Healthcare providers and suppliers that bill Medicare may appeal a denial or a reduction of a claim for Medicare reimbursement through Medicare’s administrative appeals process.1 Over the last 10 years, the Office of Medicare Hearings and Appeals (OMHA) (the entity which processes such appeals) began receiving more appeals than it could process, causing a severe delay in appeals adjudication. Federal statute mandates that at the third level of the appeals process, which involves a hearing before an Administrative Law Judge (ALJ), Medicare appeals are to be heard and decided within 90 days; however, recent statistics released by OMHA reveal that the average current processing time for appeals before ALJs is nearly 1,142 days.2
Appeal processing delays impose significant financial hardship on audited Medicare providers and suppliers, who are left without reimbursement for lengthy periods of time while the disputed appeals pend in the stagnate administrative appeals process. In response to the backlog and its financial burden on healthcare providers, the American Hospital Association (AHA) and other healthcare providers filed suit in federal court seeking an order of mandamus against the Secretary of Health and Human Services (Secretary) to clear the backlog of pending Medicare appeals.3 The plaintiffs sought a writ of mandamus to compel the Secretary to clear the backlog and comply with the 90 day statutory timeframe for ALJ hearings.
On November 1, 2018 the Court issued an order of mandamus, requiring the Secretary to fully eliminate the backlog of appeals by fiscal year (FY) 2022.4 In so holding, the Court found that recent Congressional appropriations of $182.3 million (which will allow OMHA’s adjudication capacity to more than double) have made it possible for the Secretary to comply with an aggressive four-year timetable to reduce the backlog of Medicare appeals: by 19 percent at the end of FY 2019, by 49 percent at the end of FY 2020, by 75 percent at the end of FY 2021 and by 100 percent at the end of FY 2022.5
Since the time of its initial filing, this case has served as a catalyst for the Secretary’s release of various initiatives and programs to mitigate the backlog. Most recently, in June 2018 OMHA publicly implemented a long-awaited expansion to its Settlement Conference Facilitation (SCF) process which was first released in June 2014. SCF is an alternative dispute resolution process which provides appellants and the Centers for Medicare & Medicaid Services (CMS) an opportunity to discuss a mutually agreeable resolution for claims appealed to the ALJ or Medicare Appeals Council (Council) levels of appeal. SCF is a one-day mediation, in which an OMHA senior attorney or program analyst trained in mediation techniques acts as a neutral facilitator between the appellant and CMS to negotiate a lump-sum settlement on eligible appeals. If a settlement is reached, a settlement agreement is signed the day of the facilitation and the settled claims are dismissed from the Medicare appeals process.
History of SCF Program
OMHA has released four iterations, or “phases” of the SCF program since it was initially released in June 2014.6 Under each phase, OMHA has expanded the eligibility criteria for appellants and appeals so that the SCF program has a greater opportunity to resolve backlogged appeals at the ALJ and Council levels of appeal. The first phase of the SCF program was available only to Medicare Part B providers and suppliers. For a Part B claim to be eligible under the initial SCF, an ALJ hearing request had to have been filed in 2013 and the appeal could not already be assigned to an ALJ for hearing. OMHA then expanded SCF in a “phase II” program in the fall of 2015. Phase II expanded claim eligibility criteria to ALJ hearing requests filed on or before September 30, 2015 and not yet scheduled for ALJ hearing. Under phase II, at least 20 claims had to be at issue or at least $10,000 in controversy if fewer than 20 claims were involved. In February 2016, OMHA expanded SCF to all Medicare Part A providers in a “phase III” program. For a Part A claim to be eligible, the ALJ hearing request must have been filed on or before December 31, 2015 and not yet scheduled for ALJ hearing. Additionally, each individual claim had to be $100,000 or less and there had to be at least 50 claims and $20,000 collectively in controversy.
