July 27, 2016

CMS Proposed Rule to Implement Major Reforms to Medicare Appeals Process

By Andrew B. Wachler, Esq. and Jessica C. Forster, Esq.


Andrew B. Wachler, Esq.


Jessica C. Forster, Esq.

On July 5, the Centers for Medicare & Medicaid Services (CMS) published a proposed rule heralding significant changes to the Medicare appeals process, particularly in light of the backlog of Medicare appeals currently pending.

Recently, this backlog has been the subject of focus for the U.S. Department of Health and Human Services (HHS), CMS, the Government Accountability Office (GAO), and Congress. These government entities have taken steps to attempt to implement reform within the Medicare audit and appeals processes in an effort to reduce the backlog.  These efforts have included a GAO report critiquing the appeals system with suggestions for improvement, the Audit & Appeals Fairness, Integrity, and Reforms in Medicare (AFIRM) bill pending in the U.S. Senate, and administrative actions by HHS, CMS, and the Office of Medicare Hearings and Appeals (OMHA). This new rule is the federal government’s latest attempt to address the core issues feeding into the appeals backlog.

According to a GAO report released earlier this year, the number of administrative law judge (ALJ) hearing requests being submitted increased by 936 percent between the 2010 and 2014 fiscal years, going from 41,733 appeals to 432,534. The growing docket has led to longer delays due to a system that cannot keep pace with the volume of appeal requests. These delays place a large burden on providers and suppliers, which depend upon the timely processing of appeals in order to proceed with focusing on high-quality patient care.

To this end, the proposed rule takes steps to amend procedures at the ALJ level of appeal. According to the rule, in addition to Medicare appeals on the merits of medical necessity being filed, ALJs are also responsible for processing appeal dismissals, withdrawals, and other procedural rulings that do not require an oral hearing. The rule would allow “attorney adjudicators,” defined as “a licensed attorney employed by OMHA … with knowledge of Medicare coverage and payment laws and guidance,” to handle non-hearing decisions at the ALJ level of appeal, such as withdrawals and dismissals. This change would add more reviewers to the system and relieve some of the workload for ALJs, foreseeably allowing for actual claims on merits to be processed faster.

In addition, the rule proposes to calculate the amount in controversy (AIC) for ALJ hearings based on the Medicare allowable amount rather than billed charges. Exceptions to this revision would be if a claim is not priced pursuant to a fee schedule or does not have a published, contractor-priced allowable amount. In these situations, the AIC will continue to be based on the billed charges. 

Another change to the ALJ level of appeal proposed in the rule is the criteria for when a party may submit evidence for the first time. The rule provides that a party may submit evidence l if good cause exists, as determined by the ALJ or an attorney adjudicator pursuant to four separate criteria.

Specifically, the rule proposes that an ALJ may accept good cause when a) the ALJ or attorney adjudicator finds that the new evidence is material to an issue addressed in the qualified independent contractor’s (QIC’s) reconsideration decision and the issue was not identified as a material issue prior to the QIC’s decision; b) the new evidence is material to a new issue identified in the QIC’s decision; c) the party was unable to obtain the evidence before the QIC issued its reconsideration decision and the party submits evidence that establishes the party’s reasonable attempts to obtain the evidence before the decision was made; d) the evidence was submitted by the party to the QIC, and the party can supply evidence of such, but it was not included in the administrative record.  In addition to these four circumstances, the rule proposes a fifth example in which the ALJ or attorney adjudicator determines that the party demonstrated that it could not have obtained the evidence before the QIC issued its reconsideration decision.

In addition to allowing for the acceptance of new evidence, the rule proposes to revise regulations relating to when an ALJ may consider a new issue at hearing that was not part of the initial administrative record. The proposed revision would allow an ALJ to consider a new issue only if the resolution of the issue is material to the claim and a) there is new or material evidence not available or known at the time of the underlying determination; and b) if the evidence considered in making the determination was in obvious error. 

The rule also introduces proposed changes to higher levels of appeal. Specifically, this would affect appeals heard by the Medicare Appeals Council, the fourth step in the Medicare appeals process.

Currently, final Council decisions are binding only upon the same parties that took part in the original appeal. However, the rule proposes that some judgments made by the Council be given precedent over all lower-level cases and contractors, regardless of the original parties involved, in an effort to make appeal decisions more consistent and uniform.

The authority to deem a holding precedential would be given to the chair of the Departmental Appeals Board (DAB). In order to give notice, the precedents would be published via the Federal Register, and the opinion would also be made public once all confidential information is redacted. After those steps are complete, the precedents would become binding upon lower levels of appeal (including the ALJ level). The rule clarifies that this would not add precedential weight to any other decisions, only those made by the Council that the DAB chair explicitly selects to be binding.

The rule also covers some textual issues, and would alter and add certain references throughout the Medicare regulations. First, the rule would add references to OMHA, which was not yet developed at the time of the regulations’ original drafting. Second, the Code of Federal Regulations would be revised to change the Medicare Appeals Council’s current acronym, MAC (as well as references to it as the “Board”), to “Council.” The “MAC” acronym would be changed to avoid confusion with “Medicare Administrative Contractors,” and “Board” will be altered so as to not cause confusion between mentions of the Council and the DAB. While these last two changes are not striking, or especially related to the appeals backlog, they are still aimed at streamlining inefficiencies within the Medicare appeals system.

The reforms proposed in the rule reflect the similar themes outlined in reports and proposed legislation previously published. Specifically, the focus of these actions is on efforts to create more efficiency throughout the Medicare audit and appeals process in order to reduce the current backlog of appeals. While the rule’s proposed revisions could improve the Medicare appeals process, stakeholders should consider submitting comments on the proposed changes.

The rule provides that comments on the proposed revisions will be accepted either electronically at https://www.regulations.gov or via mail addressed to the Office of Medicare Hearings and Appeals, Department of Health and Human Services, Attention HHS-2015-49, 5201 Leesburg Pike, Suite 1300, Falls Church, Va., 22041.

All comments must be received by 5 p.m. EST on Aug. 29.

About the Authors

Andrew B. Wachler is the principal of Wachler & Associates, P.C.  He graduated Cum Laude from the University of Michigan in 1974 and was the recipient of the William J. Branstom Award. He graduated Cum Laude from Wayne State University Law School in 1978. Mr. Wachler has been practicing healthcare and business law for over 25 years and has been defending Medicare and other third party payor audits since 1980.  Mr. Wachler counsels healthcare providers and organizations nationwide in a variety of legal matters.  He writes and speaks nationally to professional organizations and other entities on a variety of healthcare legal topic

Jessica Forster is an associate at Wachler & Associates, P.C.  She dedicates a considerable portion of her practice to defending healthcare providers and suppliers in the defense of RAC, Medicare, Medicaid and third party payer audits.  Her practice also includes the representation of clients in Stark, anti-kickback, and fraud and abuse matters.

Contact the Authors

awachler@wachler.com

jforster@wachler.com

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