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The recent announcement by the Office of Medicare Hearings and Appeals (OMHA) that it will delay assigning an administrative law judge (ALJ) to any new audit appeals for two years has providers up in arms, and understandably so. Yet the ALJs also have cause for complaint.

The ALJ governance structure was never designed to receive and process so many appeals. Per the American Hospital Association (AHA) 2013 Third-Quarter Survey Results, 71 percent of all appealed claims are still making their way through the appeals process. This represents more than 150,000 active ALJ cases as of Oct. 1, 2013, with more than 500,000 cases processed in total since RACTrac reporting began. Both sides are being pushed with this latest announcement.

Many Consequences

An OMHA memo to Medicare appellants sent in December 2013 stated the following: “We do not expect general assignments to resume for at least 24 months and we expect post-assignment hearing wait times to continue to exceed six months.” What are the ramifications of this announcement? That’s the big question.

Adding that kind of delay to a system that’s already woefully behind in audit appeals certainly will have complicated results. Separate deadlines for providers and the ALJs is a factor leading to provider frustration and fairness concerns. However, everyone admits that the appeals process is over capacity and stretched to its limits.

Two Sets of Rules

As part of the Centers for Medicare & Medicaid Services (CMS), OMHA is charged with providing a forum for the fair and timely adjudication of Medicare claim and entitlement appeals. The aforementioned announcement raises serious questions for providers.

  • Is the two-year delay denying due process?
  • How can providers appeal in a timely fashion?
  • What rights do providers have?
  • What can be done to expand ALJ capacity?

Providers have strict deadlines as it pertains to records submission. CMS can issue a technical denial if your submissions are two days late. But with this announcement, CMS can be more than two years lateand not suffer any consequences. According to a notice posted to OMHA’s website, “based on our current workload and volume of new requests, we anticipate that assignment of your request for hearing to an administrative law judge may be delayed for up to 28 months.”

While understandable, given the appeal volume, the two-year delay appears to violate the CMS appeal guidelines set forth for providers. The initial rule stated that ALJ appeals would be heard in 60-90 days, not 28 months. Since the announcement, here is what hospitals are doing.

AHA’s directive

In a Jan. 14, 2014 memo to CMS, the AHA expressed its strong concern regarding OMHA’s December 2013 letter announcing that it has suspended assignment of most new requests for ALJ hearings for at least 24 months. On behalf of its nearly 5,000 member hospitals, health systems, and other healthcare organizations, plus its 43,000 individual members, AHA urged CMS to work with OMHA to remedy this situation immediately.

In the memo, the AHA suggested to CMS solutions to help mitigate the detrimental impact of hearing requests issued to hospitals, including postponing recoupment for appealed claims until after the hospital receives an ALJ determination and enforcing the statutory time frames pertaining to appeal decisions.

According to the AHA, avoidable RAC denials strain the appeals system. The aforementioned memo reads that “erroneous RAC denials force hospitals to shoulder the significant administrative burden of pursuing appeals in order to receive payment for the medically necessary services they provide to Medicare beneficiaries.”

“Hospitals participating in AHA’s quarterly RACTrac survey have seen a nearly 30-fold increase in RAC denials since 2010,” the memo continues. “Hospital appeals have also grown exponentially in that time – average appeals per hospital increased from around 17 in 2010 to more than 300 in 2013. As a result, hospitals have an increasing amount of funds at stake in the appeals process – the total value of appealed hospital claims through September 2013 neared $1.5 billion.”

According to the RACTrac survey, hospitals have won nearly 70 percent of adjudicated appeals. This means a significant number of denied payments ultimately are returned to the hospitals.

But because the appeals process is so backlogged, again, more than 70 percent of the overall RAC denials that have been appealed by hospitals since the program began are still pending in the appeals process. “This is primarily due to the backup at the ALJ level,” the AHA’s memo reads.

The AHA memo goes on to state that “it is clear that the RAC program and the resulting volume of inappropriate claim denials are putting significant strain on the appeals process. And hospitals are bearing the financial burden, with over a billion dollars caught in a broken appeals process that takes several years to issue a final determination.”

Factoring In Two Midnights

CMS implemented its so-called “two-midnight rule,” which went into effect Oct. 1, 2013, as an attempt to mitigate substantial delays in the appeals system. Previously, the expectation was that if a patient stayed in the hospital more than 24 hours, he or she was admitted as an inpatient. Now, the expectation is that the patient needs to be in the hospital for two successive midnights before they can be defined as an inpatient. Due to confusion over this new rule, RACs will not enforce it until Sept. 30, 2014; this already has been postponed twice from the original date of Dec. 31, 2013.

“The effects of this controversial policy on the appeals system have yet to be seen,” the AHA memo reads in referencing the two-midnight rule. “However, it will certainly not have an effect on the almost half a million cases OMHA stated are already in its backlog. Action must be taken to address this problem now.”

Steps to Take Now

So what can hospitals do to encourage change? Here are some steps to take:

  • Discuss with internal appeals department/staff and legal counsel.
  • Work with AHA at the state level to lobby for reform.

According to the OMHA’s website, “although OMHA is processing a record number of Medicare appeals, we continue to receive more requests for hearing than our administrative law judges can adjudicate in a timely manner.”

By its own admission, OMHA cannot keep up with the current level of appeals. Delaying the process by more than two years will only make the problem worse unless capacity is expanded and changes implemented.

About the Author

Dawn Crump, MA, SSBB, CHC, is vice president of audit management solutions at HealthPort. She formerly served as network director of audit and compliance at a large regional healthcare system in Missouri.

To comment on this article please go to editor@racmonitor.com


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