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The Medicare Appeals Process Is Overburdened

Healthcare and healthcare law professionals across the country are noticing that as Medicare audit numbers are climbing, so too is the length of the Medicare appeals process. Once a provider or healthcare entity receives a denial from a Medicare contractor, the Medicare appeals process consists of five stages:

• Redetermination, which is filed with a Medicare Administrative Contractor (MAC)
• Reconsideration, which is filed with a Qualified Independent Contractor (QIC)
• An Administrative Law Judge (ALJ) hearing
• Medicare Appeals Council Review
• Federal District Court Review

Much of the increase in the length of the appeals process is currently coming from the ALJ level. ALJs are supposed to issue a decision within 90 days of receipt of the hearing request. If the ALJ cannot issue a decision within this timeframe, the ALJ should notify the appellant of their right to escalate the case to the Medicare Appeals Council. However, current ALJ workloads are so high that the healthcare law industry is seeing delays of 18-24 months at the ALJ level. This could be viewed as a breach of procedural due process, since providers’ rights are taken away for unduly long delays before receiving a final decision from an ALJ. In addition, when a provider does receive a favorable decision, that provider may face additional delays waiting for the MAC to issue the reimbursement.

In general, delays during the Medicare appeals process have negative impacts on providers who are left in appeal process limbo. One such negative impact is that providers will either have the denied payment recouped, or if the provider files to prevent recoupment, then interest begins accruing on the overpayment after 31 days. According to American Hospital Association’s (AHA) RACtrac, 75 percent of all appealed claims are still sitting in the appeals process. The roughly two year delay at the ALJ level is particularly damaging for providers for a couple of reasons. First, providers that experience delays at the ALJ level of appeal are particularly burdened because in overpayment cases it is not possible to prevent recoupment after an unfavorable reconsideration decision. Therefore, where recoupment occurs after an unfavorable reconsideration decision, a provider may still have to wait an unreasonable period of time before a final decision is rendered. Furthermore, since providers often have more success at the ALJ level than at the lower levels of appeal, a provider may have to wait a considerable period of time before receiving reimbursement after a favorable ALJ decision. According to an Office of Inspector General (OIG) report released in November 2012, 61 percent of appealed cases for both part A and part B providers that make it to the ALJ level are overturned. This is a very high percentage of the total 72 percent success rate in the appeal process reported by hospitals to RACtrac.
What has caused this delay?

In 2005 the Department of Health and Human Services (HHS) established the Office of Medicare Hearings and Appeals (OMHA). This created a group of ALJs dedicated to adjudicating Medicare appeals. New regulations were introduced that required ALJs to “give substantial deference” to local coverage determinations and CMS program guidance. At a conference in March, Nancy Griswold, the Chief Administrative Law Judge for OMHA, reported that OMHA requested additional funding in the President’s Budget for FY 2013, but that they have not yet received any additional funding. Furthermore, according to the OIG, case files are not standardized and are not fully electronic. This combination of being understaffed and not standardized has led to the ALJs working at low efficiency.

In addition, MACs and RACs have continued to audit providers aggressively and issue a high volume of unfavorable claim determinations. RACs are paid on a contingency fee, so they are incentivized to recover as much as possible, which they do by issuing more denials. As a result of more audits and more denials, healthcare providers, beneficiaries, and state Medicaid programs increase their number of appeals. At the same conference in March 2013, Nancy Griswold reported that in FY 2012 there was a 119% increase in appeals compared to FY 2011. In FY 2013, there was a 147% increase in appeals compared to FY 2012.

Healthcare law professionals are seriously concerned that, due to the high volume of audits and subsequent payment denials, MACs, RACs, and QICs may not have the staff to thoroughly review all of the records submitted. As a result, few cases receive favorable decisions in the first two levels of appeal. Thus, providers that meet the amount in controversy requirement appeal to the ALJ level. This results in ALJs considering a large percentage of the cases appealed by providers. According to the OIG, this adds up to tens of thousands of cases each year.

The Centers for Medicare & Medicaid Services (CMS) Administrator’s Ruling CMS-1455-R has also had an effect on the ALJs. The Administrator’s Ruling denies the ALJ jurisdiction to order payment of part B outpatient/observation services when a claim for Part A inpatient admission is found not medically necessary and reasonable. Prior to the Administrator’s Ruling, a large volume of Part A inpatient admission claims were remanded by ALJs to the QIC level. The ALJ cases that were remanded to the QIC must be returned to the ALJ and adjudicated under the new scope of review defined by the Administrator’s Ruling. Therefore, the Administrator’s Ruling has added additional cases to the ALJ’s workload. The proposed rule, if adopted in its current form, will permanently prevent ALJs from requiring Part B payment for Part A appeals.

In conclusion, the ALJs are overburdened as a result of increased audits and understaffing, which is detrimental to providers. Furthermore, the recently issued Administrator’s Ruling and proposed rule limit the ALJs’ broad jurisdiction, which also has a negative impact on providers. As a result, providers should do their part to limit their risk of audits and increase their success of appeals by improving compliance. If you or your healthcare entity needs assistance in developing an effective compliance plan, please contact our experienced healthcare attorneys at 248-544-0888.

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