February 18, 2015

Looming Changes Evident in Newly Unveiled Medicare Budget

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President Barack Obama’s 2016 budget report was recently released, and the news coming out of Washington, D.C. does not bode well for hospital appellants and the appeals process. The 150-page report has approximately 10 pages that are dedicated to healthcare issues. The Medicare budget includes a projected savings of $407.2 billion over 10 years and includes a $403 million mandatory multi-year investment in detecting, preventing, and prosecuting healthcare fraud.

Buried in the budget request for the U.S. Department of Health and Human Services (HHS) are several concerning proposals that attempt to address the Medicare administrative law judge (ALJ) appeals backlog. These proposals would adversely affect the already unlevel Medicare appeals playing field. The proposals included in the budget request were suggestions recommended by the Office of Medicare Hearings and Appeals (OMHA). The requested budget for OMHA is $140 million, an increase of $53 million over the 2015 fiscal year.

Ironically, the title of HHS budget brief is “Strengthening Health and Opportunity for All Americans;” it can be found online at http://www.hhs.gov/budget/fy2016/fy-2016-budget-in-brief.pdf . The OMHA section can be found beginning on page 139. HHS has developed what it is calling a three-pronged approach for improvement titled the “Medicare Appeals Process Improvement Strategy.” The three approaches are as follows:

  1. Invest new resources at all levels of appeal to increase adjudication capacity and implement new strategies to alleviate the current backlog.

  2. Take administrative actions to reduce the number of pending appeals and prevent new cases from entering the system.

  3. Propose legislative reforms that provide additional funding and new authorities to increase efficiency and address the volume of incoming appeals.

Two of the most concerning proposals from OMHA include the establishment of a per-claim filing fee charged to providers and suppliers at each of the four Medicare appeal levels, and the allowance of sampling and extrapolation to adjudicate appeals into a single administrative appeal at all levels. According to the report, the per-claim filing fee would be returned to appellants if they receive a fully favorable appeal decision. Just the claim filing fees alone are projected to recover $5 million, and OMHA has indicated that this money would fund an increase from 77 ALJ teams to a projected 196 teams, as well as improve the responsiveness and efficiency of the appeals system.

Currently, OMHA administers five field offices and projects that its backlogged claims will increase to 1,200,000 in 2015. This is an 83-percent increase over its 2013 totals. Currently, the time frame for adjudication averages approximately 400 days. The sampling and extrapolation process was part of a pilot project put forth by OMHA back in mid-2014 known as the Statistical Sampling Pilot.

This program was to allow for a potentially mutually agreeable resolution between appellants and the Centers for Medicare & Medicaid Services (CMS) for claims appealed to the ALJ hearing level.

Concerns were voiced by many facilities, state organizations, and legal representatives during the pilot project, and very few hospitals participated in the program. OMHA has admitted that this project is insufficient as it pertains to addressing the recent dramatic growth in appealed claims.

Other proposals include increasing the amount in controversy minimum amount for a claim to be adjudicated by ALJ; remanding all appeals back to a Medicare contractor if any new evidence is submitted at or above level 2; implementing a system in which a magistrate would adjudicate all claims below the amount of controversy; and allowing CMS to retain an increased percentage of the payments denied by the RACs. A portion of the increased percentage of RAC recoveries is proposed to fund fraud and abuse prevention activities such as provider education/training and new processing edits.

The appeals process was set up to provide a fair and efficient means of dispute resolution, but the proposals now being put forth would adversely affect most hospital appellants by limiting the number of appealed cases. Not only would hospitals have to go through the expense of writing an appeal, but again, they would also have to pay a fee at each level of the appeal process. Depending on the fees and the values of the denied claims, this would effectively preclude many hospitals from appealing all claims for which they disagreed with the initial determinations. This effectively shuts down the appeal option, particularly for smaller facilities. 

Many in the provider community believe that the proposals appear to be aimed toward discouraging cases from entering the appellate process. Providers are left to question the root cause of inappropriately denied cases that are overturned and how appropriately auditor accountability can be integrated in the process. The burdens audits place on providers are unyielding, and the amount of money directed into the appeal process by hospitals is staggering. The question remains how to monitor fraud and abuse prevention efforts without placing undue administrative burden on the provider community, which ultimately redirects limited Medicare resources away from patients. 

About the Author

Amy Shaffner, RN, BSN, PHN is responsible for providing government guidance, support, and oversight to acute-care facilities at Optum360. She ensures that key stakeholders have the tools, knowledge, and processes to effectively manage responses to government audits and to minimize the fiscal impact to the health system. Amy counsels and educates appeal nurse writers in a variety of subjects relating to the denial process and appeals. She performs QM audits and promotes standardization of the audit process.

Contact the Author

Amy.Shaffner@DignityHealth.org

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Amy Shaffner, RN, BSN, PHN

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