As of December 31, 2017, OMHA had resolved 70,785 appeals through the various phases of the SCF program, which is the equivalent of almost an entire year’s disposition capacity for all of OMHA.7 Resolving nearly an entire year’s worth of appeals from the ALJ level of the appeals process frees up considerable resources for OMHA to adjudicate claims that are not eligible for SCF, or claims that appellants preferred to try at hearing. Given the success of the SCF program in reducing the backlog and providing appellants with an efficient and cost-effective alternative to resolving eligible appeals, appellants and industry stakeholders called on CMS to release an expansion to the SCF program.8
The Most Recent Expansion to OMHA’s SCF Program
In the latest SCF expansion in June, OMHA significantly expanded the program’s eligibility criteria for appellants and appeals. For appellants, any Medicare Part A or Part B provider or supplier (with an assigned National Provider Identifier (NPI) number) is eligible for participation, so long as that provider or supplier has not filed for bankruptcy or expects to file for bankruptcy in the future, and does not have past or current False Claims Act litigation or investigations against it or other program integrity concerns such as civil, criminal or administrative investigations.9 Also, the provider or supplier must have either: (1) 25 or more eligible appeals pending at OMHA and the Council combined, or (2) less than 25 eligible appeals pending at OMHA or the Council and at least one appeal has more than $9,000 in billed charges.10
Under the most recent expansion to the SCF program, eligible appeals must meet all of the following criteria:
- Appeals must involve requests for ALJ hearing or Council review filed on or before November 3, 2017;
- The request(s) for ALJ hearing or Council review must arise from a Medicare Part A or Part B Qualified Independent Contractor (QIC) reconsideration decision;11
- All jurisdictional requirements for OMHA or Council review must be met for the eligible appeals;
- All pending OMHA and Council appeals associated with a single NPI and corresponding Provider Transaction Access Number (PTAN) must be included in SCF;12
- Appeals must not be scheduled for an ALJ hearing and an ALJ hearing must not have been conducted;
- The billed amount of each individual claim must be $1,000,000 or less. For the purposes of a statistical sample, the extrapolated overpayment amount stated in the initial demand notice must be $1,000,000 or less;
- Settlement agreements with individual claims, or extrapolated overpayments, of $100,000 or less will be fully executed when CMS and the appellant sign the settlement agreement.
- Settlement agreements with any individual claims, or extrapolated overpayments, in excess of $100,000 (and up to $1,000,000) will be subject to U.S. Department of Justice (DOJ) approval prior to full execution by CMS and the appellant.
- Appeals must not be involved in OMHA’s Statistical Sampling Initiative;13
- Appeals must not be actively engaged in a CMS Medicare appeals initiative made available on or after November 3, 2017 (i.e. the Low Volume Appeals Settlement, the QIC Demonstration Project, or the CMS Serial Claims Initiative);14
- The beneficiary must not have been found liable for the amount in controversy after the initial determination or participated in the reconsideration;
- Appeals must not involve items, services, drugs or biologicals billed under unlisted, unspecified, unclassified or miscellaneous healthcare codes;
- Appeals must not involve payment disputes (i.e. the appellant was paid as billed but the appellant disputes that the paid amount is sufficient payment);
- Appeals must not arise from a QIC or ALJ dismissal order; and
- Appeals must not be beneficiary-initiated appeals of QIC reconsiderations or any appeals arising from Medicare Part C, Part D or appeals of Social Security Administration decisions regarding entitlement, Part B late enrollment penalties, and Part B and Part D income-related monthly adjustment amounts (IRMAAs).15
OMHA designed the expanded SCF program to resolve large volumes of claims at the ALJ or Council levels, or lower volumes of claims at the ALJ or Council levels with high billed charges. To initiate SCF under the expanded program, an appellant must submit a form Request for SCF to OMHA.16 CMS will have 15 calendar days to accept or reject participation in the process.17 If CMS agrees to participate (which should be considered likely unless an appellant does not satisfy the program’s appellant eligibility criteria for participation), OMHA will create a spreadsheet from its appeals database identifying all potentially eligible appeals for SCF resolution. OMHA will then send the spreadsheet to the appellant in a Preliminary Notification Package. An appellant will have 20 calendar days from receipt of the Preliminary Notification Package to review the eligible claims spreadsheet and accept or reject participation in the SCF process. Although there is no formalized process under which an appellant can resolve discrepancies in the appeals identified on OMHA’s spreadsheet, in the authors’ experience OMHA has been cooperative in working with appellants to include additional eligible appeals that were inadvertently omitted from OMHA’s initial spreadsheet of claims. Therefore, it is imperative that immediately upon receipt of OMHA’s spreadsheet of eligible appeals that appellants immediately begin to review the identified appeals to verify that all eligible appeals were properly identified and included. If the appellant identifies appeals that were not included that do satisfy OMHA’s eligibility criteria, the appellant should consider contacting OMHA’s SCF team within the initial 20 calendar days to verify the eligible appeals and identify discrepancies. If an appellant accepts participation in the SCF program, following OMHA’s receipt of the appellant’s Preliminary Notification Package the appellant will be issued an SCF Confirmation Notice.
