A recent decision by the Department of Health and Human Services (“HHS”) Office of Medicare Hearing and Appeals (“OMHA”) to stop assigning provider appeals to administrative law judges (“ALJs”) is having a significant impact on provider Medicare reimbursement revenue. The decision is contrary to the plain text of the controlling Medicare statute, and OMHA has not provided any legitimate justification for this departure from controlling law.1 The decision is most damaging to providers with high volumes of pending recovery audit contractor (“RAC”) or other Medicare audit appeals. This article provides background on OMHA's decision, a recap of a recent OMHA forum meant to address OMHA's decision, an analysis of the impact of OMHA's decision, and the next steps affected providers may want to consider.
OMHA's ALJs provide the third level appeal of Medicare claim denials. The first two appeal levels are provided by Centers for Medicare & Medicaid Services (“CMS”) contractors (MACs and QICs),2 and the fourth level is provided by the Medicare Appeals Council, a division of HHS’s Departmental Appeals Board (“DAB”). This appeal process is used not just for pre-payment denials by MACs, but also for post-payment audits by RACs, ZPICs,3 and other CMS contractors. As those who have participated in RAC audits know, the disputed funds are recouped after an unfavorable QIC decision.4 Thus, almost all ALJ appeals involve situations where CMS is withholding payment for services rendered or has recouped earlier payments.
Only the ALJ level of appeal offers providers the opportunity to participate in a hearing and present witnesses, including the professionals involved in rendering the care that is the subject of the disputed claim. It also offers the most objective review of the claim denial short of federal court review because OMHA is independent of CMS, while MACs and QICs are not. For providers, ALJ hearings are the primary means of recapturing the revenue lost in RAC audits. Over 70 percent of appealed RAC recoupments are overturned, predominantly at the ALJ level.5
OMHA sent a letter to some providers on Christmas Eve of 2013, revealing that as of July 15, 2013, it had stopped assigning provider appeals to its ALJs due to an increase in workload. In a later update to its website, OMHA stated that it had not assigned any provider appeal submitted on or after April 1, 2013.6 The Christmas Eve letter told providers to expect at least two years before regular assignments of appeals resumed.
By not assigning appeals to ALJs, OMHA is significantly delaying the ALJ hearings, and preventing providers from being able to timely recapture this revenue.
On February 12, 2014, OMHA held a forum for Medicare appellants. The provider community hoped to hear an explanation for the decision to halt appeals, and a way forward that would put appeals back on track without the multi-year delay projected in the Christmas Eve letter. The provider community was largely disappointed.
At the forum, OMHA repeatedly clarified that it had not suspended ALJ hearings, just the assignment of appeals to ALJs. While those two actions certainly are different, the practical effect for providers with appeals dated April 1, 2013 or later is the same. OMHA currently estimates that it will take 28 months from receipt to assignment, and it candidly admits the wait is likely to get even longer as the year goes on. OMHA further estimated at least a six-month wait from the time an appeal is actually assigned to the time a case would go to hearing. Thus, in OMHA’s best case prediction, providers will wait 34 months from mailing an appeal to OMHA to participating in a hearing.
The relevant section of the statute governing ALJ appeals provides for a 90 day maximum wait.7 When pressed for justification on how OMHA could violate the Medicare statute, a representative of OMHA stated that its actions were justified by its inherent power to manage its docket. OMHA provided no statutory or regulatory support for this position.
II. Forum Contents
The OMHA Forum predominantly consisted of an overview of the HHS departments involved in Medicare appeals and updates from various divisions about the current state of affairs and future plans for operational changes. There were two Q&A sessions, one in the morning and one in the afternoon.
A. MAC, QIC, and ALJ Appeal statistics
CMS revealed statistics on provider success at Level I and II appeals. At the Level I (MAC) stage, CMS reported decisions that were 30 percent favorable to providers and 59 percent unfavorable, with the remainder being dismissed or partially favorable. At the Level II (QIC) stage, CMS reported decisions that were 14 percent favorable to providers and 79 percent unfavorable, with the remainder being dismissed or partially favorable. At the ALJ stage, OMHA reported decisions that were 37.36 percent favorable to providers and 30.68 percent unfavorable, with the remainder being dismissed or partially favorable.
