Medicare Compliance & Reimbursement

Be patient: Cutting your losses and taking 68% isn’t the answer, experts say.

The Centers for Medicare & Medicaid Services (CMS) can’t keep up with the rising number of claims appeals, and now Congress and industry stakeholders are getting involved. There’s no question that big changes are needed to fix the huge backlog of appeals, but everybody seems to have a vastly different opinion on how to do it. Here’s what you need to know.

On April 28, the U.S. Senate Finance Committee convened a hearing to discuss the Medicare claims appeals backlog. The Committee heard from the HHS Office of Medicare Hearings and Appeals’ (OMHA) Chief Administrative Law Judge (ALJ) Nancy Griswold, as well as other industry stakeholders. Committee Chairman Sen. Orrin Hatch (R-UT) and Ranking Member Sen. Ron Wyden (D-OR) led the hearing.

Background: When HHS created OMHA in 2005, the Office was initially able to meet the regulatory-mandated 90-day timeframe for most appeals, Griswold testified. But beginning in 2010 — partially due to appeals from the nationwide expansion of the Recovery Audit Contractor (RAC) program — OMHA’s workload began to increase rapidly. 

Why Doubled ALJ Productivity is Not Enough

ALJ team productivity has more than doubled in the past five years, but still “the magnitude of the increase in workload has exceeded OMHA’s ability to adjudicate incoming appeals within the 90-day timeframe that Congress contemplated for most appeals,” Griswold noted. Adjudication timeframes are now 572 days “and will continue to increase until receipt levels and adjudication capacity are brought into balance.”

Funding increases in fiscal year (FY) 2014 and FY 2015 have allowed OMHA to hire 12 additional ALJ teams, bringing its adjudication capacity to 77,000 appeals, Griswold said. Unfortunately, this still doesn’t even come close to meeting the demand — OMHA received more than 384,000 appeals in FY 2013 and 474,000 appeals in FY 2014 alone. 

Currently, there are more than 500,000 appeals pending review and 870,000 pending appeals at the ALJ level, with only 60 officers assigned to handle cases, according to a May 19 analysis by the law firm Wachler & Associates, P.C. Griswold urged the Committee to support President Barak Obama’s proposed FY 2016 budget, which would boost OMHA’s budget by about $300 million.

This funding boost would allow OMHA to hire additional ALJs and perhaps magistrates, which OMHA estimates would increase the number of appeals adjudicated per year from 77,000 to 278,000. But the number of appeals in FY 2013 and FY 2014 exceeded this figure, so clearly the budget increase alone won’t solve OMHA’s problems.

Does Faulty System Go Deeper?

Sympathetic ear: Sen. Hatch blamed the backlog on the “insurmountable increase in appeals,” although he did acknowledge the contributing factor of preventing improper Medicare payments — 60 percent of the appeals are found in favor of the defendants. Sen. Hatch expressed concern for providers who are potentially facing undue burdens and questioned whether Medicare contractors were making improper payment decisions. Stakeholders also point to inefficiencies in the lowest review levels as contributing to the enormous backlog of appeals.

More problems: The first-level reviews deny coverage 98 percent of the time, a rate “so ludicrously low as to be no review at all,” according to a recent statement by the Center for Medicare Advocacy (CMA). “The irony is that the review process changes made in the last decade were supposed to make the lowest levels of review a more efficient and effective part of the process, so that beneficiaries would not be forced to go to the ALJ level.”

But with success virtually impossible at the lowest review level, beneficiaries must continue their appeals to the ALJ level for any chance of success, the CMA lamented. And unfortunately, the Committee hearing “did not consider these ‘rubber stamp’ denials at the lower levels of review, which contractors are paid hefty sums to administer.”

Many Solutions, But Little Consensus

In addition to increasing OMHA’s funding to double the Office’s capacity for processing appeals, Griswold also suggested the following legislative reforms:

• Utilize RAC collections. Use part of the money that the RAC program recovers to fund the program’s administration and fully fund the appeals process for RAC-related appeals.

• Establish a refundable filing fee. Institute a refundable per-claim filing fee for providers, suppliers, and Medicaid State Agencies, including those acting as a beneficiary representative, at each level of appeal. Appellants who receive a fully favorable determination would receive a refund of their filing fees. “A filing fee would encourage those who frequently file to more carefully assess the merits of their appeals before filing,” Griswold noted.

• Consolidate similar claims. Allow the adjudication of large numbers of similar claims appeals using sampling and extrapolation techniques, without the appellants’ consent. Griswold also suggested authorizing the consolidation of similar appeals into a single administrative appeal at all levels of the appeals process for adjudicative efficiency. All appeals included within an extrapolated overpayment or consolidated previously would remain part of the extrapolated or consolidated file on appeal.

