CMS Sequestered Funds Policy Stands—For Now

The Provider Reimbursement Review Board (PRRB) after two years of hearings has upheld the practice of including sequestered funds as part of hospice providers’ revenue when determining Medicare payment caps. Stakeholders intend to appeal the decision.

“This decision is not a surprise,” Bill Dombi, president of the National Association for Home Care & Hospice told Hospice News. “But bringing the issue before the PRRB was likely still a worthwhile venture.”

Under the auspices of the Budget Control Act, the U.S. Centers for Medicare & Medicaid Services (CMS) in 2014 began reducing payments to hospice providers by 2 percent across the board, a practice called sequestration.


Under current law, a hospice provider must return payments to CMS if the total paid exceeds the Medicare payment cap allowance. Presently, CMS includes the sequestered 2 percent as part of the total, even though hospice providers never received those funds.

“Hundreds of hospice providers have appealed cap demands based on this calculation,” said lawyers from the law firm Sheppard, Mullin, Richter, & Hampton in a blog. “In the last five years, CMS may have overstated hospice cap demands by more than $100 million by including sequestration in the payments-made side of the cap equation.”

Attorneys representing hospice providers argued that this practice violates existing law, and allege that the inclusion of sequestered funds in payment cap demands conflicts with CMS’ own rules, which say that only “payments made” should count, according to Sheppard, Mullin, Richter, & Hampton, who brought the case before the PRRB.


An appeal is almost certain. The hospices’ legal team will most likely appeal to CMS Administrator Seema Verma before proceeding to further action in the courts.

“The CMS administrator has never reversed a decision that is favorable to CMS,” Dombi said. “If you appeal to the administrator this is likely a precursor to an appeal in federal court.”

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