Medicare Audits: Deference to the Agency or the Judges?

The appellate court reversed the decision of the ALJ.

When you defend an overpayment finding by a Recovery Audit Contractor (RAC) or a termination of a Medicare/Medicaid contract, you present before an administrative law judge (ALJ)in an administrative court.

Today I want to write about the strength or deference that is given to a state agency or federal government (the Centers for Medicare & Medicaid Services, or CMS) argument by an ALJ. One would think that a judge, sitting on a bench, regardless of whether it is in administrative court, would have more deference than the amorphous government.

But Medicare and Medicaid regulatory issues are esoteric. That’s one of the reasons I have a job. One of my favorite quotes describing a Medicare statute notes that it was “written by James Joyce and edited by E.E. Cummings.”

In North Carolina, a case was decided on Aug. 6, 2019. The important takeaway from this case is that the ALJ was overturned despite the fact that the ALJ personally saw the witnesses, read the evidence, and made discretionary decisions based on being present. The appellate court only read the transcript, and never laid eyes on the witnesses, similar to a RAC auditor determining medical necessity without ever seeing the patient.

In early 2016, the agency determined a need for a fixed MRI machine in Wake County, N.C. and began fielding competitive requests. In April 2016, two providers, Duke and Raleigh Radiology, filed an application with the agency.

Section 131E-183 of North Carolina’s General Statutes sets forth the procedure an agency should use when reviewing such applications. The agency uses a two-stage process: first, the agency reviews each application independently to make sure that it complies with certain statutory criteria. 

Typically, if only one application is found to have complied with the statutory criteria, that applicant is awarded judgment. But if more than one application complies, the agency moves to a second step, whereby the agency conducts a comparative analysis of the compliant applications. 

In the present case, the agency approved Duke, denying Raleigh’s application, on two alternate grounds. First, the agency determined that Duke’s application alone was compliant.

Alternatively, the agency conducted a comparative analysis, assuming both applications were compliant and determined that Duke’s application was superior.

In October 2016, Raleigh filed a Petition for Contested Case Hearing. After a hearing on the matter, the ALJ issued a final decision, determining that both applications were compliant, but that based on its own comparative analysis, Raleigh’s application was superior. Accordingly, the ALJ reversed the decision of the agency and awarded judgment to Raleigh.

The appellate court found that the ALJ exceeded his authority by conducting a de novo comparative analysis of competing applications.

But isn’t the ALJ’s job to weigh the credibility of the evidence? If deference is given heavily to the agency, what is the ALJ’s job? We all know that in order for a state to allow an ALJ to render decisions versus recommended decisions, the states need a waiver from CMS – because for an ALJ to render a decision, it violates the “single state agency” requirement dictated by federal regulation.

The appellate court, in this case, reversed the decision of the ALJ and reinstated the decision of the agency. This shows you that sometimes, agency decisions hold more weight than a judge’s. Deference is statutorily given to the government.

Programming Note:

Listen to Knicole Emanuel’s live reporting every Monday on Monitor Monday, 10-10:30 a.m. EST.