In a significant departure from prior phases of the SCF program, the expanded SCF program provides certain eligible appellants with a “fast track” resolution opportunity. Appellants with appealed claims that have billed amounts of $100,000 or less, or appeals of an extrapolated overpayment that is $100,000 or less will be offered an “SCF Express” settlement offer. The SCF Express offer will be communicated to appellants within 30 calendar days of the SCF Confirmation Notice. An appellant has only seven calendar days from the date of the SCF Express offer to accept or reject the offer. The SCF Express offer is a non-negotiable settlement sum and will not be based on a medical review of an appellant’s eligible appeals, and appellants do not have the opportunity to submit initial information for CMS’ consideration as part of the SCF Express process. However, appellants should expect that the SCF Express settlement offer will be based on preliminary data available to CMS regarding the appellant and its claims. This preliminary data may include the appellant’s past record of favorable findings at the ALJ hearing and Council levels of review, type of claim or service at issue, or the number and scope of prior audits initiated by CMS regarding the appellant. If an appellant accepts the SCF Express settlement offer, the appellant and CMS will sign a settlement agreement memorializing the terms of the settlement and the covered claims will be dismissed from the Medicare appeals process. If an appellant rejects the SCF Express settlement offer, the appellant has the opportunity to proceed to the SCF conference, discussed below, during which the appellant has the opportunity to negotiate a settlement value with CMS. Once the SCF Express settlement offer is rejected, it is expired and cannot later be accepted at the SCF conference. At the SCF conference CMS may extend the same or a similar percentage, a higher percentage, or a lower percentage than what was extended through SCF Express.
If an appellant rejects the SCF Express settlement offer but elects to proceed to the SCF conference, OMHA will coordinate a Pre-Settlement Conference between the appellant and CMS. At the Pre-Settlement Conference, the appellant, CMS and the OMHA facilitator will discuss the logistics for the settlement conference, including scheduling a date and time for the settlement conference, selection of sample claims for CMS’ and the appellant’s consideration, and scheduling the timing of submission of supporting materials, such as a position paper.
In a settlement conference where all appealed claims have billed amounts of $100,000 or less or the extrapolated overpayment is $100,000 or less, and the parties reach an agreement, CMS and the appellant will sign the settlement agreement the day of the conference. In a settlement conference where the appealed claims have billed amounts in excess of $100,000 or the extrapolated overpayment is in excess of $100,000, and the parties reach an agreement, the OMHA facilitator will inform the DOJ of the proposed settlement terms. If the DOJ approves, the OMHA facilitator will allow CMS and the appellant one business day, respectively, to sign and return the proposed settlement agreement to OMHA. If settlement is not reached, the appeals will return to the previous assigned adjudicator, if applicable, or to the OMHA and Council docket for future assignment in the order in which the request for review was received.
