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Federal Court: Medicare Must Clear Claims Appeal Backlog

Analysis  |  By Christopher Cheney  
   December 12, 2016

A U.S. District Court ruling has stated flatly for the second time this year that Medicare's bloated disputed-claims appeals backlog violates the law and must be fixed.

The U.S. District Court for the District of Columbia has intervened in the ongoing matter of Medicare's disputed claims appeals backlog (now approaching one million claims).

The court has ordered that the logjam be cleared by the end of 2020.

"Although the court is glad to learn that the backlog-reduction projections are better than earlier reported, they are still unacceptably high," Judge James Boasberg wrote in his Dec. 5 ruling.

The American Hospital Association, which sued Health and Human Services Secretary Sylvia Burwell in 2014 over the appeals backlog, said last week's ruling should not only tame the backlog but also Medicare's Recovery Audit Contractors.

"Today's decision is a victory for hospitals that continue to have billions of dollars in Medicare reimbursement 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 program," AHA General Counsel Melinda Hatton said in a media statement last week.

Hospital claims for Medicare reimbursement have four levels of appeal, starting with the Medicare Administrative Contractors (MACs) who decide whether reimbursement claims are approved or denied:

  • At level one, "redetermination" appeals are made to MACs.
  • At level two, "reconsideration" appeals are made to Qualified Independent Contractors.
  • At level three, disputed claims over $150 are appealed to Administrative Law Judges (ALJs) for adjudication that can include a hearing.
  • At level four, appeals are reviewed by the Medicare Appeals Council, a division of the Departmental Appeals Board.

Last week's District Court ruling sets annual backlog-reduction targets at the ALJ level:

  • 30% reduction from the current backlog by Dec. 31, 2017
  • 60% reduction from the current backlog by Dec. 31, 2018
  • 90% reduction from the current backlog by Dec. 31, 2019
  • Elimination of the backlog of cases by Dec. 31, 2020

"ALJ review is the third of four levels in the administrative-appeal process set out in the Medicare Act and is the step at which the backlog and delays are especially significant," Boasberg wrote in last week's ruling.

In February, the U.S. Court of Appeals for the District of Columbia Circuit reversed a December 2014 ruling Boasberg had made to dismiss the AHA vs. Burwell case.

In sending the case back to District Court for further consideration, the Court of Appeals suggested the best backlog remedy would stem the flood of appeals unleashed when the RAC program started in 2010.

"If Congress fails to act, either by providing the Secretary sufficient resources to comply with the clear statutory deadlines it has already enacted or by relieving her of the obligation to do so, these deadlines dictate that the Secretary will have to curtail the RAC program or find some other way to meet them," the Court of Appeals reversal ruling states.

The RAC program is a double-edged sword, the federal appellate court's three-judge panel found.

With HHS reporting that RACs identified $2.3 billion in Medicare overpayments in 2012 and $3.6 billion in overpayments in 2013, "the government has recovered a great deal of improperly paid money," the Court of Appeals ruling says.

"But because RAC denials are appealable through the same administrative process as initial denials, the RAC program has contributed to a drastic increase in the number of administrative appeals. Thus, the number of appeals filed ballooned from 59,600 in fiscal year 2011 to more than 384,000 in fiscal year 2013."

The growing number of RAC-related appeals has stretched adjudication deadlines far beyond the statutory breaking point, the Court of Appeals found.

The adjudication deadline for appeals at the ALJ level is 90 days. "As of February 2015, the decisions ALJs were releasing had been pending for an average of 572 days. This number will almost certainly continue to grow as the backlog worsens."

In last week's ruling, Boasberg scolded HHS over the timeline violations. The agency is "bound by statutorily mandated deadlines of which it is in flagrant violation as to hundreds of thousands of appeals," he wrote.

Christopher Cheney is the CMO editor at HealthLeaders.

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