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I. Background

Health care providers, suppliers, and beneficiaries may appeal the denial of claims for payment under Medicare Parts A, B, C, and D. Currently, a unified process exists for the appeal of claim denials under Medicare Parts A and B. These appeal procedures are codified at 42 CFR Part 405, Subpart I. The procedures governing appeals under the Medicare Part C (Medicare Advantage) program may be found at 42 CFR Part 422, and the regulations governing the appeal of Medicare Part D (Prescription Drug Program) claims are set forth at 42 CFR Part 423.https://compliance.com/compliance-challenge-appealing-medicare-claim-denials The Medicare claim appeals process was changed dramatically by the Medicare, Medicaid and SCHIP Benefits Improvement and Protection Act of 2000 (BIPA)(Pub. L. 106-554), which amended section 1869 of the Social Security Act (“Act”), 42 USC § 1395ff, to restructure the entire administrative process for appealing the denial of Medicare payment for claims. The law established five levels of review:

  1. Redetermination by a Medicare Administrative Contractor (“MAC”)
  2. Reconsideration by a Qualified Independent Contractor (“QIC”)
  3. Administrative Law Judge (“ALJ”) Hearing
  4. Medicare Appeals Council (“Council”) Review
  5. U.S. District Court Review.

In addition, a number of procedural changes were made, including the establishment of:

  • A uniform appeals process for Medicare Part A and Part B claims;
  • Time frames for “redeterminations” by MACs;
  • New appeals entities, QICs, to conduct “reconsiderations,” also subject to mandated time frames;
  • Ninety day time limits for the issuance of decisions by an ALJ and the Council;
  • An appellant’s right to “escalate” an appeal to the next level of appeal if an ALJ or the Council does not meet the 90 day deadline for a decision;
  • Reduced amount in controversy requirements; and
  • De novo review by the Council when it reviews an ALJ decision.

Several years later, the Medicare Prescription Drug, Improvement, and Modernization Act (MMA) of 2003 (Pub. L. 108-173) enacted additional changes, the most significant of which was the transfer of the responsibility for ALJ hearings from the Social Security Administration (“SSA”) to the U.S. Department of Health and Human Services (“DHHS”). The Office of Hearings and Appeals (“OMHA”) in DHHS was established in 2005 to provide ALJs and related staffing to handle administrative hearings and issue decisions. In 2005, DHHS issued an “Interim Final Rule” implementing the BIPA provisions, revising the Medicare claims appeal process, and establishing 42 CFR, Part 405, Subpart I. 70 Fed. Reg. 11420 (March 8, 2005). These regulatory provisions governed all aspects of the Medicare claim appeals process through all four levels of administrative review. More recently, in 2009, a “Final Rule” was published by DHHS, effective January 8, 2010, establishing the final implementing regulations for the Medicare claim appeals process. 74 Fed. Reg. 65296 (December 9, 2009).

II. Office of Inspector General Review of the Medicare Appeals Process

Over the course of years the DHHS Office of Inspector General (“OIG”) has conducted several studies and issued reports pertaining to the Medicare administrative appeals process. In 1999, the OIG issued its first report on Medicare Administrative Appeals – The ALJ Hearing Process (OEI-04-97-00160) and found:

  • An ever-increasing number of Medicare claims appeals were being filed and it had become a “provider dominated process.” For example, in FY 1996, 28,515 ALJ hearings were held, as compared to 49,253 in FY 1998, a 73% increase.
  • Structural deficiencies existed including the “lack of consistent criteria for contractors and Administrative Law Judges, lack of communication by parties in the appeals system, and the lack of precedence” of ALJ decisions. For example, “ALJ decisions typically reflect use of a much broader and less prescriptive criteria.” Further, “the ALJ may not even have access to local medical review policy.”
  • The “non-adversarial nature” of the appeals process resulted in ALJs serving as “fact finders and neutral decision-makers.” It was observed that “the appeals process typically allows no opportunity for HCFA (now “CMS”) and its contractors to rebut provider evidence and arguments.”
  • Prior Medicare Appeals Council and ALJ decisions were not considered to be “precedential.”
  • The ALJs, who primarily handle Social Security appeals, had minimal experience and training on Medicare issues.

