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From Health Law Daily, August 15, 2017

Court failed to properly consider impossibility of clearing Medicare appeals backlog

By Jeffrey H. Brochin, J.D.

A federal district court’s order of mandamus commanding the HHS Secretary to clear Medicare appeals backlogs within a timeframe the Secretary stated was impossible to comply with was an abuse of discretion, a federal appeals court has ruled. Notwithstanding the district court’s earnest efforts to make do with what the parties presented, the failure to seriously test the Secretary’s assertion of impossibility and to make a concomitant finding of possibilitywas an abuse of discretion (American Hospital Association v. Price, August 11, 2017, Wilkins, CJ).

Background. Congress established an administrative appeals process for denied Medicare reimbursement claims and directed HHS to complete that process within a specified timeframe. Specifically, from start to finish, the administrative appeals process is designed to take less than one year, and the enabling statute sets specific time frames for each of the four levels of the process: sixty days for the first level; another sixty days for the second level; ninety days for the third level; and another ninety days for the fourth level.

For years, the administrative appeal process functioned largely as anticipated. However, starting in fiscal year 2011, an unexpected and dramatic uptick in appeals produced a jam in the process. Part of the backlog was attributed to the congressionally mandated Medicare Recovery Audit Program under which recovery audit contactors (RACs) would review already-paid reimbursement claims for overpayment or underpayment. Instead of repaying the difference, many providers availed themselves of the administrative process which resulted in filed appeals ballooning from 59,600 in 2011 to over 384,000 in 2013. As of June 2, 2017, there was a backlog of 607,402 appeals awaiting review at the administrative law judge (ALJ) level, and the backlog was projected to grow to 950,520 by the end of fiscal year 2021. Some already-filed claims could therefore take a decade or more to resolve, which would be far outside the ninety-day timeframe set by statute. In 2014, the American Hospital Association (AHA), along with various providers, filed suit for mandamus to compel HHS to alleviate the backlog. The district court granted mandamus pursuant to terms which HHS found to be impossible to comply with.

Ends versus means approach. The healthcare providers proposed two sets of options: either a means-oriented plan requiring the Secretary to take specific actions, or an ends-oriented plan setting a timetable for clearing the backlog. The district court opted for a timetable, reasoning that such an approach would intrude as little as possible on the Secretary’s specific decision-making processes and operations. Because the Secretary refused to engage with the premise of setting a timetable at all-- and proposed no alternative targets-- the district court adopted the healthcare providers’ four-year plan: the Secretary was ordered to reduce the current backlog of cases pending at the ALJ level by 30% by December 31, 2017; 60% by December 31, 2018; 90% by December 31, 2019; and 100% by December 31, 2020.

Impossibility of performance. The Secretary asserted that the timetable placed him between a rock and a hard place: either violate the Medicare statute by settling reimbursement claims en masse without regard for their merit, or violate the court’s mandamus order by missing the court-ordered deadlines. The appeals court determined that by declining to evaluate the Secretary’s claims, the district court had effectively ordered HHS to hit the target by any means necessary. However, because the necessary means were unlawful, the court could not have mandated them, it being well established that courts of equity can no more disregard statutory and constitutional requirements and provisions than can courts of law. Accordingly, the appeals court reversed the order of mandamus and remanded the matter back to the district court for evaluation of the Secretary’s claim that lawful compliance would be impossible.

The case is No. 17-5018.

Attorneys: Adam Keith Levin (Hogan Lovells US LLP) for American Hospital Association. Joshua Marc Salzman, U.S. Department of Justice, for Thomas E. Price.

Companies: American Hospital Association

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