Credit: Mohamad Faizal Bin Ramli/Getty Images

Federal regulators this week finalized plans to make appeal waivers automatic in the case of most civil monetary penalties meted out to nursing homes.

But language added since the Centers for Medicare & Medicaid Services first proposed the end of the 60-day written waiver requirement in April is raising questions about whether the change might ultimately cost providers more in the end.

The fiscal 2024 Skilled Nursing Facility Prospective Payment System underscored that CMS is doing away with waivers to lessen administrative work for the agency. That also had been the goal behind a 35% penalty reduction for nursing homes that agreed to waive an appeal, because it reduced hearings and related work.

But now that the waiver and the reduction will be automatic if an appeal is not filed within 60 days, CMS has indicated it might also walk back the penalty reduction.

“In the future, we may assess whether the 35 percent penalty reduction is functioning as intended to make the civil money penalties administrative process more efficient, or whether a lesser penalty reduction is warranted,” the agency said in the rule issued Monday, ahead of official publication in the Federal Register.

Starting Oct. 1, providers won’t have to submit any paperwork if they plan not to appeal the issuance of a civil monetary penalty. Such a move to an automatic waiver system is projected to save providers $2.3 million annually, with about $775,000 in savings for the agency.

A ‘business case’ for waivers

But the efforts to reduce paperwork and staff time could backfire if CMS ultimately lessens or removes the penalty reduction that comes with waiving an appeal, said attorney Alan Horowitz, Esq., RN, of Arnall Golden Gregory.

“A consequence of that would be an increase in appeals,” Horowitz predicted in an interview with McKnight’s Long-Term Care News Thursday. “I’ve had clients tell me they’re waving the appeal as a business decision … that they know they have the documentation and could win but they want to save the time and expense of what could be a 5-year appeal.”

With removal of a 35% reduction, the decision not to appeal “becomes less compelling,” he said, especially in the case of five- and six-figure penalties.

In 2022, CMS reported, 81% of nursing homes submitted a written waiver of hearing, and another 17% percent failed to submit a waiver but did not contest the penalty. Only 2% of facilities actually contested the imposed penalty and its basis. 

Horowitz had earlier this year praised CMS for moving toward a constructive or automatic waiver process, and he still believes the current changes will aid providers. That would be especially true for the share who forget to file a waiver but have no intentioning of appealing.

He said he ultimately expects that CMS would not move forward with a rate reduction.

“It would take a new regulation to rescind the existing regulation, and I assure you there would be an overwhelming negative response to that during the comment period,” he noted.

The penalty reduction reconsideration wasn’t in the proposed rule, LeadingAge Director of Nursing Home Quality & Policy Jodi Eyigor told members during a call Wednesday.

“We’re going to keep an eye on that,” she said. “We don’t know if they’re saying that they need to evaluate it to make sure that a penalty reduction is still within the limits of statute, if it means that they’re going to try to reduce the penalty reduction amount or if they’re going to try and get rid of the penalty reduction altogether.”

Fresh look at reduction spurred by comments

CMS received comments on the waiver process from several consumer advocates who argued providers should still pay the full fine if not appealing. One commenter, unidentified by CMS, wrote that an automatic 35% reduction “serves as a reward to those facilities who flout the minimum standards and have actually been cited at actual harm or immediate jeopardy.” 

“They were concerned that this is a signal to SNFs that compliance with regulations is not mandatory and effectively reduces the enforcement efforts of CMS,” the agency said in response to such comments. 

“We appreciate the comments raised, but we believe clarification and modernization to improve efficiencies are warranted on the current waivers process,” CMS added. “The [new] constructive waiver process would not affect the frequency of CMPs being imposed, CMS’ ability to penalize facilities for infractions, or the publication of facility infractions through Care Compare. We believe that by improving program efficiencies we will be able to divert these resources to strengthening other oversight and enforcement activities. … [and] ensuring the health and safety of residents.”

Still, CMS said, in light of those comments, the agency plans “to review the appropriateness of the 35 percent penalty reduction in future rulemaking.”