OMB will issue the control number's expiration date upon their approval of the final rule's collection of information request. The issuance of that date can be monitored at reginfo.gov.

Section 405.1210 requires hospitals to deliver, prior to release from the hospital, a standardized notice informing eligible beneficiaries of the change in status from an inpatient to an outpatient receiving observation services, and their appeal rights if they wish to challenge that change.

The Medicare Change of Status Notice (MCSN) is new and is intended to be furnished only to those beneficiaries eligible for this specific new appeal process. The MCSN notice contains only two fields that hospitals must complete: (1) the beneficiary's name, and (2) the beneficiary's identifier number. The remaining information (information on the change in coverage, a description of appeal rights and how to appeal, and the implications for skilled nursing facility coverage following the hospital stay) is standardized.

For beneficiaries with Medicare Part B coverage, hospitals will be required to deliver the notice to eligible beneficiaries as soon as possible after hospital reclassifies the beneficiary from an inpatient to an outpatient and the beneficiary has stayed in the hospital for 3 or more consecutive days but was an inpatient for fewer than 3 days. The notice must be delivered no later than 4 hours before the beneficiary is released from the hospital.

For beneficiaries without Medicare Part B coverage, hospitals will be required to deliver the notice to eligible beneficiaries as soon as possible after the change from inpatient to outpatient with observation services is made as a 3-day hospital stay is not required for these beneficiaries. The notice must be delivered no later than 4 hours before the beneficiary is released from the hospital.

We estimate it would take 10 minutes (0.1667 hr) at $90.84/hr for a Registered Nurse to complete the two data fields and deliver each notice to the applicable beneficiary.

The 10-minute estimate is same as that for our Important Message from Medicare (CMS-10065/10066; OMB 0938-1019), which the proposed MCSN notice is modeled after.

In 2022 there were approximately 15,655 instances where hospital stays met the criteria for an appeal.^[29] With regard to this final rule we estimate that hospitals would be required to give an estimated 15,655 MCSN notices to beneficiaries each year. In aggregate, we estimate an annual hospital burden of 2,610 hours (15,655 notices × 0.1667 hr/notice) at a cost of $237,092 (2,610 hr × $90.84/hr).

Please note, our data does not permit us to determine whether the observation services occurred prior to the initial inpatient stay or followed the change in status from inpatient to outpatient, as required to qualify for an appeal. As a result, 15,655 MCSN notices likely overstates the number of beneficiaries eligible for an appeal.

Please see section IV.D. of this final rule for information on how to view the draft standardized notice and supporting documentation.

3. ICRs Regarding Applicable QIO Review Regulations (§ 476.71 and § 476.78)

In section III.B. of this final rule, we provided that the QIOs will review the prospective expedited appeals under their contracts with the Secretary. CMS expects to revise the BFCC-QIO's contracts under the 13th Statement of Work to include the new prospective expedited appeals requirements after publication of the final rule. The additional costs to the government for the BFCC-QIOs to review the new appeals would include payment for the additional level of effort associated with communicating with beneficiaries and hospitals for the duration of the appeal, collecting and reviewing patient records, performing reconsiderations if requested, and providing case files requested for further levels of review if needed. It also would include the cost of reimbursing hospitals for the submission of patient records for prospective expedited appeals. Hospitals would submit patient records and request reimbursement from the QIO using the process established in the existing memorandums of agreement (MOAs) under § 476.78(a) between hospitals and the QIO having jurisdiction over the particular State in which the hospital stay occurred.

As discussed in section III.B. of this final rule, hospitals will be required to submit patient records to the QIOs for prospective expedited appeals under § 405.1211(d). Existing QIO regulations at § 476.78(b)(2) and (c) require providers and practitioners to electronically submit patient records to the QIOs for purposes of one or more QIO functions and allow for the reimbursement of providers and practitioners by the QIO for the electronic submission of patient records for one or more QIO functions at a rate of $3.00 per submission under § 476.78(e)(2). Hospitals that have waivers for the required electronic submission of records under § 476.78(d) may be reimbursed by the QIO at a rate of $0.15 per page for submission of the patient records under § 476.78(e)(3).

The estimation methodology used to determine the reimbursement rates for electronic and non-electronic submission of patient records for one or more QIO functions is discussed further in section IX.A. of the preamble of the Fiscal Year (FY) 2021 Hospital Inpatient Prospective Payment System (IPPS)/Long-Term Care Prospective Payment System (LTCH PPS) final rule (85 FR 58977 through 58985). This estimation methodology is appropriate when applied to the proposed prospective expedited appeals due to the substantial similarity of its requirements and processes to those of other QIO functions upon which these rates were determined.

In section III.B.6. of this final rule, we established the addition of a QIO review type at § 476.71(a)(9) making the QIO's review of the prospective expedited appeals under proposed § 405.1211(d) a QIO function using our authority in section 1154(a)(18) of the Act. As established earlier in the ICR section, the prospective appeals process would constitute a CMS administrative action toward a specific individual or entity. Thus, the preparation and submission of the appeal, supporting documentation needed for the appeal, and communications between the QIO and parties to the appeal are not subject to ( print page 83282) the PRA as stipulated under 5 CFR 1320.4(a)(2).

C. Summary of Annual Burden Estimates for Changes

Table 2—Annual Requirements and Burden Estimates

Regulation section(s) under Title 42 of the CFR	OMB Control No. (CMS ID No.)	Respondents	Total responses	Time per response (hours)	Total time (hours)	Labor cost ($/hr)	Total cost ($)
§ 405.932	0938-1466 (CMS-10885)	32,894 beneficiaries	6,579	0.5 (30 min)	3,290	23.18	76,262
§ 405.1210	0938-1467 (CMS-10868)	6,162 hospitals	15,655	0.1667 (10 min)	2,610	90.84	237,092
Total		39,056	22,234	varies	5,900	varies	313,354