A stack of 100 dollar bills

Providers who don’t plan to appeal a civil monetary penalty but fail to file a hearing waiver would still be in line for a fee reduction under a Centers for Medicare & Medicaid Services proposal issued this week.

CMS outlined the CMP “constructive waiver” process as part of the FY 2024 SNF Prospective Payment System proposed rule released Tuesday. If finalized, the agency would eliminate the requirement that facilities waive their right to a hearing in writing in order to have their CMP reduced by 35%.

Under the new process, CMS would assume a provider waived a hearing if no formal appeal request was made within 60 days.

“This proposed revision would result in lower administrative costs for most LTC facilities facing civil money penalties (CMPs), and would streamline and reduce the administrative burden for CMS,” the agency said. It estimated a potential $2.3 million in annual administrative costs savings for providers and $772,044 annual savings for the CMS locations responsible for tracking and responding to written waivers.

A similar provision was included in a series of regulatory revisions proposed in a late 2019 CMS rule, but it was never finalized after the advent of COVID.

The new version is a “fair” standard, said attorney Alan C. Horowitz, Esq., RN, who has worked for CMS and now represents providers with Arnall Golden Gregory LLP.

“There is no reason that this should not be the default position,” he said. “It saves time, energy and resources by not going through an appeal. … I definitely think it’s a positive, particularly for the provider that may not have counsel reminding them, ‘Hey, you’ve got 60 calendar days from the notice you received to either file an appeal or waive your right.’”

CMS noted that the vast majority of providers never intend to appeal CMPs, which are issued in connection with survey violations. But many fail to waive the appeal in a timely manner and end up on the hook for the full amount of the initial penalty.

Last year, CMS said, 81% of facilities facing CMPs filed an express waiver, while 2% filed an  appeal for hearing. The other 17% failed to act and missed out on a potential reduction.

Horowitz said most providers avoid the appeals process because of significant delays in the administrative law judge system and nearly insurmountable odds of victory. 

“If I file a formal appeal today, it will be three years or longer before we get a decision from an ALJ,” he said. “It gets worse from here. Overwhelmingly, no matter what the facts or the law, the ALJ’s going to rule in favor of CMS.”

Last year, he said, CMS won 46 of 47 appeals that went to trial or hearing.

That makes the penalty reduction the most promising avenue for providers facing a CMP, especially given that CMS holds the entire fine in escrow as any appeal process winds its way through the system.

CMS asked for feedback on potential challenges of the constructive waiver process. It also tucked one potentially concerning note about waived-hearing fee reductions into more than three pages of regulatory language.

“In the future, we may assess whether the 35% 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 wrote.

That element seemed illogical to Horowitz, who said cutting the reduction too low would likely disincentive providers and might lead more to appeal.

“I could see AHCA and LeadingAge taking CMS to task on that,” he said. “That would undermine years of doing things this way. Most providers feel that 35% is insufficient, particularly given seven-figue CMPs. To reduce that further, there would be enormous opposition to that.”