• Remand to lowest appeal level when new evidence arises. When a party submits new documentary evidence into the administrative record at the second appeal level or above, Griswold proposed that OMHA remand the appeal back to the first review level at CMS. Griswold believes that this proposed change would create “a strong incentive for all evidence to be produced early in the appeals process and to ensure the same record is reviewed and considered at the second and subsequent levels of appeal.”

• Increase the minimum amount for ALJ adjudication. Griswold recommended increasing the minimum amount in controversy required for adjudication by an ALJ to the Federal district court amount requirement (currently $1,460). 

• Establish magistrate adjudication for smaller claims. Also, Griswold’s proposal would allow OMHA to use attorney adjudicators to resolve appeals that meet the current ALJ amount in controversy threshold ($150) but fall below the amount currently required to file an appeal in Federal district court ($1,460).

• Expedite appeals with no material fact in dispute. The proposal would allow OMHA to issue decisions without holding a hearing when no material fact is in dispute and a binding authority governs the decision (i.e., appeals in which Medicare does not cover the cost of a particular drug or the ALJ cannot find in an appellant’s favor due to binding limits on authority).

Expect Push-Back on OMHA Proposals

The CMA is among several healthcare industry heavy-hitters that aren’t impressed with OMHA’s proposed changes. 

“We are greatly alarmed at these proposals, which would further restrict access to meaningful reviews,” the CMA stated. “The primary way that OMHA proposes to deal with the backlog is to limit access to ALJ hearings — diminishing, rather than enhancing, due process rights.”

For example, the CMA warned that establishing a refundable filing fee “will deter providers and suppliers from rendering assistance to beneficiaries, and prevent Medicaid State Agencies, subrogated to the rights of the poorest Medicare beneficiaries, from seeking just and proper coverage from Medicare.” Also, remanding appeals to the redetermination (first) level would further subject beneficiaries to the 98-percent denial rate at this lowest appeals level, the CMA said.

Provider Organizations Look to These ‘Alternative Remedies’

Congress must consider alternative remedies as a means to reduce erroneous claims denials and resulting appeals, according to a May 15 statement by the National Association for Home Care & Hospice (NAHC). NAHC suggested that “CMS should take all necessary steps to improve the quality and accuracy of initial claim determinations to limit the need for an administrative appeal.”

And NAHC’s other recommendations for curing the backlog align with this preventive sentiment, including that CMS should monitor its contractors handling early-stage administrative appeals to ensure accuracy and reduce the number of appeals that end up before an ALJ. But the NAHC also looked beyond prevention, suggesting that OMHA establish “alternative dispute resolution processes to resolve some appeals.”

Additionally, NAHC recommended that CMS provide a settlement option to all appellants with claims pending before an ALJ to reduce the backlog. “That settlement should be based on historical data on ALJ reversal rates and the cost savings achieved by Medicare coming through the avoidance of an ALJ appeal,” NAHC stated.

Also, the hospital community has lamented the time and monetary burdens that the RAC process poses and has advocated for reforms, according to an April 28 statement by The Hospital & Healthsystem Association of Pennsylvania (HAP). Hospital provider advocates are asking Congress to approve two specific reforms:

1. Impose a financial penalty on RACs when a denial is overturned on appeal, to ensure greater accountability by the RACs and proper focus on addressing incorrect payments; and

2. Require RACs to consider only the medical documentation available at the time the admission decision was made in determining whether an inpatient stay was medically necessary. This would restrain RACs’ current practice of second-guessing physicians’ judgment based on the outcome instead of the facts the physician had at the time.

Should You Settle for Less?

Don’t let the backlogs discourage you from fighting for the reimbursement you deserve. “Despite the appeal backlog and processing time, Medicare providers and suppliers must continue to appeal Medicare contractors’ overpayment determinations and preserve their appeal rights,” Wachler & Associates urged.

Last year, in response to the increasing backlog, CMS offered hospitals an “administrative agreement mechanism” in which you could agree to dismiss the appeal and in return CMS would agree to a partial repayment of the claims in question, according to attorney Knicole C. Emanuel with Gordon & Rees in Raleigh, N.C. “Specifically, the hospital will be reimbursed for 68 percent of the disputed claims.”

But this mechanism pertains only to hospitals, and CMS will offer this partial payment only if no other appeals are pending — which leaves out providers with multiple appeals, Emanuel says. “As in, you must dismiss all lawsuits in order to receive the partial payout.”

“Personally, I call this a raw deal,” Emanuel laments. One reason she cites is that the RAC’s determinations are not always right, so “why take 68 percent when you are owed 100 percent?”