Barring settlements or reforms, it still may take years for hospitals to recoup disputed claims dollars.

Dec. 9—A federal judge’s recent decision compelling the U.S. Department of Health and Human Services (HHS) to hasten its administrative law process for resolving appeals of denied Medicare claims could speed contested payments to hospitals, healthcare attorneys said.

At stake are billions of dollars in denied Medicare claims that hospitals and other healthcare providers have appealed through the Centers for Medicare & Medicaid Service’s (CMS’s) administrative law process.

Federal law requires CMS to complete administrative law judge (ALJ) hearings of appealed claims within 90 days. But the average time for processing those has skyrocketed from 94.9 days in FY09 to 877.2 days in FY16, according to a posting from CMS’ Office of Medicare Hearings and Appeals (OMHA). The ALJ review is the third of four levels in the administrative appeal process and where the backlog and delays are most pressing.

In a statement, Melinda Hatton, general counsel for the American Hospital Association (AHA) called the decision by U.S. District Court Judge James Boasberg a victory for hospitals that continue to have billions of dollars in Medicare payment tied up in a heavily backlogged appeals system.

“To meet the court-ordered backlog reductions, we trust that HHS will implement real reforms critical to resolving the backlog, including fundamental reforms of the RAC [recovery audit contractor] program,” Hatton said in the statement.

The AHA filed the lawsuit against HHS Secretary Sylvia Burrell in May 2014 to force HHS to process claims appeals under statutorily imposed deadlines. The AHA “sought relief from a morass in which hundreds of thousands of appeals were languishing in a highly backlogged administrative process.”

In his seven-page opinion, Boasberg compelled HHS to trim its backlog by 30 percent by Dec. 31, 2017; 60 percent by Dec. 31, 2018; 90 percent by Dec. 31, 2019, and 100 percent by Dec. 31, 2020. He also required HHS to file status reports to the court every 90 days chronicling the department’s progress.

More Settlements?

Andrew Wachler of the Royal Oaks, Mich., law firm, Wachler Associates, said Boasberg’s decision “is going to put pressure on the stakeholders, particularly CMS and OMHA, to look at ways to effectuate reductions in this backlog of 884,000 pending claims.”

Wachler said in an interview that CMS must find ways to more efficiently reduce the caseload through a combination of reforms and settlements.

“Realistically, CMS must undertake a number of reforms that would probably result in some combination of global settlements,” Burris said in an interview.

In 2014 OMHA offered a global claims settlement, paying 68 percent of the claims’ value.

“That cleared out a lot of cases and CMS paid out more than $1 billion,” Wachler said.

More recently, OMHA offered certain providers a global settlement that would pay about 66 percent of the total value of their appealed claims, which would resolve around 200,000 pending payments. That deal expires Jan. 31, 2017.

While the AHA and several hospital systems filed the lawsuit seeking adjudication of outstanding claims, not all of those claims are from hospitals. In 2014, 109,738 of  the total 438,534 appeals filed were from durable medical equipment (DME)-related businesses, as well as another 84,000 filed by  nursing homes, physicians, clinical laboratories, transportation firms, and home health organizations, according to a May 2016 report from the Government Accountability Office (GAO). The GAO reported that between FY10 and FY14, the ALJ level experienced the largest rate of increase in appeals—from 41,733 to 432,534 appeals (a 936 percent increase).

Wachler partly attributed the bottleneck to increased denials by Medicare RACs, which are paid based on the claims they deny. Many of the claims denied were inpatient stays that RACs said should have been billed as outpatient visits. Various diagnosis-related group (DRG) denials, the medical necessity of certain surgical procedures, the ‘two midnight rule,’ and the necessity of underlying services in various settings are among the categories of claims denials.

Wachler also blamed the morass on the appeals process structure.

“We had a system in which you couldn’t regularly settle cases,” Wachler said. “Now you can.”

Wachler said that hospitals with more than 50 claims worth more than $20,000 can seek ‘facilitation,’ which is an individual settlement of their claims.

“You settle cases when both parties are incentivized and Medicare has not always been incentivized,” Wachler said. “But with this pressure, they may have a greater incentive to settle, while hospitals may feel like they’re getting an opportunity for a fair shake.”

Other reforms could include aggregating similar cases---trying many or all similar claims at once rather than a handful at a time. Wachler said CMS can change the rules to force aggregation. He suggested doubling the number of ALJs and allowing settlement in earlier levels of the appeals process.

‘Disappointing’ Timeline

R. Ross Burris, a health attorney specializing in Medicare audits and appeals at Polsinelli, said Boasberg’s decision was grounded in reality.

“Obviously, the idea that it will take four years to completely exhaust the backlogged appeals is disappointing,” Burris said in an interview.  “It’s not as though everyone will have to wait four years. Hopefully, many providers will begin getting hearings sooner. There’s a lot to work through. I still think it’s a win for any providers caught up in this backlog, which occurred when the RAC programs got out of control.”

In 2015, CMS processed 1.2 billion Medicare claims, 123 million of which were denied, and 3.7 million were appealed, Burris said.

Sixty percent of hospitals win at the ALJ, the third step in the appeals process, Burris said.

“If you have a better than 50 percent shot of winning, you’re going to keep appealing. A lot of what the AHA lawsuit attacked was the RAC programs. They performed big audits, and based on small statistical sampling, denied large groups of claims and said hospitals had been overpaid,” Burris said.

Burris said he has hospital clients with millions of dollars caught up in appeals lasting four or five years.”

In spite of the judge’s order to speed the appeals process, Burris said most of his clients are pleased that the court has recognized their plight.

Hospitals were disappointed that the imposed deadlines were not shorter, he said.

“We appreciate CMS’s past efforts to reduce the backlog, but the Medicare appeals process continues to be overly-burdened and has a significant backlog that affects all our hospitals and many other providers,” Chip Kahn, president of the Federation of American Hospitals, said in a written statement.


Mark Taylor is a freelance writer based in Chicago. 

Publication Date: Friday, December 09, 2016