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02.17.2016 Legal News

Judicial Solution May Force Faster Medicare Appeals

Last week, the American Hospital Association (AHA) and several hospitals were successful in convincing the U.S. Court of Appeals for the D.C. Circuit to overturn a 2014 lower court decision, possibly paving the way for a faster and more efficient Medicare appeals process.  Currently, due to a massive system backlog, it is taking about 572 days to get Medicare appeals decisions from Administrative Law Judges (ALJs), a time period far exceeding that mandated by statute.  Last Tuesday’s decision indicates that a judicial order to resolve the situation may be forthcoming.  Such a change might encourage more providers to appeal cases where the backlog once seemed to make that option unattainable.  It would certainly benefit providers by limiting the timeframe of the seemingly indefinite appeals process, a period in which critical funds can be restricted.

In what could be a watershed moment for the Medicare appeals process, the Court of Appeals departed from the rationale behind the 2014 District Court opinion that stated, “the Court hopes that the Secretary and Congress will continue working together toward a solution and that OMHA [the Office of Medicare Hearings and Appeals] will receive the resources necessary to fill its obligation.”  Am. Hosp. Ass'n v. Burwell, 76 F. Supp. 3d 43, 56 (D.D.C. 2014) rev'd and remanded sub nom. Am. Hosp. Ass'n v. Burwell, No. 15-5015, 2016 WL 491658 (D.C. Cir. Feb. 9, 2016).  Last week’s decision spells out two distinct choices for the District Court when it revisits the issue:  (1) “determine Congress and Secretary are making significant progress towards a solution” or, more likely, (2) issue a writ of mandamus ordering the Secretary to “cure the systemic failure to comply with the deadline.”  Am. Hosp. Ass'n v. Burwell, No. 15-5015, 2016 WL 491658 (D.C. Cir. Feb. 9, 2016).  The Appeals Court’s repeated references to a situation that has gotten progressively worse since the fall of 2014 signals that a judicial solution may now be necessary.

Regardless of the course, there are clear implications for those who may face Medicare denials or those who currently are involved in a Medicare appeal.  First, the reintroduction of a quicker process may encourage more providers to exercise their appeal rights.  An AHA survey cited by the Appeals Court explained that AHA members appealed 52% of Recovery Audit Contractor (RAC) denials and that 66% of those appeals ultimately were successful. Id.  Second, providers will know that funds will be tied up for a more definitive period while waiting for an ALJ hearing.  Put simply, the hope is that the system will function under the timeframes set forth in the statute. 

Under the statute, hospitals and health care providers submit claims for Medicare-eligible services to Medicare Administrative Contractors (MACs).[1]  If the MAC denies the claim, the provider can appeal through a four-stage administrative appeal process.

  • First, the provider resubmits its claim to the MAC for redetermination.[2]  
  • Second, if the redetermination is unfavorable, the provider may then have the appeal reconsidered by a Qualified Independent Contractor (QIC).[3]   
  • Third, the provider may then appeal to an ALJ.[4]  The third step is overseen by OMHA.  Hearings before ALJs are critically important because providers prevail infrequently in the first two steps. 
  • Fourth, the provider can appeal to the Medicare Appeals Council, a division of the Departmental Appeals Board (DAB).[5]

Under federal law, there is a specific time frame for each stage in the appeal:  60 days for the first stage, 60 days for the second stage, 90 days for the third stage (this includes the rendering of an opinion) and 90 days for the final stage.  Under the statute, in cases in which the Secretary fails to meet the deadline, the provider may “escalate” automatically to the next stage. 

The demands on this system changed dramatically with the introduction of the RACs in 2010, under the Medicare Recovery Audit Program.  With RAC audits supplementing regular audits, the number of appeals jumped markedly from 59,600 in fiscal year 2011 to over 384,000 in fiscal year 2013.  Unfortunately, the spike in appeals did not generate a proportionate increase in staffing.  Though the OMHA receives around 400,000 appeals annually, it recently reported that it only had the capacity to process around 72,000 appeals a year.  Because of this lack of resources, the average 2015 ALJ decision had been pending for approximately 572 days.  In 2013, the backlog was so severe that OMHA’s Chief of Staff sent a memorandum to certain hospitals that OMHA had temporarily suspended assigning appeals.

The practical implications of these delays were not lost on the Appeals Court.  In its opinion, the Court cited the case of Baxter Regional Medical Center, which reinforced the need for speedy appeals by “explaining that having appeals money tied up . . . makes it much more difficult to purchase replacement ICU beds, replace (rather than patch) a roof in its surgery department and replace a twenty-year- old cauterization lab which will ‘soon need to be shut down.’”  Am. Hosp. Ass'n v. Burwell, No. 15-5015, 2016 WL 491658 (D.C. Cir. Feb. 9, 2016).

Providers will want to watch closely for the District Court’s next steps and can find more information from the Williams Mullen health care team once a decision is reached by the Court.


[1] 42 U.S.C. §§ 1395ff(a)(1)-(2), 1395kk-1(a); 42 C.F.R. §§ 405.904(a)(2), 405.920-58. 
[2] 42 U.S.C. § 1395ff(a)(3)(A), (a)(3)(C)(ii)
[3] 42 U.S.C. § 1395ff(c)
[4] 42 U.S.C. § 1395ff(b)(1)(E)(i), (b)(1)(E)(iiii), (d)(1)(A); 42 C.F.R. § 405.1006(b); 80 Fed. Reg. 57,827 57,827 (2015)
[5] 42 C.F.R. §§ 405.1100-34