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Medicare Appeals Backlog: A Setback and New Opportunities for Providers

Summary

As of June 2017, the Office of Medicare, Hearing and Appeals (OMHA) had 607,402 appeals pending with a current estimated wait time of three years for an Administrative Law Judge to process a provider’s appeal. At this rate, the backlog is predicted to reach 950,520 appeals by the end of the 2021 fiscal year. Though recent developments in the DC Circuit offered little hope of relief, OMHA’s implementation of alternative programs may present dynamic, strategic opportunities for providers.

In Depth

The massive backlog of appeals pending before the Office of Medicare, Hearing and Appeals (OMHA) continues to vex providers. As of June 2017, there was a back log of 607,402 pending appeals, and providers face a current estimated wait time of three years for an appeal to be processed by an Administrative Law Judge (ALJ). The appeal backlog is predicted to reach 950,520 by the end of 2021’s fiscal year. Recent developments in a key case in the DC Circuit offered little hope of relief. However, new alternative programs being implemented by OMHA may present new strategic opportunities for providers.

Recent Development from the DC Circuit

Health care providers hoping that the DC Circuit Court of Appeals (DC Circuit) would affirm a District Court mandate for the Department of Health and Human Services (HHS) to clear the Medicare appeals backlog, were left sorely disappointed last month. On August 11, 2017, the DC Circuit ruled in American Hospital Association, et al v. Thomas Price, No. 1:14-cv-00851, in a 2-1 opinion, that the District Court had failed to weigh the Secretary’s assertion that compliance with the District Court’s mandated deadlines to clear the backlog, would be impossible. Thus, in this latest iteration, the DC Circuit has again remanded the case to the District Court for further reconsideration to weigh HHS’s claim that clearing the backlog as directed by the District Court would require the Centers for Medicare and Medicaid services to violate the Medicare statute by paying meritless claims.

Procedural History

The initial suit, filed in 2014 by the American Health Association and several providers, sought a mandamus order to compel the Secretary to clear the Medicare Appeals backlog at OMHA. OMHA is the 3rd level of Medicare Appeals where appellants receive a de novo hearing from an ALJ. The mandamus order would also compel OMHA ALJs to comply with the ninety-day (90) statutory deadline to issue a decision, dismissal order or remand. On first pass, the District Court granted the Secretary’s motion to dismiss, citing budgetary constraints faced by HHS and the fact that HHS was actively proposing solutions to resolve the issues. The DC Circuit thereafter reversed the District Court’s dismissal, finding that the providers had met threshold requirements for mandamus jurisdiction and instructed the District Court to examine the equitable merits of the mandamus request. On remand, the District Court found that the current measures proposed by the Secretary were unlikely to resolve substantive issues with the appeals process and concluded the equities of the parties weighed in favor of the providers. The court ordered that the Secretary set a timetable for clearing the backlog. The Secretary appealed arguing, among other things, that meeting the court-ordered targets would be impossible absent settling claims en masse without regard to the individual merit of the claims, which would conflict with the Medicare Statute. The Secretary also argued that establishing a timetable would incentivize providers to appeal claims, regardless of their merit, because providers would wager that the Secretary would be forced to pay the claims under a court-imposed timetable.

DC Circuit Finding

The DC Circuit concluded that the District Court erred by not taking into account the Secretary’s position that it would be impossible to both meet the mandamus order without violating the Medicare Statute by paying meritless claims. The DC Circuit also criticized the District Court’s failure to consider the Secretary’s contention that a court-ordered timetable would increase, not decrease, the number of backlogged appeals because providers would begin appealing an even larger number of claims. The DC Circuit indicated that “[i]t is not appropriate for a court—contemplating the equities—to order a party to jump higher, run faster, or lift more than she is physically capable.” Moreover, “equity courts, like any other, may not order parties to break the law.” The DC Circuit again remanded the case back to the District Court to review the Secretary’s claim that lawful compliance with the timetable would be impossible.

