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Andrew Wachler Esq.

  Medicare providers and suppliers (hereinafter collectively referred to as “providers”) with pending Medicare appeals are well aware of the growing appeals backlog at the Administrative Law Judge (“ALJ”) level of appeal.

Recently released data from federal government agencies and court decisions support the conclusion that it is necessary to take action to reduce the growing number of appeals pending at the ALJ level of appeal. One possible action is to lobby the Centers for Medicare & Medicaid Services (CMS) to reopen the 68 Percent Settlement that was available to hospitals with inpatient claims pending in the Medicare appeals process that had been initially denied because a Medicare contractor concluded that the services should have been rendered in an outpatient, rather than inpatient, setting.

Reopening the 68 Percent Settlement could significantly reduce the pending appeals backlog; however, whether or not it can be reopened may depend largely upon the level of interest expressed by industry stakeholders.

The case for reopening the 68 Percent Settlement is made throughout recently released federal government agency reports, legislative proposals, and even federal case law. Specifically, the Government Accountability Office (GAO) released a report titled “Medicare Fee-For-Service: Opportunities Remain to Improve Appeals Process.” That report  outlined significant data regarding the effects of the backlog of appeals. For example, the report stated that in FY 2014 96 percent of ALJ appeals were resolved outside the 90-day statutory time period for review. In the same year, 93 percent of ALJ decisions were issued 180 days or more after an ALJ appeal request was filed. Furthermore, between 2010 and 2014, appeals filed at the ALJ level of appeal increased by 936 percent. The GAO report also found that in FY 2015, three times the number of ALJ appeals were filed than could be adjudicated in the same year. Finally, the report also stated that CMS paid $17.8 million in interest to providers due to the backlog of appeals.

In addition to the GAO report, legislative proposals have also been published to encourage reform to the Medicare appeals process. For example, the President’s Proposed FY 2017 Budget includes several reforms to the Medicare appeals process. The proposals are very similar to the reforms analyzed in the December 2015 Senate Committee on Finance report on the Audit & Appeals, Fairness, Integrity, and Reforms in Medicare Act of 2015 (“AFIRM”). The Committee recommended that AFIRM, a bipartisan bill, be further considered by the U.S. Senate and the U.S. House of Representatives. AFIRM proposes several initiatives to reduce the growing appeals backlog. For example, AFIRM includes several reforms to the Medicare audit and appeals process to effectively improve the audit and appeals processes. With regard to improving appeals, AFIRM proposes such reforms as raising the amount in controversy requirement for ALJ appeals and creating Medicare magistrates that could render decisions where the amount in controversy is less than the proposed revised amount for ALJ appeals. Furthermore, AFIRM would require the Office of Medicare Hearings and Appeals (“OMHA”) to initiate alternative dispute resolution processes.

Currently, OMHA has implemented the Settlement Conference Facilitation (“SCF”) Pilot Program that permits providers to settle eligible claims rather than waiting for an ALJ hearing. Although many claim types are eligible for the SCF Pilot, inpatient status claims that were eligible for the 68 Percent Settlement are not eligible for the SCF Pilot.

The need for reform to the Medicare appeals process is also highlighted in recent federal case law. The American Hospital Association (AHA) sought a writ of mandamus compelling the U.S. Department of Health and Human Services (HHS) to act within the statutory Medicare appeal time frames, specifically, rendering decisions within 90 days from the date a request for ALJ hearing is timely filed.

While the United States Court of Appeals for the District of Columbia remanded the case and instructed the district court to determine whether grounds now exist to warrant mandamus, the Court advised that the lengthy delays for adjudication of appeals, and thus delay in payment, will affect hospitals’ willingness and ability to provide patient care. This could have health impacts for Medicare beneficiaries. The Court stated that given the unique circumstances of the case and the clear statutory duty, a writ of mandamus will likely be appropriate if HHS fails to make meaningful progress within a reasonable time period, defined by the Court as by the end of the next full appropriations cycle.

The legislative reforms, case law, and data support that the Medicare appeals process is in crisis due to the overwhelming number of appeals pending. The data also supports that reopening the 68 Percent Settlement is a very plausible solution for reducing the appeals backlog. The GAO report documented that prior to the initial 68 Percent Settlement there were 786,507 ALJ appeals pending and the 68 Percent Settlement resolved 243,389 appeals; this is a 31 percent reduction in the ALJ appeals workload. There are purportedly 200,000 inpatient status appeals still pending that were not resolved through the initial 68 Percent Settlement.

While hospitals with these pending appeals may have initially decided to not proceed with the initial 68 Percent Settlement, the prospect of settling these claims may be more attractive at this point. The value of resources and time associated with the delays in payment while waiting for an appeal is an important consideration for hospitals.

If hospitals are interested in the reopening of the CMS 68 Percent Settlement, hospitals should organize to present a uniformed voice to CMS. Hospitals should discuss with their leadership and send an inquiry to RACmonitor Publisher Chuck Buck at cbuck@panaceainc.com and Andrew Wachler at awachler@wachler.com. Our goal is to compile the information regarding the interest in the reopening of the 68 Percent Settlement and present a letter to the Secretary of HHS, Administrator of CMS, and OMHA.

There are strong arguments to support the reopening of the 68 Percent Settlement. This solution will assist CMS and OMHA reduce the backlog of appeals, thus allowing other providers to move through the appeals process. In addition, reopening the 68 Percent Settlement is consistent with the SCF Pilot Program. Furthermore, it will help hospitals interested in settling with CMS as opposed to waiting for an ALJ hearing.

Finally, it would help CMS to reduce the amount of interest that would potentially have to be paid on the pending appeals. Therefore, persuasive arguments exist for reopening the 68 Percent Settlement and it could significantly reduce the current appeals backlog.

 About the Authors

Andrew B. Wachler is the principal of Wachler & Associates, P.C.  He graduated Cum Laude from the University of Michigan in 1974 and was the recipient of the William J. Branstom Award. He graduated Cum Laude from Wayne State University Law School in 1978. Mr. Wachler has been practicing healthcare and business law for over 25 years and has been defending Medicare and other third party payor audits since 1980.  Mr. Wachler counsels healthcare providers and organizations nationwide in a variety of legal matters.  He writes and speaks nationally to professional organizations and other entities on a variety of healthcare legal topic

Jessica Forster is an associate at Wachler & Associates, P.C.  She dedicates a considerable portion of her practice to defending healthcare providers and suppliers in the defense of RAC, Medicare, Medicaid and third party payer audits.  Her practice also includes the representation of clients in Stark, anti-kickback, and fraud and abuse matters.

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