Update: On Friday, the American Hospital Association submitted its ideas for settlement of the enormous backlog of Medicare provider claims that has accumlated as a result of Recovery Audit and Medicare Administrative Contractors' payment determinations over the last three to four years. The total backlog of appeals is estimated at around 750,000. Providers are waiting over 900 days for a hearing before an ALJ despite a statutory requirement of no more than 90 days. The total amount in controversy is unknown but a settlement in 2014 resolved about 260,000 appeals for $1.4 billion.
The AHA's proposal, as well as one forthcoming from Health and Human Services on November 4th, was solicited by the court sqeamish about using that nuclear weapon of the judiciary known as a writ of mandamus. In their proposal to the court, the AHA submits a three part plan and an alternative. The three part plan is designed to require HHS to implement specific reforms that address the existing backlog, financial implications for providers and limit growth in the backlog. The plan consists of:
- A requirement that HHS offer broad, reasonable settlement. The AHA notes that a broad and reasonable settlement is probably the most efficient cure for the backlog. They cite the 2014 offer by HHS to settle appeals for 68 cents on the dollar. That settlement, which resolved almost a quarter of a million appeals at a cost of $1.4 billion, was offered only to inpatient acute care hospitals. The settlement offer was further confined to patient status claims - also known as short stay claims. In their proposal to the court, the AHA is suggesting that the court compel HHS to make a similar settlement offer but expand to all hospitals, including inpatient rehabiliation and long term care hospitals or to all Medicare Part A providers including hospitals, skilled nursing facilities and home health agencies. HHS could, as suggested by the AHA, narrow the scope by limiting a settlement offer to types of providers of sevices and supplies like skilled nursing facilities or DME suppliers.
- That the court order HHS to defer repayment of disputed claims and toll the accrual of interest on those claims for all periods for which an appeal is pending beyond the statutory maximum for any level of review (i.e., 90 days at the Administrative Law Judge level). A delay in repayment of claims and in the accrual of interest would bring relief to hospitals whose Medicare revenue was clawed back by the RAC or never paid by the MAC. In the past, HHS has maintained that they did not have the authority to make such an accomodation. The AHA helpfully suggests that HHS conduct a demonstration like those used for implementing alternative payment models.
- The Secretary be compelled to penalize RACs for poor performance at the ALJ level. With this suggestion, the AHA is taking a cue from the court which noted previously that HHS was not addressing the significant contribution RACs are making to the backlog. While the AHA states that HHS choose how best to implement penalties against the RACs, they do offer some helpful suggestions like payment of a penalty at the same time a RAC returns its contingency fee when their payment determination is reversed at any level of appeal. Another idea presented by AHA would be a tiered fee schedule under which RACs would recieve a diminishing fee schedule for an increased overturn rate at the ALJ level. In the absence of a penalty structure, the AHA suggests reforms to the RAC program including limiting look-back period to one year and suspending medical necessity audits unless there is evidence of fraud.
The AHA also offers an alternative should the court reject prescribing a specific three point plan. Under the alternative, the court would establish a timeline for reducing the backlog of appeals. The preferred timeline of the AHA would be:
- A 30 percent reduction from the current backlog of cases at the ALJ level by December 31, 2017
- A 60 percent reduction from the current backlog of cases at the ALJ level by December 31, 2018
- A 90 percent reduction from the current backlog of cases at the ALJ level by December 31, 2019
- Elimination of the baklog of cases pending at the ALJ level by December 31, 2020
- Beginning on January 1, 2021, a default judgement in favor of all claimants whose appeals have been pending at the ALJ level without a hearing for more than one calendar year.
To help HHS along by giving it as many tools as possible to meet the appeals reduction timeline, the AHA is also asking the court to affirm the legality of the various approaches listed in their three point plan. To support compliance, the AHA is also asking the court to require HHS to file status reports every 60 days.
Original Post: This week, the American Hospital Association will get the chance to tell D.C. district judge, James Boasberg what it thinks must be done to fix the tremendous backlog of appeals at the Office of Medicare Hearings and Appeals. There were about 920,000 appeals on backlog at OMHA. That number is expected to grow to over 1 million by 2020, and that is assuming all of the legislative and administrative changes requested by HHS are implemented. Without those changes, the backlog would grow to 1.9 million. The time necessary for OMHA to fully adjudicate an appeal is now estimated at 848 days – well in excess of the 90-day statutory limit imposed by Congress.
