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Government Accountability Office Releases Critique of Medicare Appeals Process

On June 9, 2016, the Government Accountability Office (GAO) publicly released its report on the Medicare system, highlighting the deficiencies within the Medicare audit and appeals process; a bill currently in the Senate would address many of these problems by reforming CMS’ procedures.

The GAO report, titled “Opportunities Remain to Improve Appeals Process,” focuses on the rising amount of Medicare appeals in recent years and the strain it has put on the system. The increase has been almost unprecedented—between the fiscal years (FYs) 2010 and 2014, the number of ALJ hearings ballooned from 41,733 to 432,534, or a 936% increase. Further, while the statutory time frame for an ALJ hearing to be completed is 90-days, GAO found that in FY 2014 96% of ALJ appeals were not completed within the 90-day limit.

GAO also reported on the insufficiency of data collected by CMS during the Medicare appeals process. The data currently being collected does not report on the reasoning for the appeals, or the amount of money over which the appeals are being made. GAO found this to interfere with the observation and documentation of trends within the appeals system, leading to inconsistencies with Federal regulations. The lack of data has also led to repetitive appeals, with CMS arguing the same issues over and over, with nearly identical appeals remaining separate all the way to the 3rd and 4th levels of appeals.

One category of duplicative appeals which GAO focuses on is claims related to durable medical equipment, prosthetics, orthotics and supplies (DMEPOS), noting that DMEPOS ALJ appeals saw a 1000% increase between FYs 2010 and 2014, with the majority of these claims regarding  oxygen supplies and diabetic glucose testing. When DMEPOS requiring recurring monthly renewals, such as oxygen supplies, are denied once, they are also denied for every subsequent month. This means a year’s supply of DMEPOS could lead to 12 denials, and as a result, up to 12 appeals. Even if the first appeal is reversed and payment approved, the other 11 appeals would still need to be processed separately, as currently a positive determination cannot be extended to future adverse decisions. The GAO reports as well that the Department of Health and Human Services (HHS) does not currently have the authority to consolidate multiple claims into a single administrative appeal.

In its report, GAO made four recommendations to CMS and HHS: 1) modify the Medicare appeals data system by collecting information on the reasoning for filing ALJ appeals; 2) further modify the data system by collecting information on the actual or estimated amount in controversy on appeal; 3) streamline the Medicare appeals data system by collecting consistent data compatible across appeal categories and programs; and 4) reduce the raw number of appeals by changing the way repetitive claims are adjudicated.

As for the proposed law, it emerges from the Senate Finance Committee and is titled the “Audit & Appeal Fairness, Integrity, and Reforms in Medicare (AFIRM) Act of 2015” (the “Bill”). Introduced by Senate Finance Committee Chairman Orrin Hatch (R-UT) and Ranking Member Ron Wyden (D-OR), it comes as part of a concerted bi-partisan effort to create a more efficient and effective Medicare system, while also alleviating the unprecedented Medicare appeals backlog. The Bill was actually cited within GAO’s report, and takes steps to address the same issues highlighted by GAO. The stated purpose of the Bill is to both increase coordination on and oversight of the Medicare audit and appeals process, while also protecting the Medicare Trust Fund.

The Bill’s strategy focuses on increasing oversight of the appeals process, including the creation of an Ombudsman for Medicare Reviews and Appeals. Other highlights include creating an alternative dispute resolution method to consolidate similar claims into one hearing, and to increase the amount in controversy required to go before an ALJ, while simultaneously creating a magistrate program to hear claims with lower disputed sums. For more information on the Bill, see this ABA article written by Wachler attorneys.

Wachler & Associates represents healthcare providers and suppliers nationwide in a variety of health law matters, including compliance with Medicare regulations and appeals of Medicare claim denials. If you or your health care entity have any questions regarding Medicare audits and appeals or healthcare regulatory compliance in general, please contact an experienced healthcare attorney at (248) 544-0888, or via email at You may also subscribe to our health law blog by adding your email at the top right of this page.

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