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OIG REPORTS: Changes needed in ALJ Medicare appeals process

By Sarah E. Baumann, JD

The HHS Office of the Inspector General (OIG) conducted a study of the administrative law judge (ALJ) level of the Medicare appeals process and determined that improvements must be made (OIG Report, OEI-02-10-00340, November, 2012). ALJs and Qualified Independent Contractors (QICs) should be trained jointly to ensure consistent interpretations of Medicare policy. Additionally, the Office of Medicare Hearings and Appeals (OMHA) should implement quality assurance measures to ensure that ALJs make decisions consistent with those of other ALJs.

Background. When a CMS Medicare Administrative Contractor makes an adverse determination, a party may appeal that decision to a QIC and then to an ALJ. As a result of OIG recommendations, the ALJ appeals process was transferred from the Social Security Administration (SSA) to HHS in 2005. A number of additional changes were implemented in the process, requiring to "give substantial deference" to Local Coverage Determinations and CMS program guidance and to accept new evidence only when parties had good cause for failing to submit it prior to the ALJ level. Additionally, changes gave CMS the right to participate in an appeal as either a participant, who could provide testimony or submit position papers, or a party, who could submit evidence and call witnesses. The OIG recently completed a study to determine how the 2005 changes affected the appeals process.

OIG findings. In conducting the study, OIG investigators reviewed all appeals decided by ALJs in fiscal year 2010, as well as other documentation, and interviewed staff from OMHA, QICs, and CMS. The study revealed that 85 percent of all appeals were filed by healthcare providers; 2 percent of all providers were responsible for nearly one-third of all appeals. Staff noted that some providers appealed all adverse decisions, possibly due to the minimal cost of appealing and the likelihood of favorable decisions. ALJs reversed QIC decisions and entered decisions that were fully favorable to appellants in 56 percent of cases. They entered such decisions with respect to more than half of all Part A, Part B, and Durable Medical Equipment, Prosthetics, and Orthotics (DMEPOS) appeals. The fully favorable rate among judges ranged from 18 to 85 percent, suggesting that decisions differed from judge to judge despite similar facts. For example, a single provider filed 600 appeals heard by 17 ALJs in FY 2010; the fully favorable decision rates ranged from 7 to 100 percent.

The OIG report also noted variances in the decision-making process between QICs and ALJs. QICs, which specialize in Part A, Part B, or DMEPOS appeals, adhered strictly to the language of Medicare policies. ALJs, in contrast, who do not specialize, ruled for appellants who complied with the intent, but not the letter, of a policy. Although QICs consulted with medical staff in reviewing cases, ALJs tended to rely on evidence provided by treating physicians. When CMS participated in appeals, ALJs were less likely to enter fully favorable decisions for appellants.

Finally, the OIG report noted that nearly all staff had suspected some appellants of Medicare fraud, but may chose not to report their suspicions. In cases where an appellant with a pending appeal was also being investigated for fraud, CMS worried that appellants would selectively file ALJ appeals to obtain favorable decisions to combat fraud allegations.

OIG recommendations. The OIG made a number of recommendations to OMHA and CMS, jointly and separately. They recommended the institution of coordinated Medicare policy training for ALJ and QIC staff and clarification of unclear policies, including the revision of regulations regarding the acceptance of new evidence. The OIG encouraged the agencies to develop a fully electronic filing system at the ALJ level, which currently only accommodated paper files. The OIG suggested that OMHA institute a filing fee, which would not apply to beneficiaries, to prevent providers appealing all denials. It also suggested that the OMHA implement a quality assurance process to review ALJ decisions to ensure that ALJs consistently interpret and apply policies. The OIG suggested that CMS increase its participation in appeals, particularly by the Medicare Administrative Contractors who made the initial decisions. Finally, it recommended that both agencies standardize their responses to potential fraud and consider postponing appeals upon requests from law enforcement agencies.

OMHA and CMS concurred in whole or in part with the recommendations. Notably, however, they both raised due process concerns in response to the OIG's recommendation that they postpone hearings when appellants were the subjects on ongoing investigations. CMS also suggested that postponing a hearing might provide a party with knowledge of a fraud investigation. OMHA did endorse attempts by CMS to identify and address potentially fraudulent cases before they reached the ALJ level.

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