The problem reached this point due to the confluence of events beginning largely with the full-scale implementation of the Recovery Audit program in 2010. The implications of this program were exacerbated when Medicare Administrative Contractors got in the act with pre-claim review particularly for Inpatient Rehabilitation Services. While creating more opportunities for appeal through its increased program integrity efforts, HHS did not increase staffing at OMHA nor did it provide oversight of contractors sufficiently to discourage appealable claims.
The biggest part of the problem was created by Recovery Audits. About 300,000 of the appeals in the backlog are attributable to claims denials made by RACs including HMSY, PFMT, GIB and COTV. The balance of the backlog is attributable to beneficiary appeals and MAC determinations.
The AHA and several hospitals sued HHS to enforce the time limits for review of appeal. The Court initially denied their claim but subsequent actions by the Court of Appeals forced the issue back to the lower court for consideration. HHS, citing certain legislative and administrative efforts to correct the problem, requested the court hold off demanding any action for a year. On Sept., 19, the Court said no to that and requested the AHA submit its ideas for remedy this Friday. HHS has until Nov., 4 to respond.
AHA has, in previous filings enumerated, possible actions the court could take to resolve the issue. The first would be a broad settlement of outstanding appeals. In 2014, HHS had agreed to settle with inpatient acute hospitals over patient status claims. It eventually resolved 260,000 claims with over 2,000 hospitals. Remarkably, HHS did not extend the offer to other types of inpatient claims or other types of providers. Late last week, HHS indicated they would once again offer settlement to inpatient hospitals for patient status denials without providing much in the way of details.
Other options include changes to the RAC program like penalties for overturned payment determinations and requiring a physician to review all complex audits of a medical record. The AHA has also suggested that HHS delay recouping money from hospitals until a determination is made at the third level of appeal.
The American Association of Homecare says the 25 percent of the claims backlog is attributable to DME supplies. It suggests that Recovery Auditors be prohibited from auditing the same types of claims for the same beneficiaries. It also suggested that a finding of medical necessity for a DME item be used as precedent for subsequent rental and purchase claims that follow.
Notwithstanding the industry’s helpful suggestions, It is hard to imagine, a solution that does not include some sort of broad settlement of outstanding appeals. Any changes to the RAC program would only slow the growth in the backlog, not reverse the current, unprecedented workload and thus do nothing to restore the rights of appellants – which is the foundational issue of this dispute.
It is unclear just how much money is tied up in OMHA appeals. The Fund for Inpatient Rehabilitation estimated that its hospitals had approximately $135 million in dispute of which the majority is probably attributable to HLS pre-claim denials. On the Q2 2015, earnings call, HLS estimated the number of claims denied at 5,400 totaling $86 million in billings before accounting for reserves. As far as we know they have not provided an update to those numbers but it would be very difficult to imagine they have improved much. A broad settlement as suggested by AHA would likely have a positive and material impact on HLS which has been forced to increase bad debt provision in recent years to account for its claims denials.
For other providers the impact will be more diffused. In August, HHS reported that under the previous settlement agreement, it has paid out just under $1.5 billion. The impact was spread among over 2,000 hospitals with the largest settlement of $15 million going to New York Presbyterian. The impact on other provider types like DMEPOS and Home Health Agencies would be even less concentrated as these provider types are represented by tens of thousands of companies.
The impact to the RACs like HMSY, PFMT, COTV and GIB is difficult to assess. The enabling legislation states that payments to RACs are to be made out of recoveries. A settlement arrangement like the one used by CMS for inpatient status claims or a broader one suggested by AHA would reverse recovered payments. It does not appear that HHS attempted to recoup RAC contingency fees for the amounts it disclosed paying out under the 2014 settlement arrangement. The difference there is that arrangement was voluntary and not part of adjudication. Under a court directed settlement arrangement, the outcome may be different.
In any event, the issue of appeals backlog may be finally heading to some resolution.