Practical Considerations for Participating in SCF
When participating in SCF, appellants should keep in mind certain practice tips and strategies. First, appellants should prepare a thorough evaluation of any sample claims identified during the Pre-Settlement Conference, because CMS will review these claims and form an opinion on the strength of these claims prior to the facilitation. An appellant’s thorough evaluation should include a comprehensive position paper discussing the strength of the claims and applicable authorities, with supporting documentary evidence and testimonial support. Appellants should timely submit this information to CMS for CMS’ consideration in advance of the SCF conference. A thorough and strong posturing of the case prior to the conference can have a substantial impact on the success of the conference. At the conference there are no findings of fact or rulings of law; therefore the sample claims will not be adjudicated nor will appellants have the opportunity to discuss each sample claim in detail. However, participants should be prepared to make a general opening statement highlighting major issues and concepts for CMS’ consideration. Following opening statements, the SCF conference then proceeds through private sessions with the OMHA facilitator, who acts as a neutral intermediary in facilitating a resolution between the appellant and CMS. The SCF process is fully voluntary such that at any time prior to or during the conference CMS or the appellant can voluntarily abandon the process. If CMS or the appellant abandons the process, or if the parties engage in negotiations but cannot reach agreement, an appellant’s claims return to the ALJ appeals process in the order in which they were originally received.
OMHA did not establish a firm timetable for completion of the SCF process, although in experience the process takes at least 10 weeks from the date an appellant receives OMHA’s spreadsheet identifying eligible claims until the date of the SCF conference. If an appellant accepts OMHA’s SCF Express offer, the process takes considerably less time.
SCF offers an expedited resolution process compared to Medicare’s traditional five-step appeals process, which at recent estimates takes nearly 163 weeks at the ALJ level of appeal alone. The voluntary and expedited nature of the SCF process should be attractive to Medicare appellants seeking a cost-effective and efficient resolution of their pending appeals. There is no deadline by which appellants must participate in the SCF process. However, as the appeals backlog is not expected to clear until 2022 at the earliest, providers and suppliers should begin reviewing their potentially eligible claims for the expanded SCF process and consider participating.
1 There are five levels of appeal within the Medicare appeals process: (1) at level one an appellant files a request for redetermination with the Medicare Administrative Contractor (MAC) (Part A & B appellants), Medicare Advantage Plan (Part C appellants) or Medicare Prescription Drug Plan (Part D appellants); (2) at level two an appellant files a request for reconsideration with the Qualified Independent Contractor (QIC) (Part A & B appellants) or Independent Review Entity (Part C or D appellants); (3) at level three an appellant files a request for Administrative Law Judge hearing with OMHA (Part A, B, C or D appellants); (4) at level four an appellant files a request for Medicare Appeals Council review (Part A, B, C or D appellants) (the Medicare Appeals Council is within the Departmental Appeals Board and for purposes of this article, the fourth level of appeal is referred to as the Council level of appeal); and (5) at level five an appellant files a civil action in Federal District Court (Part A, B, C or D appellants). See OMHA’s website at http://www.hhs.gov/omha/process/index.html (last accessed 12/03/2018).
2 42 C.F.R. § 405.1016(a). See also OMHA’s website at https://www.hhs.gov/about/agencies/omha/about/current-workload/average-processing-time-by-fiscal-year/index.html (last accessed 12/03/2018).
6 The AHA’s legal suit to clear the backlog of appeals was filed May 22, 2014, approximately one month prior to OMHA’s release of phase 1 of the SCF program. By releasing an alternative resolution process such as SCF, which promoted the efficient resolution of appeals, CMS sought to avoid the issuance of a mandamus order by demonstrating to the Court that judicial action on the appeals backlog was not warranted.
