For the majority of the 2010s, the Medicare appeals process had become extremely backlogged. The Office of Medicare Hearings and Appeals (“OMHA”) is in charge of administering the Administrative Law Judge (“ALJ”) hearing program for appeals arising from Medicare claims and disputes. Pursuant to 42 U.S.C. § 1395ff(d)(1)(A), an ALJ is statutorily required to provide an appellant a hearing within ninety (90) days of the hearing being requested. However, due to a large backlog of appeals, appellants would end up waiting three (3) to five (5) years for that hearing. This caused much concern because disputed payments were being recouped from providers and suppliers during that waiting period, yet they were being deprived of defending themselves in a timely matter. Having Medicare payments recouped for 90 days is often not detrimental for provider and supplier businesses. However, being recouped for 3 to 5 years can have a significantly detrimental impact to provider and supplier businesses.

Due to the backlog, a slew of litigation ensued. The most common claim was one for a temporary restraining order (“TRO”) and preliminary injunction against the Department of Health and Human Services (“HHS”), ordering them to stay recoupments until the ALJ hearing occurred. Providers and suppliers would claim irreparable injury because they would be forced to close their businesses due to bankruptcy from the prolonged recoupment period. Additionally, to support a TRO or preliminary injunction, aggrieved parties would have to show a likelihood of success on the merits of their underlying claim. To demonstrate a likelihood of success, these parties would usually allege a violation of procedural due process or an ultra vires violation. Federal Circuit Courts varied on their granting or denying of these claims, but all agreed that HHS must reduce the backlog to reduce further harm to providers and suppliers.

Because ALJs were not keeping up with that statutorily mandated 90-day period, in 2018, the American Hospital Association (“AHA”) brought suit against HHS. The D.C. Federal District Court ruled in favor of the AHA and required HHS to completely remove the backlog by 2022 so that ALJs would comply with the statutory timing requirements. Specifically, the timeline for reducing the backlog is: a 19% reduction by the end of Fiscal Year (“FY”) 2019; a 49% reduction by the end of FY 2020; a 75% reduction by the end of FY 2021; and elimination of the backlog by the end of FY 2022. To ensure that HHS is making active efforts to reduce the backlog, the court also required the Secretary of HHS to file quarterly status reports until the end of 2022.

As of the most recent HHS status report, released on March 26, 2021, a total of 131,961 appeals remain pending at OMHA, which is a reduction of just over 69% of the backlog. This was just the update from the first quarter of 2021, and HHS is required to have a 75% reduction by the end of FY 2021, which appears to be an achievable goal based on the first quarter’s numbers.

Looking back, there are five likely reasons for the extreme backlog of appeals over the last 10 years: (1) more beneficiaries enrolling in Medicare; (2) the roll-out of new Medicare coverage and payment rules; (3) increased state Medicaid appeals; (4) implementation of the national Medicare Fee-For-Service program; and (5) a national shortage of ALJs.

The successful reduction of the backlog is, in part, due to CMS implementing and enforcing many alternatives to the appeals process which removed some cases entirely from the ALJ hearing process. The alternatives include the Settlement Conference Facilitation (“SCF”) program and the Targeted Probe and Educate (“TPE”) audits. SCF was originally implemented in July of 2014, but was significantly expanded on June 15, 2018. TPE initially was rolled out as a pilot program in a few states, but was implemented nationwide on October 1, 2017. The SCF program gives Medicare appellants the right to negotiate a lump-sum settlement with CMS in a one-day facilitation, rather than going through the whole appeals process. TPE seeks to prevent appeals on the front-end by having Medicare Administrative Contractors identify billing errors and helping the provider or supplier correct these errors before an audit is necessary.

Furthermore, the successful reduction was also a result of a $182.3 million increase in funding by Congress as of March 23, 2018. This funding enabled OMHA’s hiring of an additional 70 ALJs across the country. OMHA anticipates that this increase in ALJs will allow OMHA to adjudicate over 300,000 appeals annually. This is a stark contrast compared to the amount of appeals OMHA had the capacity to adjudicate before backlog reduction efforts commenced, which was approximately 75,000 appeals annually.

The increased ALJ capacity along with the new alternatives to the appeals process, create a double-edged sword for healthcare providers and suppliers. The backlog prompted CMS to restrict contractors and force them to slow down on Medicare audits. With the backlog coming to an end, these restrictions will likely be loosened, and providers and suppliers could see a substantial increase in Medicare audits. Implementation of an effective compliance program inclusive of an internal audit policy is more crucial than ever.

This article was originally published in Healthcare Michigan, June 2021.

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About the Author:

Emma E. Trivax is an associate attorney with Dickinson Wright, where she is a part of the healthcare law group. Her practice focuses on Medicare, Medicaid and third-party payor audits, licensing and regulatory compliance matters, and Fraud and Abuse matters, including compliance with the Anti-Kickback Statute, Stark law, and other federal and state fraud and abuse laws. Emma can be reached at 248-631-2098 or etrivax@dickinsonwright.com and her firm bio can be accessed here.

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