Understanding Medicare Conditional Payments: Timelines, Final Demands & Your Obligations

Medicare conditional payment resolution poses substantial risk for trial lawyers and paralegals when timelines slip or deadlines get missed. The Centers for Medicare and Medicaid Services (CMS) publishes formal response standards, but real-world experience may not match those expectations. Knowing where CMS timelines tend to break down, and where your legal obligations are non-negotiable can protect you and the settlement proceeds.

This article focuses exclusively on Medicare Parts A and B, not Part C or D.  It emphasizes the CMS resolution timelines and deadlines that matter most for law firms. These include the Final Conditional Payment Process (FCPP), interest accrual on Final Demands, appeal deadlines, and Department of Treasury referral exposure. It also addresses mandatory insurer reporting and International Classification of Diseases (ICD) coding issues that quietly drive delays as well as inflated Medicare Final Demands.

Under the Medicare Secondary Payer (MSP) Act, CMS holds expansive recovery rights and a direct cause of action against attorneys. Courts have confirmed personal liability exposure to primary plans or entities that receive settlement proceeds when Medicare interests remain unresolved. This specifically includes attorneys and their firms who receive or control settlement funds.

The risk does not come from a lack of published guidance. CMS has documented timelines for each stage of the process. The problem arises when firms rely on those timelines as reliable predictors instead of planning around how CMS operates in practice.

Medicare Activity from Intake Through Settlement

Medicare involvement begins long before settlement. Once a claim is reported to the Benefits Coordination Recovery Contractor (BCRC), CMS opens a recovery case and begins tracking Medicare payments. CMS states that an initial Conditional Payment Letter (CPL) should be issued within roughly 65 days of reporting. In practice, initial letters often arrive earlier. However, delays can occur if the beneficiary is now deceased, the person was never a Medicare beneficiary (and confirmation is needed), or if it classifies as a special project case.

CPLs serve a narrow purpose. They allow you to view the initial non-final claims included in the conditional payment amount.  CMS process allows disputes of unrelated treatment an unlimited number of times before settlement is reported by way of audit of the CPL. It is very important to note that they do not cap Medicare’s recovery rights and they certainly do not prevent CMS from adding new (or even older) payments later. Treating these conditional payment amounts as final binding numbers remain one of the most common and costly mistakes in Medicare resolution.

Delays at this stage most often stem from reporting incorrect dates of loss, untimely failures under mandatory reporting rules, missing ICD diagnosis codes, or overly broad injury descriptions that pull unrelated care into the Medicare ledger.

The Final Conditional Payment Process (FCPP) and CMS Response Reality

For cases approaching settlement, CMS offers the FCPP. Within 120 days before the expected settlement date, you can submit a notice, through the Medicare portal, that the case will settle soon and request to initiate the final conditional payment process. During this 120-day period, you can submit one dispute per claim line for relatedness (arguing that a service isn’t related to the case). Medicare must resolve disputes within 11 business days. When you’re within exactly 3 business days of settlement, you request the final conditional payment amount on the portal. Medicare then locks in that amount. Your settlement must occur within 3 business days of the request, and you must report the settlement details within 30 days.

Without this process, Medicare’s Final Demand is issued after the settlement details are reported, which can lead to surprises or last-minute increases in the conditional payment amount. By locking in a final amount in advance, you know exactly what Medicare will require for repayment, which helps you plan settlement disbursements, avoids renegotiating the settlement terms post-demand, and reduces risk of misallocation or unexpected repayment amounts. Having a time-stamped, final payment summary allows you to structure settlements with full knowledge of Medicare’s position, reducing risk of delay or additional repayment obligations afterward.

Final Demand Letters and the 60 Day Payment Obligation

Once CMS issues a Final Demand letter, the most rigid timeline begins. Payment is due within 60 days of the demand date. Interest begins accruing on day 61 at a rate exceeding double digit annual percentages. CMS does not pause interest while an appeal is pending, regardless of reason, unless settlement funds have not been received and you can prove it with supporting documentation.

