Press Release

New Study Shows Medicare Contractors are Inappropriately Denying Medicare Payment...

New Study Shows Medicare Contractors are Inappropriately Denying Medicare Payment,
Restricting Access to Inpatient Medical Rehabilitation Services

A new study finds that a growing number of inpatient rehabilitation hospitals and units are inappropriately denied Medicare payment for care provided to their patients.  A high rate of these payment denials are successfully overturned with findings that the care questioned was in fact medically appropriate. But the administrative red tape required to set things straight drains hospital resources resulting in less funds available for patient care.
The study, commissioned by the AHA and conducted by United BioSource Corporation (UBC), collected data from 72 inpatient rehabilitation facilities in 20 states from January through July 2007.  For this sample, fiscal intermediaries (FIs)-private companies that work for Centers for Medicare and Medicaid Services (CMS) to process Medicare bills-initially denied payment for an alarming 80 percent of inpatient rehabilitation hospital
bills reviewed, equaling more than $25 million in Medicare payments that were withheld from these facilities.  The report found that 63 percent of denied bills that had completed the appeals process were overturned resulting in nearly $6 million dollars being returned to hospitals.

"These facilities deserve a more accurate and efficient process for paying their claims," said Rich Umbdenstock, president and CEO of the AHA.  "The unpredictable interpretation of Medicare policy by CMS contractors leads to inappropriate denial of payment.  They are inaccurately second guessing doctors' decisions about the patients who could benefit most from this care and forcing hospitals to spend scarce resources fighting this bureaucratic nightmare."

Inpatient rehabilitation hospitals and units can appeal claims denials through a lengthy multi-tiered appeals process that takes an average of 18 months to reach an administrative law judge hearing.  The report also reveals that the vast majority of claims are being overturned through the appeals process, a strong indication that FIs are inappropriately denying payment for cases that pass CMS' medical necessity test.

During the appeals process, the fiscal impact of withheld payments and the high administrative costs of appealing claims-an estimated $2,000 per case-create unnecessary financial challenges for these facilities and force many to face difficult decisions about whether they can continue providing care in their communities.

"The fact that so many appeals are being overturned points to a clear lack of consistency in the way FIs are applying clinical criteria and Medicare's guidelines," Umbdenstock noted. "Add in the 75% Rule and it's a recipe for disaster for our nation's rehabilitation hospitals and units and the patients who need this unique and vital care.  We need Medicare to stop these excessive payment denials to ensure that medical rehabilitation is available for the patients and communities we serve."

The report is available on AHA's Web site,

About the AHA

The AHA is a not-for-profit association of health care provider organizations and individuals that are committed to the health improvement of their communities. The AHA is the national advocate for its members, which include nearly 5,000 hospitals, health care systems, networks, other providers of care and 43,000 individual members. Founded in 1898, the AHA provides education for health care leaders and is a source of information on health care issues and trends. For more information, visit the AHA website at

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