Medicare Appellants Should Consider Participation in OMHA’s Statistical Sampling Initiative

These processing delays have imposed significant financial hardship on audited Medicare providers. The American Hospital Association (AHA) estimated that the value of Recovery Audit Contractor (RAC) appealed claims exceeded $1.8 billion.⁴ This figure does not include the value of all other appealed claims, which are also caught in the appeals backlog.⁵ Funds associated with the audited claims are otherwise unavailable to Medicare providers to render much needed patient care. Additionally, interest accrues on the alleged debt at nearly 10 percent of the overpayment value.⁶ By the time a provider finally receives a determination on the alleged overpayment, the value of accrued interest can be substantial.

New Statistical Sampling Initiative Launched to Reduce Adjudication Delays

Over the past three years, and in response to the hundreds of thousands of backlogged appeals and complaints from the Medicare-provider community, the Centers for Medicare & Medicaid Services (CMS) and OMHA have released a series of settlement and alternative adjudication programs.⁷ Most recently released is OMHA’s Statistical Sampling Initiative (Initiative). The Initiative was announced on June 29, 2017 in an open door forum teleconference co-hosted by CMS and OMHA. The Initiative is an update and expansion of OMHA’s statistical sampling pilot program (Pilot) which was released in late 2014. The Initiative, like the Pilot, is designed for OMHA to utilize statistical sampling and extrapolation to resolve large volumes of claim disputes at the ALJ hearing level of the Medicare appeals process.

CMS contractors have long utilized statistical sampling as an efficient way to estimate Medicare overpayments owed by providers.⁸ However, the Initiative provides a new way for statistical sampling to be utilized. Through the Initiative, an appellant can voluntarily choose to utilize statistical sampling to resolve large volumes of pending, eligible ALJ appeals.

If an appellant chooses to participate in the Initiative, OMHA will utilize a trained and experienced statistical expert to pull a statistically random sample of a provider’s eligible claims. These sample claims are heard and decided by ALJs, as discussed more fully below. The statistical expert then statistically extrapolates the ALJs’ findings on the sampled claims to all of the provider’s eligible claims.

To be eligible for the Initiative, all of the following criteria must be met:

• A request for hearing must appeal a Medicare Qualified Independent Contractor (QIC) reconsideration decision.
• The appellant must be a single Medicare provider.⁹
• All jurisdictional requirements for a hearing before an ALJ must be met for the request for hearing and all appealed claims.
• The beneficiary must not have been found liable after the initial determination or participated in the QIC reconsideration.
• No hearing on the claim has been scheduled or conducted.
• There cannot be an outstanding request for Settlement Conference Facilitation for the same claims.¹⁰
• There must be a minimum of 250 claims (up to 10,000 claims can be accommodated in a single universe) and all claims must fall into only one of the following categories:
• Pre-payment claim denials
• Post-payment (overpayment) non-RAC claim denials; or
• Post-payment (overpayment) RAC claim denials from one RAC.

An appellant can meet the 250-claim threshold for multiple of the above-cited categories, but each category must have at least 250 claims at issue. In the event that an appellant has multiple categories of at least 250 claims, a separate statistical sampling will be conducted on each category.

In establishing the eligibility criteria for the Initiative, OMHA received feedback from providers and industry stakeholders during the Pilot phase of the statistical sampling program. OMHA incorporated this feedback when designing the Initiative in the hopes of attracting greater appellant participation.

There are two notable changes in the Initiative from the Pilot. First, OMHA broadened the claim eligibility criteria. Under the Pilot, claims must have been assigned to one or more ALJs or have been filed between April 1, 2013 and June 30, 2013. These restrictions, which foreclosed many providers from participation in the Pilot, have been removed. With no filing date restriction and no requirement of claim assignment to ALJs, more providers can now take advantage of this program.

