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From Health Law Daily, December 22, 2014

Court refuses to break the ‘logjam’ of Medicare appeals

By Bryant Storm, J.D.

A district court declined to intervene to resolve the backlog of Medicare reimbursement appeals in a case between several hospitals, the American Hospital Association (AHA), and HHS, stating that “the waiting game must go on.” Although the court agreed that HHS violated its statutory obligations and reasoned that Recovery Audit Contractors (RAC) audits may have been worsening the problem, the court determined that it was not in a position to address the massive and growing administrative backlog because the problem required cooperation between Congress and HHS (American Hospital Association v. Burwell, December 18, 2014, Boasberg, J.).

Appeals. Under the Medicare reimbursement appeal process, after a Medicare provider submits a claim for reimbursement to a Medicare Administrative Contractor (MAC), and the MAC denies the claim, the provider has a four-step administrative process to navigate. First a provider presents the claim to the MAC for a redetermination. If the MAC’s redetermination is not favorable, the provider can appeal that decision to a qualified independent contractor (QIC). If the QIC agrees with the original denial, the provider may request a hearing before an administrative law judge (ALJ). The ALJ step is overseen by the Office of Medicare Hearings and Appeals (OMHA), a division within HHS that is functionally separate from CMS and accordingly provides the first layer of independent review for providers. An unfavorable ALJ decision can be appealed to the departmental appeals board (DAB) and an unfavorable DAB decision can be subjected to judicial review.

Escalation. Medicare regulations provide a mechanism known as “escalation,” which allows claimants to “leapfrog” parts of the administrative appeal process if any given step exceeds a statutorily prescribed timeline. For example, under 42 U.S.C. § 1395ff(c)(3)(C)(ii), if a QIC fails to complete its review within 60 days, a provider is permitted to “escalate” its claim to an ALJ. There are comparable escalation provisions for each of the four layers of the Medicare administrative appeal process.

Audits. RACS are private entities that audit provider favorable MAC decisions through post payment review. As contractors, RACs receive a commission for improper payments that they recover. As a result, the hospitals argued, RACs are incentivized to over-audit. The hosptials asserted that meritless audits led to unnecessary Medicare appeals and further backlogged an already overburdened Medicare appeal process.

Broken process. The American Hospital Association, Baxter Regional Medical Center, Covenant Health, and Rutland Regional Medical Center filed suit seeking to have the court exercise mandamus jurisdiction and force HHS to “adjudicate their pending administrative appeals in a timely fashion” and to force HHS to modify RAC auditing. The hospitals asserted that the escalation process is not a meaningful alternative because skipping the ALJ level undermines the usefulness of the appeal record. Without the comprehensive evidentiary record that would be developed before an ALJ, including testimony and written submissions, providers are forced to continue on to further levels in the process with only the MACs record. As a result, hospitals contend that they are most likely to succeed at the ALJ level and therefore needed the court to force HHS to more quickly administer its standard appellate process.

Mandamus. The court reasoned that in order to exercise mandamus jurisdiction, the hospitals had to show that they had a clear right to relief, that HHS had a duty to act, and that without the court’s intervention the hospitals would not have an adequate remedy. The court considered several factors in determining whether mandamus was appropriate. The court evaluated the statutory timelines, the consequences of not intervening, the competing priorities of HHS and the hospitals, whether there was any bad faith on the part of HHS.

Factors. The hospitals argued that the failure of HHS to meet the statutory timelines alone was enough to justify judicial intervention.  Although the court agreed that HHS violated the timeline and would probably continue to in the future, the court held that the one factor alone was insufficient to merit mandamus jurisdiction. Although the court acknowledged that there was a possible nexus between the economic consequences of the appeal backlog and the human cost in the form of services that the hospitals were unable to provide, the court held that the factor was insignificant, because the hospitals could not point to specific services that they were forced to suspend due to the appeals.

Priorities. The court compared the competing priorities of the hospitals and HHS. Although the hospitals argued that HHS could resolve the problem by hiring more ALJs, the court reasoned that HHS was confined in terms of its ability to allocate its funding. The court held that, under 31 U.S.C. § 1532, a significant alteration of its fund allocation would require congressional action. The court held that while it could “intermeddle” in the appropriations and fund allocations of HHS it would be inappropriate to inject judicial discretion into something that is primarily handled by congress and HHS itself. The court held that it also did not make sense to tell HHS to ask Congress for funds to resolve a problem that Congress was aware of. The court held that such an action would be, at best “an empty gesture, at worst judicial overstepping.”

RAC reduction. The hospitals also asked the court to force HHS to reign in its use of RAC audits. The court contended that addressing the RAC audits was the hospitals’ true aim in bringing their lawsuit. The hospitals asserted that because, according to one survey, the RAC audits were being overturned 66 percent of the time, HHS was not doing enough to limit the scope of RAC activity. The court held that since the RAC program was developed by Congress, it was Congress’ job to address the problems associated with it. There was no evidence that HHS engaged in bad faith and, in fact, HHS was working to increase the number and capacity of ALJs. Ultimately, the court reasoned that the factors, at the present time, weighed against intervention and the court expressed hope that Congress would act to address the problem that gave rise to the Hospitals’ lawsuit.

The case number is 14-851 (JEB).

Attorneys: Adam K. Levin (Hogan Lovells U.S. LLP) for American Hospital Association, Baxter Regional Hospital, Inc., Rutland Hospital, Inc., and Covenant Health. Caroline Lewis Wolverton, U.S. Department of Justice, for Sylvia M. Burwell.

Companies: American Hospital Association; Baxter Regional Hospital, Inc.; Rutland Hospital, Inc.; Covenant Health, The Fund for Access to Inpatient Rehabilitation

MainStory: TopStory ClaimsAppealsNews MedicareContractorNews PaymentNews RACNews CMSNews DistrictofColumbiaNews

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