This reality drives strategy. Firms that intend to pursue an appeal, waiver, or compromise often pay the Final Demand first to stop interest from running. If CMS later grants relief, refunds issue back to the beneficiary or counsel – whoever paid CMS. Waiting to resolve disputes before paying Medicare often costs more in interest than the dispute saves. Instead, best practice is to dispute as many times as necessary prior to submitting settlement information. Then paying Medicare within 60 days of the Final Demand issuance to stop the interest meter from running while you continue your appeals.

Appeal Deadlines and Treasury Referral Exposure

Medicare appeals follow a multi-level administrative structure with strict deadlines. The first level appeal must be filed within 120 days of the Final Demand date, with subsequent deadlines tied to each decision issued along the way. These deadlines operate independently from payment obligations and must be calendared separately.

Paying a Final Demand does not waive appeal rights. Missing an appeal deadline does. If balances remain unresolved after collection notices, CMS refers the matter to the Department of Treasury, where offset actions and enforcement accelerate quickly. Firms should treat Treasury referral as a failure point to be avoided at all costs, not managed.

Mandatory Insurer Reporting and Problems that Arise

Section 111 of the Medicare, Medicaid, and SCHIP Extension Act of 2007 (MMSEA) added mandatory reporting requirements as a means of driving Medicare’s recovery workflow and ensuring compliance by Medicare beneficiaries as well as their attorneys. Insurers paying settlements must report claims involving Medicare beneficiaries. Generally, they must include the injury victim’s name, date of birth, Medicare Beneficiary Identifier (MBI), and Social Security Number (or the last five digits). Additionally, they must provide the date of loss, ICD-10 diagnosis codes for the illnesses/injuries alleged, claimed or released in the Total Payment Obligation to Claimant (TPOC) settlement, judgment, award, or other payment. The TPOC report must also include the date and amount of the settlement.

Issues arise when the Section 111 reporting does not match what was reported by the Medicare beneficiary or their attorney. For example, if different dates of loss, settlement dates, or settlement amounts are reported by involved parties, a new CMS file will likely be opened. Considering the significant role that ICD-10 codes play in the conditional recovery process, parties should be aligned in their selection of codes as well as the accident dates. One way to do this is by adding specific ICD-10 codes to the settlement terms, being careful not to use vague codes or an excessive number of codes. Aligning with the insurer on reporting data often shortens the time for a CMS response and reduces Final Demand amounts without formal appeals.

What Are Best Practices?

Firms that achieve consistently strong Medicare outcomes don’t sit back and wait for CMS’s default timelines to unfold. They report cases early and accurately, maintain ongoing audits of conditional payment activity, and proactively control the Medicare resolution process rather than letting it become reactive. Rather than triggering the Final Conditional Payment Process as a matter of course, they deploy it strategically when the case is truly within the appropriate settlement window to lock in a time-stamped final amount and limit surprises. They timely satisfy Final Demands when asserted and, just as importantly, pursue refunds or reductions through waiver, compromise or related dispute mechanisms when appropriate. They also ensure primary insurer reporting (including Section 111/Mandatory Insurer reporting) is accurate long before CMS compiles the Medicare payment ledger to avoid unnecessary conditional payment accruals and disputes.

Most importantly, they treat Medicare resolution as a core legal function integral to settlement strategy, not a back-end administrative task to be dealt with at the end. And they build their cases for resolution with that legal strategy in mind from the outset.

Why This Matters for Client Outcomes

Every unnecessary dollar paid to Medicare reduces the client’s net recovery, every delay undermines trust, and every missed deadline creates avoidable compliance risk. Because Medicare’s statutory timelines are firm even when CMS processing times are not. Planning around that reality protects your clients, your firm, and your reputation. Medicare’s conditional payment process requires early reporting and proactive management to avoid post-settlement surprises and escalating demand amounts.

Synergy partners with trial lawyers and paralegals nationwide to manage Medicare conditional payments, timing risk, and compliance with precision. When the rules stay fixed and CMS’s processes don’t adjust to litigation timetables, experience and proactive execution matter most.