On Nov. 3, Health & Human Services (HHS) announced two additional initiatives to address the mounting Medicare appeals backlog at the Administrative Law Judge (ALJ) level: (i) expand the Settlement Conference Facilitation (SCF) program and (ii) offer a new Low Volume Appeals (LVA) settlement option.

HHS has not yet provided details on the expansion of the SCF program, which is currently an alternative dispute resolution process at the Office of Medicare Hearings and Appeals (OMHA) that gives certain providers and suppliers an opportunity to resolve their eligible Part A and Part B appeals. We have previously outlined the SCF program here.

HHS announced the LVA settlement option would be offered to providers and suppliers with fewer than 500 Part A and B claims pending as of Nov. 3, combined, where no single claim appeal exceeds $9,000. These appeals would be settled at 62 percent of the net allowed amount. HHS has not yet provided information about the application process, but we will provide an update on this alert once new information is available.

HHS aims for these initiatives to help address the ALJ level Medicare appeals backlog that has resulted in a nearly three-year adjudication process for each denied Medicare claim, estimated at 1,057 days by the Chief Judge Nancy Griswold as of Feb. 28, 2017.

It is not yet clear how much the SCF program has alleviated the ALJ level appeals backlog to date, but according to OMHA officials, when OMHA offered the SCF pilot to a limited number of providers, it had settled about 2,400 appeals with 10 appellants by January 2016. In the past, the United States Government Accountability Office (GAO) estimated that a 2014 settlement offer by HHS to pay 68 percent of the net allowed claim amount reduced the number of undecided ALJ level appeals by 31 percent.

Addressing the Backlog

In January, HHS published a Final Rule promoting initiatives to streamline the administrative appeal processes and to reduce and eliminate the OMHA appeals backlog. This Final Rule was released in the wake of U.S. District Court Judge James Boasberg’s order to HHS to reduce the backlog by 30 percent by the end of 2017, by 60 percent by the end of 2018, by 90 percent by the end of 2019, and completely by the end of 2020.

HHS admitted that the initiatives contained in the Final Rule alone would not eliminate the appeals backlog in accordance with the timeline dictated by Judge Boasberg.

Subsequently, Chief Administrative Law Judge Nancy Griswold warned in her FY 2018 President’s Budget Request Congressional Justification letter that the processing time for an ALJ Medicare appeal takes an average of 1,051 days as of Feb. 28, 2017. Chief Judge Griswold requested a $135 million budget increase for OMHA which is in charge of the ALJ appeals.

According to the letter, this increase would help grow the number of ALJ teams from 92 to 198; add a Medicare Magistrate program; and provide for an increase in administrative actions, including the expansion of OMHA's settlement conference facilitation program and attorney adjudicator program. Chief Judge Griswold argued that the expansion of these initiatives and increase in the adjudication capacity “should allow OMHA to adjudicate its projected incoming workload for the first time in over seven years.”

However, the “Medicare Fee-For-Service, Opportunities Remain to Improve Appeals Process” GAO Report issued in May 2016, gives reason for doubt. In the report, GAO pointed out that until the inefficiencies related to the appeal process of denied claims are resolved, the number of appeals submitted is likely to continue to increase due to the nature of the Medicare Fee-For-Service Recovery Audit program, and despite HHS’s initiatives to relieve the backlog and requests to expand the ALJ adjudication capacity.

For example, GAO noted that HHS’s FY 2017 President’s Budget request included a proposal to allow HHS legislative authority to consolidate appeals of certain repetitive claims for ongoing services into a single administrative appeal and to decide them jointly. Otherwise, such repetitive claims subsequent to a claim denial are all denied and appealed separately. This has not yet been granted, and although HHS has stated in its response letter to the May 2016 GAO Report that it would assess using the reopening process to address this issue as an alternative option, no action has been taken by HHS either.

Congress is still deliberating and has not yet passed the Federal Budget for FY 2018.