7 At a recent speech regarding the appeals process and new initiatives to combat the backlog and improve the appeals process, Chief Administrative Law Judge Nancy Griswold of OMHA estimated that in FY 2017 OMHA decided 84,729 appeals. “Latest Policy & Regulatory Changes to the Medicare Appeals Process,” American Health Lawyer’s Association Conference, March 21-23, 2018, presentation by Nancy J. Griswold, Chief Administrative Law Judge, OMHA and Erin Diesel Roumayah, Esq.
8 See Questions and Answers document from OMHA’s Appellant Forum on February 25, 2016 at question 22, located at https://www.hhs.gov/sites/default/files/OMHA%20Appellant%20Forum%20Questions%20Answers%20Routing%20-%2007-07-16_remediated.pdf (last accessed 12/03/2018).
9 See CMS’ website regarding the expanded Settlement Conference Facilitation program at https://www.hhs.gov/about/agencies/omha/about/special-initiatives/settlement-conference-facilitation/index.html (last accessed 12/03/2018).
11 A QIC is a review entity that contracts with Medicare to review and process appeals at the second level of the Medicare appeals process, known as reconsideration, for Medicare Part A or Part B appeals. However, if an appeal involves a Medicare Part C or a Part D claim for services, the second level appeal is not processed by a QIC but rather is processed by an Independent Review Entity. Although decisions by an Independent Review Entity can be appealed to an ALJ for hearing at the third level of the Medicare appeals process, a decision by an Independent Review Entity on a Part C and Part D claim for Medicare benefits is not eligible for resolution through the expanded Settlement Conference Facilitation program. To be eligible for the expanded Settlement Conference Facilitation program the appeal must arise from a Medicare Part A or Part B claim for benefits.
12 A Provider Transaction Access Number or a “PTAN” is an identification number issued to Medicare providers by Medicare Administrative Contractors upon a provider’s enrollment in Medicare as an approved provider of Medicare services. (See CMS MLN Matters Number SE 1216 dated September 5, 2014 and available at https://www.cms.gov/Outreach-and-Education/Medicare-Learning-Network-MLN/MLNMattersArticles/downloads/SE1216.pdf (last accessed 12/03/2018). While the National Provider Identification Number or “NPI” is used by providers to bill the Medicare program, the PTAN is utilized to authenticate a provider when communicating with CMS.
13 OMHA’s Statistical Sampling Initiative is another expedited resolution process and alternative to Medicare’s appeals process in that it offers a consolidated ALJ hearing process with the use of statistical sampling and extrapolation on large volumes of pending, eligible ALJ appeals. See OMHA’s website discussing the Statistical Sampling Initiative, located at https://www.hhs.gov/about/agencies/omha/about/special-initiatives/statistical-sampling/index.html (last accessed 12/03/18).
14 OMHA’s Low Volume Appeals Initiative was a lump sum settlement offer that was open to Medicare Part A and Part B appellants with eligible fee-for-service appeals pending in the administrative appeals process. This initiative is now closed for participation, but additional details regarding this program are located on OMHA’s website at https://www.cms.gov/Medicare/Appeals-and-Grievances/OrgMedFFSAppeals/Appeals-Settlement-Initiatives/Low-Volume-Appeals-Initiative.html (last accessed 12/03/18).
15 IRMAAs are adjustments to Medicare premiums that apply to Medicare beneficiaries with higher incomes and that are enrolled in Medicare Part B or are covered under a Medicare Part D Prescription Drug Plan. Medicare beneficiaries may appeal the calculation of an IRMAA if they believe it was incorrectly calculated. See OMHA’s website explaining IRMAA appeals at https://www.hhs.gov/about/agencies/omha/the-appeals-process/part-b-premium-appeals/index.html (last accessed 12/03/18). Appeals of IRMAAs are not eligible for resolution in OMHA’s expanded SCF program.
16 The Request for SCF form and submission instructions are located on OMHA’s website at https://www.hhs.gov/about/agencies/omha/about/special-initiatives/settlement-conference-facilitation/index.html (last accessed 12/03/18).