The second notable change is OMHA’s use of a panel of adjudicators. Under the Pilot, one ALJ would conduct a hearing on a random sample of claims, and that decision would then be extrapolated to all of the provider’s eligible claims. Many providers were hesitant to participate in the Pilot due to the risk of pulling an unfavorable ALJ. As providers may know, favorable rulings on appeal range greatly among ALJs, from as low as 18 percent to as high as 85 percent.¹¹ The Pilot was simply too risky if only one ALJ was assigned to hear all of a provider’s claims. Under the Initiative, a panel of multiple ALJs will hear and decide a provider’s claims. In fact, the more claims that are at issue, the larger the panel. If a provider has 250 to 749 claims at issue, three ALJs will be assigned to the panel and each ALJ will hear and decide one third of the sampled claims. If a provider has 750 claims or more, four to five ALJs will be assigned to the panel and each ALJ will hear and decide one fourth to one fifth of the sampled claims. Although each ALJ on the panel will conduct his/her own hearing on his/her portion of the statistically sampled claims, the lead ALJ will combine the decisions from each hearing on the sampled claims and issue one decision, which OMHA’s statistical expert will extrapolate to the universe of eligible claims.

The Initiative can begin in one of two ways: either by appellant request or by OMHA invitation. To proactively request participation, an appellant must complete a written request for statistical sampling and a claim information spreadsheet to identify the claim appeals for which the appellant is requesting statistical sampling. The written request for statistical sampling may, but is not required, to be on OMHA’s Request for Statistical Sampling form.¹² The claim information spreadsheet must include the appellant’s name and national provider identifier number(s), QIC appeal numbers, ALJ appeal numbers (if known), assigned ALJ(s) (if known), approximate filing date of the requests for hearing, and whether the claims involve a RAC overpayment or non-RAC overpayment.¹³ Upon receipt of an appellant’s request for participation, OMHA will confirm whether a sufficient number of claims are eligible. If so, OMHA will provide a written response to the appellant requesting the appellant’s initial consent for statistical sampling on the tentative universe of claims.

Alternatively, an appellant may receive an OMHA invitation to participate in statistical sampling. Although OMHA has not advised why or to whom an invitation may issue (opposed to an appellant proactively electing participation), it is reasonable that OMHA would likely invite appellants with very large numbers of pending, eligible appeals. Resolving the appeals of such “high volume” appellants would make quicker work of meaningfully reducing the OMHA appeals backlog. OMHA’s invitation will include information on the process and the tentative universe of claims to be included. An appellant has 20 calendar days from receipt of the invitation to opt-in and consent to statistical sampling. If needed, an appellant can request additional time.

Regardless of whether an appellant requests participation in the Initiative or is invited by OMHA to participate in the Initiative, to begin the process the appellant must provide its written consent to OMHA for the use of statistical sampling. Upon OMHA’s receipt of the appellant’s written consent to use statistical sampling, a pre-hearing conference will be scheduled and conducted before an ALJ. The purpose of the pre-hearing conference is to confirm the appellant’s consent to statistical sampling, discuss and finalize the universe of claims, review the proposed statistical sampling process, discuss other matters to facilitate the ALJ hearing and answer any questions. Following the pre-hearing conference, the ALJ will issue a post-conference order, which becomes binding should no objections be filed within 10 calendar days of receipt of the order. Once the post-conference order becomes binding, an appellant can no longer withdraw its consent to statistical sampling and the universe of eligible claims will be combined under a single appeal number and assigned to a lead ALJ for hearing. If consent is withdrawn within 10 calendar days of receipt of the order, however, the appeals will be returned to the standard ALJ hearing process.

Claims will be assigned on a rotational basis to a lead ALJ. However, if all of an appellant’s appeals had been assigned to one ALJ prior to the request or invitation for statistical sampling, that assigned ALJ will become the lead ALJ. In either scenario, additional ALJs from the same field office will then be assigned depending on the size of the universe of eligible claims, as discussed above.

OMHA has not indicated what its expectations are of this Initiative, or by how much OMHA expects to reduce the adjudication backlog. However, OMHA does anticipate that the Initiative will be more attractive to appellants than the previously released Pilot due to the use of an adjudication panel, and thus more successful than the Pilot in reducing the backlog.

Practical Considerations for Appellants

In preparation for the ALJ hearings, an appellant should consider submission of a position paper addressing the merits of the sampled claims and if appropriate, challenging the sample selection. Due to the statistical extrapolation, the adjudication of each sampled claim will have a significant financial impact on the final appeal findings. Therefore, a prehearing position paper should discuss favorable facts and law with an in-depth clinical work-up of each sampled claim. Appellants may also consider utilizing coding and clinical experts to testify at the hearings in support of the sampled claims. In addition to a claim-by-claim analysis, an appellant should consider engaging a statistical expert to evaluate OMHA’s statistical expert’s methodology and whether the statistical sampling was conducted pursuant to Medicare’s guidelines on conducting statistical sampling.¹⁴

