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Andrew Wachler Esq.

 During her testimony on Feb. 26, 2015 before the U.S. House of Representatives Energy and Commerce Committee’s Subcommittee on Health, U.S. Department of Health and Human Services (HHS) Secretary Sylvia Mathews Burwell discussed the Department’s 2016 budget request. Secretary Burwell’s testimony regarding the 2016 budget included a discussion of the Medicare audit processes. Burwell stated that the 2016 budget includes new investments into Medicare program integrity, including $201 million in the 2016 fiscal year and $4.6 billion over the next 10 years. These investments, according to the 2016 budget request, are projected to result in $22 billion in gross savings for Medicare and Medicaid over 10 years.

In addition to strengthening the audit process, Secretary Burwell discussed proposed changes to the Medicare appeals process. The number of appeals received by the Office of Medicare Hearings and Appeals (OMHA) between 2009 and 2014 increased by more than 1,300 percent. This dramatic increase has resulted in a backlog that is anticipated to reach 1 million appeals by the end of the 2015 fiscal year. HHS and OMHA have announced a strategy to improve the Medicare appeals process, including: taking administrative actions to reduce the number of pending appeals and to prevent new cases from entering the system; requesting new resources to invest at all levels of appeal to increase adjudication capacity and implement new strategies to lessen the current backlog; and proposing legislative reforms that provide additional funding and new authorities to address the appeals volume. As it relates to the third prong, the 2016 budget request from HHS includes seven legislative proposals to increase the efficiency of the Medicare appeals process. 

The legislative proposals include providing OMHA and the Department Appeals Board the authority to use Recovery Audit Contractor (RAC) collections to fund related appeals at those two bodies. HHS estimates that this proposal would cost $1.3 billion over 10 years. The second proposal includes establishing a refundable filing fee for providers to pay at each level of a Medicare appeal. The proposal indicates that the fees would be returned to appellants who receive a fully favorable appeal determination. It is unclear if providers that receive fully favorable decisions at the administrative law judge (ALJ) level will have fees returned from the redetermination and reconsideration levels. 

The third and fourth proposals address the ALJ amount in controversy (AIC) threshold. The third proposal would allow OMHA to use attorney adjudicators for appealed claims below the federal district court AIC, which is $1,460 for 2015. HHS proposes this would reserve ALJs for more complex and higher AIC appeals. The fourth proposal would increase the minimum amount of AIC required for adjudication by an ALJ to the amount required for federal court. Appeals that do not reach the minimum AIC would be adjudicated by a Medicare magistrate. 

The fifth proposal would allow OMHA to issue a decision without holding a hearing if no material fact is in dispute. The sixth proposal would remand an appeal to redetermination, the first level of appeal, when new evidence is submitted into the administrative record at the second level of appeal or above. The proposal notes that this would encourage appellants to submit evidence during the early stages of the appeals process. There are some questions regarding this proposal and whether it would actually contribute to the backlog of appeals. Appellants now have until reconsideration to submit new, non-testimonial evidence without needing to show good cause. This is a common practice for appellants, especially those that must meet the 30-day deadline at redetermination to prevent recoupment of the alleged overpayment amount. 

The final proposal would allow the HHS secretary to adjudicate appeals through the use of sampling and extrapolation techniques. Further, the secretary could consolidate appeals into a single administrative appeal at all levels of the appeals process. It is unclear whether this consolidation would be mandatory or a voluntary option for providers. 

Overall, the HHS proposals in the 2016 budget request represent the Department’s recognition that the current state of the Medicare appeals process is clearly unsustainable. Providers are forced to wait for unacceptable periods of time before presenting their cases to an ALJ.

Although the proposals may allow a provider to reach a final resolution for their case more timely, the proposals do not address one of the most significant contributors to the appeals backlog: improper denials at the lower levels of appeal.

Until Medicare contractors are properly trained to fairly and accurately review claims, providers will continue to appeal claims that are improperly denied, and the appeals process will continue to be backlogged. 

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 topics.

Jessica Forster is an associate at Wachler & Associates, P.C.  Ms. Lange 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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