This decision marks the latest move in the DC Circuit’s game of ping pong with the District Court.

Backlog History and Causes

The number of appeals filed at OMHA dramatically ballooned after 2011, due at least in part to the aging of the baby boomers, which has led to a significant increase in Medicare beneficiaries. In very simple terms, more beneficiaries means more claims, and also more appeals. Indeed, a Pew Research Article indicated that on January 1, 2011, the oldest baby boomers would be turning 65 and that every day for the next 19 years, 10,000 more baby boomers would cross that threshold. Perhaps even more significant has been the implementation and expansion of the Recovery Audit Contractor (RAC) program. The RAC program allows contractors who are paid on a contingency basis to examine Medicare claims to identify potential overpayments for recoupment. The RAC program began as a demonstration project in 2005 and expanded nationwide in January 2010. As a result of the RAC program, the number of claims that have been challenged has increased significantly. Unsurprisingly, the number of appeals filed at OMHA has also increased dramatically following the expansion of the RAC program. In 2011, OMHA saw 59,600 Medicare appeals. By 2013, this number had increased to more than 384,000.

As time has passed, government appropriations to OMHA have not increased to reflect the unprecedented number of appeal increases, leaving OMHA significantly understaffed. Providers are thus left in a precarious position when faced with a Medicare claims denial or notification of overpayment (especially if the appellant is not in a financial position to wait for potentially more than three years for an ALJ hearing). A provider has always had the option of “escalating” their appeal to the Medicare Appeals Council (MAC). However, doing so forfeits an appellant’s right to a hearing in front of an independent ALJ (or a hearing at all for that matter). Thus, providers have had few options but to wait years if they want an independent hearing in front of an ALJ.

New Programs from OMHA

Although limited fiscal resources have constrained OMHA, it has initiated new programs that may alleviate the wait time for providers with appeals meeting certain criteria. These include OMHA’s Statistical Sampling Initiative, Settlement Conference Facilitation and the Attorney Adjudicator Initiative.

  1. Statistical Sampling Initiative

The Statistical Sampling Initiative enables providers to expedite large numbers of appeals for similarly categorized claims by consenting to a statistical sampling approach. Under this initiative, a provider gives OMHA permission to examine a specified universe of claims that are currently in the backlog at OMHA and allows OMHA to take a statistically significant sample of these claims to adjudicate. The provider receives a hearing regarding each of the claims in the sample created by OMHA, and the findings for these claims are then extrapolated and applied across the entire universe of the provider’s claims waiting at OMHA. Thus, by way of example, if a sample of 10 appeals were established for a universe of 1000 claims, the ALJ would hold a hearing to examine the individual administrative record for each of the 10 sample claims. The provider is able to proffer evidence and make Medicare reimbursement arguments for each of the sampled claims just as they would in a normal ALJ hearing. The ALJ’s findings—i.e., the rate of favorable/unfavorable—is then applied across the universe of claims. In this example, if the ALJ were to find that 9 out of 10 sample claims were favorable, OMHA would then apply this rate to the entire universe of claims, meaning 900 claims of the 1000 claims in the universe would be deemed favorable. For appeals involving a larger universe of claims, a panel of two to four additional ALJs may be assigned to a case to adjudicate roughly equal portions of the claims sample. The providers overall payment by HHS would reflect the favorable vs. unfavorable ratio of the sample.

To qualify for the Statistical Sampling Initiative, a provider must meet several criteria, including: (1) the appellant must be a single Medicare provider or supplier; (2) there must be a minimum of 250 claims (not appeals) at issue; and (3) all claims must be pre-payment claim denials, post-payment non-RAC claim denials, or post-payment RAC claim denials from one RAC. Additional details regarding the requirements to participate in the Statistical Sampling Initiative are available on HHS’s site.

