October 12, 2016

Medicare Appeals Backlog Crisis: Looking for Solutions – Part I

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The situation at the Office of Medicare Hearings and Appeals (OMHA) continues to deteriorate. The appeals backlog continues to explode, and different options are being considered to solve the problem.

In part I of this series, we will examine the statistics behind the backlog. In Part II, we will examine the proposal to add a new role for attorney adjudicators (AAs), who can take over part of the administrative law judges’ (ALJs’) work during the appeals process. In Part III we will examine the proposal for bulk settlements based on a simple percentage of claims, but with no review of the claims themselves: the "80-percent rule." In Part IV we will examine financial strategies being used by hospitals to handle the massive impounding of their claim payments.

The recent ruling in American Hospital Association v. Burwell keeps up the pressure on OMHA to dig out of this hole. In the ruling, we see that the exploding backlog is "especially harmful to hospitals, because HHS (the U.S. Department of Health and Human Services) recoups funds after the QIC (qualified independent contractor) stage" under 42 U.S.C. § 1395ddd(f)(2)(A).

This is the time gap in the appeals process preceding the hearing with the ALJ. The essence of the backlog problem is that the amount of time that passes before an ALJ decision finally is rendered is rapidly increasing. The prospect for any hospital to get their money back is running away into the distant future, thus draining the cash reserves of the hospital, or leaving its banking account empty.

For hospitals that have a large share of patients relying on Medicare, this seizure of funds is particularly damaging. Some are faced with decisions to suspend some services, or even defer maintenance on buildings. One hospital recently reported an inability to repair a leaking roof covering its ER facility.

In 2011, a total of 59,600 appeals were filed. In 2013, the number had shot up to 384,000. Challenges of Recovery Auditor (RA) decisions are responsible for 46 percent of these appeals. 

Hospitals frequently appeal because statistics show there is a reasonable chance of success in turning around claim denials made by overzealous auditors. These are denials that never should have been made in the first place. For example, hospitals appeal around 52 percent of RA denials, and they win around 66 percent of the time. That amounts to a good chunk of change. 

OMHA does not have the capacity to handle the current caseload. It can process only around 72,000 appeals per year, which is less than one-fifth of the needed capacity. As of July 2014, the backlog had risen to over 800,000 appeals. 

Just as a reminder, here are a few of the deadlines: redetermination by Medicare Administrative Contractors (MACs) is 60 days (42 U.S.C. § 1395ff(a)(3)(C)(ii)); reconsideration by QICs is 60 days (§ 1395ff(c)(3)(C)(i)); time in which to hold a hearing and render a decision by an ALJ is 90 days (§ 1395ff(d)(1)(A); and review by DAB and a decision or remand is 90 days (§ 1395ff(d)(2)(A)). This adds up to 10 months.

Simple math shows that at this rate, appeals easily could take more than 130 months to resolve. In simple terms, the amount of time to resolve claims is at least 13 times greater than that required by the statutory framework. 

OMHA long ago went into "crisis mode." Back in 2013, the chief ALJ of OMHA notified hospitals that it was "temporarily suspending appeals to ALJ dockets" and that this suspension would last "at least 24 months."

That is like saying "I would love to pay you back, but you have to wait at least two years for me to think about it again." 

Again, in Part II we will examine proposals published in the Federal Register to offload some of the appeal work onto a new class of administrative lawyers called AAs.

About the Author 

Edward M. Roche is the founder of Barraclough NY LLC, a litigation support firm that helps healthcare providers fight against statistical extrapolations. Prior to joining the California Bar, Dr. Roche served as the chief research officer of the Research Board (Gartner Group) and chief scientist of the Concours Group, both leading IT consulting and research organizations. 

Contact the Author 

roche@barracloughllc.com

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