Medicare Sees 33% Spike in Claims Appeals

Medicare Part A and Part B appeals rose markedly between 2008 and 2012 with most of the increase coming from appeals of inpatient hospital claims. "We think that the recovery audit contractors are driving a lot of the increase," says an OIG official.

First-level appeals for Medicare Part A and Part B are on the rise, but most of those appeals are ultimately unsuccessful, a new federal study shows.

The study from the Office of the Inspector General for the Department of Health and Human Services found that more than 1 billion Medicare claims were processed in 2012, of which 3.7 million were appealed at the first level—an increase of 33% since 2008. These are also known as "redeterminations"

"About 80% of the first-level appeals were for Medicare Part B services and 20% for Part A," said Maria Maddaloni, team leader at OIG's Office of Evaluation and Inspections in Boston. "But Part A appeals have increased by over 500% from 2008 to 2012. Most of the increase was with appeals of inpatient hospital claims. We think that the recovery audit contractors are driving a lot of the increase."

By 2012, appeals involving RACs accounted for 39% of all appealed Part A claims. Contractors decided in favor of Part A appellants at a lower rate than that for Part B appellants.

"In 2012, only 1 out of 4 Part A appeals was decided in favor of the one making the appeal," Maddaloni said. "In 2012, about half of Part B appeals were decided in favor of appellants. This was also the case for appeals of physician services, which make up most of the Part B appeals."

Maddaloni said the study represents OIG's first examination of the first level appeals process for Medicare Parts A and B. The study focused on redeterminations processed from 2008-2012. The study analyzed the Centers for Medicare and Medicaid Services' Contractor Reporting of Operational and Workload Data system. OIG auditors surveyed 18 contractors that process redeterminations for Medicare Parts A and B and interviewed five RACs to learn more about how they process redeterminations.

While contractors generally met mandatory timeframes for processing redeterminations and paying appeals for successful appellants, Maddaloni said the RACs were not as prompt in meeting timeframes for transferring case files for second-level appeals. "Processing timeliness for Part A appeals dropped in 2012," she said.

"Contractors told us it was because of the increase in Recovery Audit Contractor appeals. Part A appeals typically require the review of an entire medical record, so they're much more time and resource intensive to process than Part B appeals."

Maddaloni said the audit could not provide detail on the specific claims. "Most of the Recovery Audit Contractor appeals involved short-term inpatient hospital stays. Aside from that, CMS has limited data available," she said. "However, it's implementing the Medicare Appeals System for first-level appeals. This is a database that will have specific information about appeals. It should make it easier for contractors and CMS to track appeals."

"In fact, two of the three recommendations in our report have to do with the Medicare Appeals System," she explained. "We recommended that CMS use it to oversee contractors and to monitor data quality. Our other recommendation was that CMS encourage information-sharing, like best practices, among its contractors."