OMHA’s expert statistician is responsible for determining the extrapolation methodology pursuant to the guidelines of the Medicare Program Integrity Manual (Manual). The Manual generally recommends utilizing the lower bound of a one-sided 90 percent confidence interval to determine the amount of an overpayment recovery.¹⁵ The Manual explains that this is a conservative statistical method which is intended to work to the financial advantage of the. Whether an upper bound or a lower bound of a confidence interval is utilized can have a significant financial impact on the payout to a provider or the payment that a provider owes CMS. For example, in the event that a provider is determined to be owed money by CMS, utilizing the lower confidence bound as opposed to the upper confidence bound would yield a lower payout to a provider. In the event that a provider is determined to owe money to CMS, utilizing the upper confidence bound as opposed to the lower confidence bound would yield a larger recovery from the provider. OMHA clarified that for purposes of the Initiative, it is possible that the upper bound of the confidence interval will be more financially advantageous to the provider. Therefore, OMHA has advised that it will instruct the statistical expert to base his/her decision on either the upper or lower bound of a one-sided 90 percent confidence interval, whichever is most financially advantageous to the provider. Therefore, when engaging in the Initiative appellants should be attentive to the statistical methodology employed by the expert statistician.

Additionally, appellants should be mindful of the federal regulations governing party status and participation in the Medicare appeals process. CMS or CMS’ contractors may participate in the ALJ hearings pursuant to this Initiative as a party or non-party participant. Federal regulations provide that non-party participation status generally includes the ability to file position papers and provide clarifying testimony of fact or policy, but does not include calling witnesses or cross examining witnesses of a party to the hearing.¹⁶ Contrastingly, if CMS or its contractors participate in the ALJ hearings as a party, CMS or its contractors may file position papers, submit evidence, provide testimony to clarify factual or policy issues, call witnesses or cross examine witnesses of other parties.¹⁷

Appellants with large volumes of pending Medicare appeals would be wise to consider participating in this Initiative. First, by aggregating all eligible appeals into at least three but no more than five ALJ hearings, an appellant is likely to receive a more expeditious resolution to its appeals than by awaiting ALJ hearing on a claim-by-claim basis. During the open door forum, OMHA indicated that it is currently assigning claims to ALJs that were filed in January through March 2014. OMHA has clarified with the authors of this article that by participating in the Initiative, an appellant’s claims are moved from the regular ALJ assignment process to the Initiative’s assignment process. OMHA has indicated that appellants are much more likely to get a faster resolution to their appeals through the Initiative than through the regular ALJ process.

Secondly, the Initiative promotes cost-savings and efficient use of resources by aggregating hundreds of claims into a few ALJ hearings. Rather than preparing for ALJ hearing on each individual claim for potentially hundreds of claims, appellants will realize significant cost savings on internal personnel time and resources, as well as on external costs such as counsel and experts, by preparing for only a select few ALJ hearings.

Additionally, the Initiative may offer appellants a more favorable adjudication forum. Many appellants often have large volumes of claims assigned to one ALJ, and if that ALJ tends to rule unfavorably for the appellant, the Initiative may provide an opportunity for the appellant to have its claims reassigned to other, and potentially more favorable ALJs. The Initiative guarantees appellants an opportunity to appear before a panel of ALJs who will each conduct a separate hearing on a sub-selection of the sample of claims. Use of a panel eliminates the risk that an appellant will continually appear on a claim-by-claim basis before the same unfavorable ALJ. In fact, if some but not all of an appellant’s claims have been assigned to an ALJ and that ALJ has generally ruled unfavorably for the appellant, by participating in the Initiative the appellant has the opportunity for reassignment of its claims to a potentially different panel of ALJs entirely. If all of an appellant’s claims have been assigned to an ALJ that has generally ruled unfavorably for the appellant, that ALJ will be the lead ALJ. Appellants are guaranteed, however, that two-thirds to four-fifths of the claims will be heard and decided by other ALJs.

Conclusion

Given the current adjudication delays, the costs attendant to proceeding to ALJ hearing on a case-by-case basis and the limited number of alternative resolution options available to appellants, it is difficult to envision a scenario where appellants with eligible claims should not consider participating in this Initiative. OMHA’s modifications to the Pilot have made the current Initiative an attractive opportunity to Medicare appellants. The Initiative provides an efficient way to adjudicate large volumes of claims in a practical manner that will save appellants both time and resources. Appellants with at least 250 eligible claims should consider participation in this program. 