OMHA’s numbers were particularly surprising in light of numbers published by the American Hospital Association (“AHA”) in its RACTrac survey. AHA reports a 67 percent success rate for providers that complete the appeal process compared to OMHA’s 37.36 percent. While OMHA’s numbers included all Part A and B claims, not just those generated by the RAC, RAC claims are the bulk of the new influx of appeals currently at OMHA.
B. OMHA Operations
As indicated in its Christmas Eve 2013 letter, the number of appeals handled by OMHA increased dramatically in 2013. Providers submitted approximately 350,000 new appeals in Fiscal Year (“FY”) 2013, compared to fewer than 125,000 the year before. ALJ productivity increased in 2013, though not enough to keep pace with the increase of appeals. ALJs cleared 1,220 appeals per year in 2013, compared to 1,008.5 in 2012. However, with little increase in the number of ALJs, cases received far outstripped cases decided in 2012 and 2013.
At the forum, OMHA gave historical and current data about the ratio of appeals received to appeals resolved. In 2011, OMHA received 59,601 appeals and cleared 53,368, a clearance rate close to 90 percent. In 2012, it received 117,371 and cleared 61,517 (52 percent cleared). In 2013, the number of appeals almost tripled to 350,629, but OMHA only cleared 79,303 (22 percent cleared). So while the number of appeals increased almost 300 percent, only about 30 percent more appeals were cleared. This drastic increase was the sole justification OMHA gave for its decision to suspend assignment of appeals to its ALJs.
OMHA also explained its basic workflow. Highlights included the revelation that it received 15,000 appeal requests per week. Providers were told they should anticipate at least 15 weeks from mailing to OMHA to having OMHA open the request, and an additional six weeks for OMHA to enter the information into its central database.
OMHA touted several plans and proposals to increase efficiency, but none appeared to be live at the time of the forum, and no firm deadlines were given for activation. The proposals were tantalizing, but without hard timelines, they offer cold comfort to providers looking at a minimum two-year wait to receive a favorable ALJ decision and receive incorrectly recouped reimbursement. Proposals included an all-electronic appeal system, alternative dispute resolution to resolve claims without an ALJ hearing, the publication of an OMHA adjudication manual to increase consistency across adjudications, use of statistical sampling to adjudicate multiple claims with the same underlying issue, and attorney review to fast track cases prior to hearing.
C. Practical tips from OMHA
Perhaps the most interesting portion of the program came from ALJ Jeffrey Gulin, who encouraged providers to waive their right to a hearing in appropriate cases. Judge Gulin disclosed that an unspecified number of OMHA ALJs prioritized non-hearing cases, pushing them to decision more quickly. He also pointed out that by waiving the hearing, providers deprive the QIC of the opportunity to present testimony at hearing. Providers can increase this advantage by using sworn affidavits to have the effect of testimony, without opening the door to rebuttal by the QIC. To a litigator, this seems like an enormous advantage: the ability to present the strongest case for your position without rebuttal or interruption. While Judge Gulin admitted that a live hearing was advantageous for cases with peculiar circumstances, an on the record hearing could provide a great advantage to providers, when and if appeals begin to be assigned again.
OMHA also gave several tips about common errors that delay filing, but given the 28 month delay in assignment, they seemed almost academic. The tips mostly boiled down to submitting correct and accurate information on the appeal form, including:
- Prominently list the Medicare Appeal Number on the Request
- Ensure that the Beneficiary information matches the Medicare Appeal Number
- List the Beneficiary’s full Health Insurance Claim Number (“HICN”)
- Include the first page of the QIC decision OR prominently list the Full Name of the QIC
- Document that the provider provided Proof of Service to the other parties identified on reconsideration
- Mail the Request via tracked mail to Central Operations
D. Escalating a claim
When OMHA fails to adjudicate a claim in the required 90 day timeframe, providers have the option to escalate their claim to the Medicare Appeals Council (the “Council”).8 However, the Council representative at the Forum made clear why claim escalation is not a viable strategy for the majority of claims stuck at OMHA. The Council is part of the DAB, which itself only has 76 total employees. It is also facing its own backlog. While the Council cleared 2,595 appeals in 2013, it still has 4,888 pending. It anticipates a total of 7,000 escalation requests in 2014.
