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On Friday, the American Hospital Association (AHA) submitted its ideas for settlement of the enormous backlog of Medicare provider claims that has accumulated as a result of Recovery Auditor (RA) and Medicare Administrative Contractor (MAC) payment determinations over the last three to four years.

The total backlog of appeals is estimated at around 750,000. Providers are waiting more than 900 days for a hearing before an administrative law judge (ALJ) despite a statutory requirement mandating a hearing occur within 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 the U.S. Department of Health and Human Services on Nov. 4, were solicited by a court squeamish about using that nuclear weapon of the judiciary known as a writ of mandamus. In its proposal to the court, the AHA submitted 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, consider financial implications for providers, and limit growth in the backlog. The plan consists of:

  • A requirement that HHS offer a broad, reasonable settlement. The AHA notes that a “broad and reasonable settlement” is probably the most efficient cure for the backlog. The Association cites the 2014 offer by HHS to settle appeals for 68 cents on the dollar. That settlement, which, again, 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 its proposal to the court, the AHA is suggesting that the court compel HHS to make a similar settlement offer, but expand it to all hospitals, including inpatient rehabilitation and long-term care hospitals, or to all Medicare Part A providers – including hospitals, skilled nursing facilities, and home health agencies. HHS also could, as suggested by the AHA, narrow the scope by limiting a settlement offer to types of providers of services and supplies like skilled nursing facilities or durable medical equipment (DME) suppliers.
  • A requirement 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 ALJ 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 a RA or never paid by a MAC. In the past, HHS has maintained that it did not have the authority to make such an accommodation. The AHA helpfully suggests that HHS conduct a demonstration like those used for implementing alternative payment models.
  • A requirement that the Secretary be compelled to penalize RAs 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 RAs are making to the backlog. While the AHA suggests that HHS choose how best to implement penalties against the RAs, it also offers some helpful suggestions, such as payment of a penalty at the same time a RA returns its contingency fee when a payment determination is reversed at any level of appeal. Another idea presented by AHA would be a tiered fee schedule, under which RAs would receive a diminishing payment for an increased overturn rate at the ALJ level. In the absence of a penalty structure, the AHA suggests reforms to the RA program, including limiting the lookback 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 Dec. 31, 2017
  • A 60-percent reduction from the current backlog of cases at the ALJ level by Dec. 31, 2018
  • A 90-percent reduction from the current backlog of cases at the ALJ level by Dec. 31, 2019
  • Elimination of the backlog of cases pending at the ALJ level by Dec. 31, 2020
  • Beginning on Jan. 1, 2021, a default judgment 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 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 its three-point plan.

To support compliance, the AHA is also asking the court to require HHS to file status reports every 60 days. 

About the Author

Emily Evans is the managing director of healthcare policy at Hedgeye in Washington, DC

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