Updated on: November 29, -0001

News Alert: CMS Finalizes Reforms for Medicare Appeals Process

By Andrew B. Wachler and Jessica C. Forster
Original story posted on: January 18, 2017

Effective Jan. 17, 2017, the Centers for Medicare & Medicaid Services (CMS) published a final rule titled Medicare Program: Changes to the Medicare Claims and Entitlement, Medicare Advantage Organization Determination, and Medicare Prescription Drug Coverage Determination Appeals Procedures, finalizing proposed changes made to the Medicare appeals process. 

The purpose of the revisions, which become effective March 20, 2017, is to assist in reducing the continually increasing workload at the administrative law judge (ALJ) level of appeal. The final rule outlined the “recent workload challenges” to the Medicare appeals process – specifically noting that the number of requests at the ALJ level of appeal increased 1,222 percent from fiscal year 2009 through 2014. Although according to CMS, ALJ productivity has improved, the number of appeal requests continues to exceed the Office of Medicare Hearings and Appeals (OMHA) capacity to adjudicate cases. The most recent figure from CMS reflects that as of Sept. 30, 2016, over 650,000 appeals were pending at OMHA for adjudication, while the Office’s adjudication capacity under current regulatory standards and procedures is approximately 92,000 appeals per year.

The U.S. Department of Health and Human Services (HHS) has a three-pronged approach to addressing the increasing number of appeals and the current backlog of claims waiting to be adjudicated:

  • Request new resources to invest at all levels of appeal to increase adjudication capacity and implement new strategies to alleviate the current backlog;
  • Take administrative actions to reduce the number of pending appeals and implement new strategies to alleviate the current backlog;
  • Propose legislative reforms that provide additional funding and new authorities to address the volume of appeals.

Based upon this approach and the data’s support that immediate action is required to address the growing backlog of appeals, the new final rule implements significant changes to the Medicare appeals process. CMS anticipates that these changes will make a meaningful difference. 

The first major finalized regulatory change announced in the final rule is a provision to permit certain decisions from the Departmental Appeals Board (DAB)/Medicare Appeals Council to be binding on all CMS components, HHS components that adjudicate matters in dispute, OMHA ALJs, and entities that render initial determinations, redeterminations, and reconsiderations.

As proposed, the authority to identify a holding precedential rests with the Chair of the DAB. Based upon comments made regarding the proposed rule, CMS included in the final regulation factors the Chair of the DAB should consider when determining whether to identify a decision as precedential. Those factors include decisions that address, resolve, or clarify recurring legal issues, rules or policies; or decisions that may have broad application or impact, or involve issues of public interest.

The final rule confirmed that to provide notice to all relevant parties, the precedents will be published via the Federal Register and the opinions will be made public once all confidential information is redacted. It is important to emphasize that this would not add precedential weight to all decisions – only those made by the Council and that the Chair of the DAB explicitly selects as precedential.

In addition, the final rule accepts the proposed rule’s implementation of “attorney adjudicators” at the ALJ level of appeal. The final rule permits attorney adjudicators to handle non-hearing decisions at the ALJ level of appeal, such as withdrawals and dismissals. Attorney adjudicators are defined as “a licensed attorney employed by OMHA with … knowledge of Medicare coverage and payment laws and guidance.”

The final rule stated that commenters to the proposed rule issued broad support for the implementation of attorney adjudicators, with some challenging the validity of attorney adjudicators under the Administrative Procedures Act. CMS strongly disagreed with those commenters’ position and finalized the proposed rule’s proposals to implement attorney adjudicators without modification.

Another change to the ALJ level of appeal finalized in the final rule is the criteria for when a party may submit evidence for the first time at the ALJ level of appeal. The final rule implements changes to regulatory language indicating that a party may submit evidence for the first time at the ALJ level of appeal if good cause exists, as determined by the ALJ or attorney adjudicator pursuant to four separate criteria. Specifically, the rule’s language states 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 QIC’s decision; and/or d) the evidence was submitted by the party to the QIC; in this case, the party can supply evidence that the evidence was submitted to the QIC but not included in the administrative record. In addition to these four circumstances, the final rule outlines a fifth example wherein 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.

The major provisions of the final rule focus on the same theme: to implement reforms that will help improve efficiencies at all levels of appeal that will help reduce the backlog of pending ALJ appeals. Providers should carefully review the final rule’s provisions and consider how these changes may affect their strategies for Medicare audits and appeals.