The Statistical Sampling Initiative may present potential advantages to some providers as opposed to the traditional Medicare appeals process. First and foremost, it has the potential to expedite the time frame for resolving a large number of pending appeals cumulatively. Second, it allows an appellant to focus their advocacy on presenting compelling and thorough Medicare reimbursement arguments on the select sample claims. This is in contrast to the normal appeals protocol where a provider must argue each appeal individually. Thus, the statistical sampling approach may reduce litigation costs for the provider.

  1. Settlement Conference Facilitation

The Settlement Conference Facilitation program is a pilot program administered by OMHA whereby OMHA acts as a facilitator between the provider and a CMS representative. An OMHA “settlement conference facilitator” will work with both parties to discuss a potentially mutually agreeable resolution for claims appealed to OMHA. If both the provider and the CMS official can reach an agreement on the amount of payment for the claims at issue, a settlement document is drafted by the settlement conference facilitator. The settlement conference is available to providers appealing specific types of Medicare Part A and B claims. There are other limitations on claims eligible for the Settlement Conference Facilitation, which HHS outlines.

The Settlement Conference Facilitation program offers providers an opportunity to potentially expedite a large number of outstanding claims by settling multiple large dollar claims through dispute resolution, rather than through the normal course of Medicare appeals. Thus, if a provider opts for Settlement Conference Facilitation, in theory, the claims will not be subject to the extraordinary delays usually associated with the traditional Medicare appeals process. However, unlike the Statistical Sampling Initiative, the claims will not receive review from an ALJ and will not receive an individualized hearing; rather, OMHA acts as a facilitator between the provider and CMS in what amounts to a settlement negotiation.

  1. Senior Attorney Advisors and On-the-Record Decisions

Providers seeking to decrease wait times at OMHA may also wish to consider requesting an “on-the-record” decision. The option to request an on-the-record decision is not new. However, OMHA has recently empowered lawyers in the office to issue decisions for appeals that do not require a hearing. Thus, if an appellant wishes to have an individualized determination of their appeal, whilst expanding the available pool of adjudicators, requesting an on-the-record decision may be an option.

An important consideration when requesting an on-the-record decision is that such a request will deprive a provider of a full hearing. Further, providers will have to wait for all of their appeals to be adjudicated individually rather than all outstanding claims being decided concurrently. However, a provider will have the same appeal rights as if they had requested a traditional ALJ hearing request.

Conclusion

As the DC Circuit continues to determine whether or not HHS must commit to a timeline to clear the backlog of Medicare appeals, providers continue to face uncertainty regarding Medicare claims appeals. New programs from OMHA may offer some relief, and providers should carefully weigh their strategic options based on the nature of the claims and the associated disputes, the financial implications of waiting years for resolution, and whether the claims at issue are pre-payment denials, overpayments or a combination. Ultimately, the optimal strategy for a particular provider requires an individualized approach tailored to their specific circumstances.

© 2019 McDermott Will & Emery

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About this Author

Associate

Amy Hooper Kearbey is an associate in the law firm of McDermott Will & Emery LLP and is based in the Firm’s Washington, D.C. office.  She focuses her practice on providing regulatory advice on Medicare coverage, coding, reimbursement and compliance; federal fraud and abuse regulations; and clinical research compliance, with a particular emphasis on emerging issues in secondary research concerning biological samples and data warehousing.  Amy also regularly counsels nonprofit organizations on a broad range of issues, including determination and maintenance of...

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Nicholas Alarif, McDermott Law Firm, Healthcare Law Attorney
Associate

Nicholas Francis Alarif focuses his practice in health care regulatory and fraud and abuse matters, including the physician self-referral law (Stark Law), False Claims Act (FCA), the Federal Anti-Kickback Statute and other health care compliance matters. He also advises clients on the complex legal and factual issues surrounding Medicare Parts A–D reimbursement and other Centers for Medicare & Medicaid Services (CMS) payment policies.

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