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Andrew Wachler Esq.


On Dec. 8, the U.S. Senate Committee on Finance submitted a report on the Audit & Appeals Fairness, Integrity, and Reforms in Medicare Act of 2015 (AFIRM Act), recommending that the bill be further considered by the Senate and the House of Representatives. If passed, the bill would significantly change the Medicare audits and appeals process. It would affect how healthcare providers nationwide interact with Medicare review contractors and engage in strategic approaches to the Medicare appeals process.

In its report, the Committee remarked on the tone and the purpose for the AFIRM Act, stating that its purpose is to:

“Increase coordination and oversight of Medicare claims review contractors, implement new strategies to address the growing number of review contractor determination appeals, reduce review burdens on providers, and give review contractors the tools necessary to better protect the Medicare Trust Fund.”

The Committee’s report clearly outlined the need for the AFIRM Act at this time, as the expansion of audits has coincided with the rise of appeals, resulting in an unprecedented backlog for administrative law judge (ALJ) appeals with the Office of Medicare Hearings and Appeals (OMHA). According to the Committee’s report, the backlog of cases at OMHA is near 1,000,000 cases. With ALJ hearing requests continuing to be filed, the AFIRM Act’s reforms attempt to address and reduce the backlog of appeals.

The bill would require $127 million to be appropriated from the Medicare Trust Funds annually, beginning in the 2016 fiscal year. A total of $125 million would go to OMHA and $2 million to the Departmental Appeals Board of the U.S. Department of Health and Human Services (HHS), which handles Medicare Appeals Council reviews. These funds will be used to address the primary causes of the increase in the number of appeals and the growing backlog at OMHA.  

The AFIRM Act includes several reforms to the Medicare audit process. For example, AFIRM would prohibit Recovery Auditors (RAs) from conducting patient status reviews (i.e. inpatient versus outpatient reviews) more than six months after the dates of service if the claim was submitted within three months of the dates of service. This reform is directed at encouraging hospitals submitting inpatient claims to submit their claims within three months so that if the claim is denied for improper status, the hospital may submit its Part B inpatient claim within the one-year timely filing requirement. Hospitals, therefore, may be incentivized to rebill their denied inpatient claim as opposed to appealing the denial through the Medicare appeals process.

In addition, AFIRM would improve Centers for Medicare & Medicaid Services (CMS) oversight of audit contractors and require better coordination between auditors and CMS. This would include a requirement to establish a CMS ombudsman for Medicare reviews and appeals. The ombudsman’s responsibilities would include identifying trends in complaints and inquiries regarding the current Medicare review and appeals systems to provide recommendations for improvement to the Secretary of HHS. Finally, AFIRM would require the HHS Secretary to implement reforms to promote transparency and consistency in Medicare payment and coverage policy. While several reforms to attain this goal have been proposed, one example includes developing standards that require review entity contractors to have audits conducted or approved by medical doctors with knowledge of relevant Medicare laws, policies, and program instruction. Although only one of many reforms, this particular reform in of itself could significantly improve the caliber of the reviews being conducted by Medicare review contractors and reduce the number of appeals that result from clearly inappropriate contractor denials.

AFIRM also features significant proposed reforms to the Medicare appeals process. One of the major examples is the implementation of Medicare magistrates that would perform reviews and render decisions in appeals for which the amount in controversy is less than the new amount in controversy implemented through AFIRM. Medicare magistrates would be licensed attorneys with knowledge of the relevant Medicare statues, regulations, and policies. In addition to Medicare magistrates, AFIRM also would implement a remand process for new evidence introduced at the reconsideration, ALJ, and/or Medicare Appeals Council levels of appeal. Specifically, beginning Jan. 1, 2017, AFIRM would require a qualified independent contractor (QIC), a Medicare magistrate (as to be implemented through AFIRM), an ALJ, or the Medicare Appeals Council to remand an appeal to a Medicare Administrative Contractor for a redetermination when an appellant introduces new evidence into the administrative record at a subsequent level of appeal. AFIRM would incorporate exceptions to this remand process, including an inadvertent error by a lower-level reviewer, or if a lower-level reviewer’s decision was rendered on different grounds than that cited in the initial decision (or other circumstances that may be determined by the Secretary of HHS). While the proposed Medicare magistrates could reduce the appeals backlog, the remand proposal may unintentionally result in a growing backlog of appeals at the redetermination level, as providers may submit new evidence at later levels of appeal.

The AFIRM Act features several proposed reforms that will considerably change the Medicare audits and appeals processes. While the changes aim to increase Medicare review contractor accountability and efficiency throughout the Medicare appeals process, the need for the changes is being driven by the unprecedented backlog of appeals at the ALJ level.  The current backlog is unsustainable, violates federal law, and may cause irreparable harm to healthcare providers with pending appeal claims. Therefore, all reforms possible to increase the efficiency and accuracy of the Medicare audits and appeals process are necessary in order to properly address this issue.

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.  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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