Council review also lacks a feature essential to the process from the provider perspective: a neutral third party who will conduct a hearing if necessary and issue a written opinion. The Council makes its decisions as a body, not as individual decision makers. It does not hold hearings. It will only review the QIC decision de novo, and will not accept new evidence without good cause. In short, it is a poor substitute for the level of review offered by OMHA, and it is facing a similar logjam. A mass escalation of claims by the provider community would likely cause a similar shutdown at the Council level.
Throughout both Q&A sessions, provider frustration with the process was palpable. Many from the provider community took the microphone to complain about the numerous problems with MAC and QIC appeals. The complaints were familiar to any provider involved in the appeal process: delays at the QIC and MAC level, a lack of communication, the inconsistency of denial reasons between the QIC and MAC, and the often Kafkaesque experience of dealing with CMS contractors as a whole. Smaller providers experiencing high volume RAC audits explained that a multi-year appeal delay would have a severe financial impact, including potentially shutting down some providers.
Key OMHA and CMS managers seemed genuinely surprised to hear about the extent of problems at the MAC and QIC level. They expressed their concern and indicated they would try to make that end of the appeals process more efficient. But there were no firm commitments to any particular reform or timeline for reform.
As mentioned in the introduction, CMS and OMHA management seemed unprepared to provide any legal authority for OMHA’s decision to suspend case assignment. The lack of attention devoted to this issue seemed especially surprising giving the timing of the Christmas Eve letter and the scheduling of the Forum. CMS and OMHA declined to frankly admit that RAC volume was the predominant driver of the OMHA backlog. Just days before the Forum, over 100 members of Congress wrote to HHS requesting reform to the RAC program and pointing out its role in the delays at OMHA.9 The concerns in this letter were not addressed at the Forum.
An OMHA Representative did promise that a solicitation of comments would be forthcoming in the Federal Register. However, OMHA did not reveal the scope or substance of the solicitation, nor the timing. In the end it became clear that OMHA had no short term solution to solve its backlog, and that providers were just being asked to be patient for the next three years.
IV. Provider next steps
Providers left the forum with a clearer idea of OMHA’s plans to fix the appeal backlog, but no short term solution that would alleviate the over two-year wait providers now face. Smaller providers might face bankruptcy; larger providers are certainly experiencing disruptions to cash flow. What can the embattled provider do?
As explained above, escalation to the Council is a poor substitute for an ALJ hearing. If a provider chooses to escalate to the Council it may face delays similar to those occurring at OMHA. If a provider does face long delays at the Council, the provider may escalate to federal court. This may be an option for some providers, but others may not be able to handle the costs of federal court litigation. Furthermore, a large move by providers in this direction might simply transfer the logjam to the federal courts.
Providers can and should keep an eye out for the promised Federal Register solicitation of comments. This will be the first opportunity for the provider community to clearly lay out the problems with the first three levels of the appeal process. However, this is not guaranteed to speed up the delays occurring at OMHA.
Finally, a provider or provider trade associations may wish to consider litigation against OMHA, CMS, or both. OMHA’s decision to suspend assignment of appeals is plainly in violation of the statutory language requiring an ALJ decision in 90 days. Neither statute nor regulation makes an exception for the interruption to the process by suspending assignment of appeals. OMHA’s decision may be arbitrary and capricious under the Administrative Procedures Act. OMHA’s decision could also be construed as a deprivation of due process to providers. Providers may be able to protect further interruptions in Medicare reimbursement by seeking an injunction against OMHA’s suspension of appeals, or an injunction against RAC recoupment until OMHA’s suspension ends. Providers should discuss all of these options with qualified counsel.