OIG Releases Report Addressing Improvements Needed at the ALJ Appeal Level

November 16, 2012

Recently, the Office of Inspector General (OIG) released a report focusing on various areas of concerns pertaining to Medicare appeals at the Administrative Law Judge (ALJ) level. In 2005, the responsibility for conducting ALJ appeals was transferred from the Social Security Administration to the Department of Health and Human Services (HHS). Upon this transfer, HHS established the Office of Medicare Hearings and Appeals (OMHA) which formed a group of ALJs committed to deciding Medicare appeals. In addition, ALJs were required to follow new regulations that addressed the application of Medicare policies, acceptance of new evidence, and the participation of the Centers for Medicare and Medicaid Services (CMS) in the appeals. In its report, the OIG assessed the impact of these changes on ALJ appeals by gathering and analyzing appeals data from fiscal year (FY) 2010.

The report contains several findings in which the OIG determined to be significant. For instance, the OIG found that 85 percent of all appeals decided by ALJs in FY 2010 were filed by providers, compared to 11 percent filed by beneficiaries and 3 percent filed by State Medicaid agencies. Moreover, the OIG found that a small subset of these providers were frequent filers, accounting for nearly one-third of all appeals.

The OIG also found that ALJs reversed prior-level appeals and granted fully favorable decisions to appellants 56 percent of the time. Meanwhile, Qualified Independent Contractors (QICs) decided fully in favor of appellants in only 20 percent of appeals. The OIG determined that these differences in fully favorable decisions were due to a number of key factors. One factor was the tendency of ALJs to interpret Medicare policies less strictly than QICs, finding that ALJs often granted fully favorable decisions when the intent of a Medicare policy was met, rather than the strict letter of the policy, whereas QICs strived to follow Medicare policies more strictly. Another reason stated in the OIG's report for the favorable outcome disparity was due to the difference in the degree of specialization in Medicare program areas between ALJs and QICs. Each of the QICs specialize in a particular Medicare program area (e.g. Part A, Part B and DMEOPS appeals), while ALJs receive randomly assigned appeals that involve all Medicare program areas.

The report also contains findings by the OIG relating to ALJ appeal participation by the Centers for Medicare and Medicaid Services (CMS). According to the OIG, CMS participated in only 10 percent of ALJ appeals. Furthermore, it was found that ALJs were less likely to find fully in favor of appellants when CMS participated.

Additional findings by the OIG included concerns by ALJ and CMS staff about the acceptance of new evidence and the organization of case files. ALJs may only accept new evidence if they determine that appellants had "good cause" for waiting to submit the evidence until the ALJ level. However, in its interviews with ALJ staff, the OIG found that ALJs typically accepted new evidence when submitted by appellants. The OIG also found that, at the ALJ level, case files differed in content, organization, and format compared to the QIC-level case files. According to ALJ staff, these organization differences created inefficiencies in the appeals process, such as having to spend additional time requesting information, reorganizing the files, or remanding appeals to the QICs.

Finally, the OIG found inconsistencies in the way ALJs handled suspicions of fraud. Despite nearly all ALJ staff having suspected appellants of Medicare fraud, the extent to which they referred suspected fraud to their supervisors or law enforcement varied across ALJs. For instance, the report claims that while many ALJs made at least one fraud referral, several other ALJs did not make a single referral, regardless of their fraud suspicions. Furthermore, the OIG found that ALJs differed in their pursuit of additional information when fraud was suspected. According to the OIG, these differences in the way ALJs handle suspected fraud may be due to the fact that the agency does not have written policies about how ALJs should handle such suspicions.

Based on its findings, the OIG made several recommendations to OMHA and CMS to improve the Medicare appeals system, which include:

  • Develop and provide coordinated training on Medicare policies to ALJs and QICs in order to ensure consistent knowledge of the policies at the different level of appeals.
  • Identify and clarify Medicare policies that are unclear and interpreted differently, focusing on policies with vague definitions and on program areas with significantly high favorable rates.
  • Standardize case files to promote consistency across the different levels of appeals, and accelerate OMHA's Electronic Records Initiative.
  • Revise regulations to provide more guidance to ALJs regarding the acceptance of new evidence, such as revising these regulations to provide additional examples and factors to consider in the ALJs' determination of "good cause".
  • Determine whether specialization among ALJs would improve efficiency in the appeals process.
  • Continue to increase CMS participation in ALJ appeals.
  • Seek statutory authority to establish a filing fee, the goal of which should be to limit the number of frequent filers, or at the very least, encourage frequent filers to more carefully assess their appeals prior to filing.
  • Develop policies and training initiatives to ensure that the ALJs handle suspicions of fraud appropriately and consistently.

The OIG report could have a significant impact on future ALJ appeals. Based on its recommendations, an inference can be drawn that the OIG believes that the number of fully favorable ALJ decisions is too high at the ALJ level. In particular, increasing CMS participation, clarifying Medicare policies for program areas with high favorable rates, and revising regulations pertaining to the acceptance of new evidence could lead to a decrease in fully favorable decisions for providers. Therefore, it is more important than ever for providers reassess their appeal strategies to align themselves with the future changes in the appeals process at the ALJ level.

The attorneys at Wachler & Associates are very experienced representing providers during the Medicare appeals process, including during ALJ hearings. For assistance on preparing for an ALJ hearing or more information on the Medicare appeals process, please contact one of our experienced health care attorneys at 248-544-0888.