1.  42 C.F.R. § 405.1016(a). There are five levels of appeal within the Medicare appeals process. The ALJ level is the third level of appeal. See OMHA’s website at: http://www.hhs.gov/omha/process/index.html (last accessed 8/21/17).
2.  See OMHA’s website at https://www.hhs.gov/about/agencies/omha/about/current-workload/average-processing-time-by-fiscal-year/index.html (last accessed 8/22/2017). Note that all references to “provider” refers to both providers and suppliers as defined by the Medicare program.
3.  Id.
4.  AHA v. Burwell, 209 F. Supp. 3d 221 (D.D.C. Sept. 19, 2016) (Pl. Mot. for Summ. J. at 15). RACs are entities contracted by CMS to identify and return improper Medicare payments. RACs are compensated on a contingency-fee basis and thus, tend to audit Medicare providers zealously.
5.  Id. RACs are only one of many entities that contract with the government to audit Medicare providers. Other contractors include Medicare Administrative Contractors, Zone Program Integrity Contractors, Uniform Program Integrity Contractors and Comprehensive Error Rate Testing contractors.
6.  If an overpayment finding is reversed in favor of the provider at the ALJ level or subsequent level of review, the accrued interest can be paid to the provider. Otherwise, the accrued interest is payable to CMS in addition to the principal amount of the final overpayment. This interest is colloquially referred to as “935 interest” as it derives from Section 935 of the 2003 Medicare Prescription Drug, Improvement and Modernization Act.
7.  The other settlement and adjudication programs are not the focus of this article but additional details can be found on HHS’ website. See https://www.hhs.gov/about/agencies/omha/about/special-initiatives/index.html and CMS’ website at https://www.cms.gov/Medicare/Appeals-and-Grievances/OrgMedFFSAppeals/Hospital-Appeals-Settlement-Process-2016.html (last accessed 8/22/2017).
8.  See Medicare Program Integrity Manual (Internet-Only Manual 100-08), Chapter 8, located at: https://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/downloads/pim83c08.pdf (last accessed 8/22/2017).
9.  OMHA explains that if multiple providers or suppliers with multiple National Provider Identifiers (NPIs) are owned by a single entity, the owning entity may serve as “a single provider or supplier” so long as the owning entity agrees to accept any payment that may be due from Medicare as a single payment, or agrees to make any payment that may be due to Medicare as a single payment.
10.  SCF is a voluntary alternative to an ALJ hearing whereby CMS and Medicare Part A and Part B healthcare providers and suppliers utilize mediation principles to reach a mutually agreeable settlement on eligible claims pending at the ALJ level of the Medicare appeals process. Under SCF, an employee of OMHA serves as the facilitator for a one-day settlement conference between CMS and the participating provider or supplier. If a settlement is reached, a settlement agreement is signed the day of the settlement conference and the settled claims are withdrawn and dismissed from ALJ hearing. Additional information on the SCF program is available on HHS’ website. See https://www.hhs.gov/about/agencies/omha/about/special-initiatives/settlement-conference-facilitation/index.html (last accessed 8/22/2017).
11.  Improvements are Needed at the Administrative Law Judge Level of Medicare Appeals, HHS-OIG, OEI-02-10-00340 (November 2012); see also Nudelman, Jodi, Statement to the House Committee on Ways and Means, Subcommittee on Health, Current Hospital Issues in the Medicare Program, Hearing May 20, 2014.
12.  A copy of the form is located on OMHA’s website. See https://www.hhs.gov/sites/default/files/omha/OMHA%20Statistical%20Sampling/request_for_statistical_sampling_template.pdf (last accessed 8/22/2017).
13.  A template claims information spreadsheet is located on OMHA’s website. See https://www.hhs.gov/about/agencies/omha/about/special-initiatives/statistical-sampling/index.html (last accessed 8/22/2017).
14.  These guidelines are available in the Medicare Program Integrity Manual (Internet-Only Manual 100-08), Chapter 8, located at: https://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/downloads/pim83c08.pdf (last accessed 8/22/2017).
15.  Id. at Section 8.4.5.1
16.  42 C.F.R. § 405.1010(c)(1).
17.  Id. at 405.1012(c)(1).