Based on these findings, the OIG recommended:

  • Establishing a separate administrative appeals process for providers and beneficiaries;
  • Establishing adversarial ALJ hearings for provider appeals;
  • Requiring Medicare contractors and ALJs to apply the same standards; Developing consistent training programs for both Medicare contractor staff and ALJs;
  • Developing consolidated, specialized regulations to govern all Medicare appeals; Establishing a case precedent system for Council decisions.
  • Developing consistent training programs for Medicare contractor staff and ALJs; and
  • Establishing formal communication and information networks to cover the entire appeals process.

In 2002, subsequent to the enactment of the BIPA amendments to section 1869 of the Act, the OIG issued another report on Medicare Administrative Appeals – The Potential Impact of BIPA, (OEI-04-01-00290). This report focused on Medicare Part B appeals, and found:

  • The Medicare appeals system is “backlogged, overwhelmed, and untimely;”
  • The elevation of appeals not decided within the required timeframes could “further overload the system,” as well as increase administrative costs;
  • The mandated time frames could “compromise program integrity efforts and fraud investigations;”
  • The Social Security Administration ALJs do not provide sufficient attention and resources to Medicare cases; and
  • The Medicare Appeals Council “is not prepared to handle a large influx in cases.”

Accordingly, the OIG recommended:

  • Establishing a new administrative entity for ALJ hearings;
  • Ensuring adequate resources for each level of the appeals process;
  • Modifying the mandated time frames by providing time for fair processing of cases, yet ensuring “timely and efficient resolution of appeals;”
  • Providing the opportunity for CMS participation at higher levels of review.
  • Requiring all reviewers of Medicare claims to apply the same standards; Developing Medicare-specific regulations for conducting appeals; and
  • Modernizing appeals processing by enhancing “manual file systems” with “electronic features.”

In responding to these recommendations, DHHS highlighted three over-arching goals associated with its efforts to implement the Medicare appeals process:

  • Implementing the provisions contained in BIPA;
  • Achieving a “more timely, efficient, and less costly administrative review process;” and
  • Obtaining greater consistency in case adjudications.

In following years, the OIG issued additional reports, Medicare Administrative Law Judge Hearings: Early Implementation, 2005-2006 (OEI-02-06-00110), and, Medicare Administrative Law Judge Hearings: Update 2007-2008 (OEI-02-06-00111). All OIG reports may be found on the OIG’s web site: www.oig.hhs.gov.

III. Recent OIG Report – Improvements Are Needed at the Administrative Law Judge Level of Medicare Appeals

The OIG undertook a comprehensive review of the Medicare claims appeals process several years after the establishment of OMHA and issuance of final regulations. It sought to assess the impact of these changes on the handling of requests for ALJ review in FY 2010 – five years after the initial DHHS enhancements. It issued a report in November 2012 (OEI-02-10-00340), and made the following findings.

A. Data Regarding ALJ Appeals in FY 2010 (October 1, 2011 – September 30, 2012)
  • ALJs issued decisions relating to 40,682 appeals. Of these appeals, 85% were filed by providers (34,542). Of the provider appeals, 40% entailed coverage of items and services under Medicare Part A, 34% entailed coverage of items and services (other than Durable Medical Equipment, Prosthetics, and Supplies – “DMEPOS”), and 25% related to coverage of DMEPOS. The remainder of provider appeals related to coverage and payment under Medicare Parts C and D.
  • Over one-half of beneficiary appeals related to coverage under Medicare Part C (47%) and Part D (8%). Of the remainder of beneficiary appeals, 16% related to Medicare Part A, 16% related to Medicare Part B, and 5% related to DMEPOS.
  • State Medicaid Agencies filed 1361 appeals (3% of the total) in FY 2010.
  • ALJs reversed prior “unfavorable” decisions by a QIC and decided fully in favor of an appellant in 56% of the appeals. An additional 6% of appeals were decided partially in favor of an appellant. This compares with the QICs issuing fully favorable decisions in 20% of the appeals.
  • CMS participated in 10% of all appeals decided by ALJs in FY 2010. When CMS participated in an ALJ hearing, an ALJ was less likely to issue a fully favorable decision for the appellant. Where CMS participated in a hearing, 44% of the decisions were fully favorable for the appellant as compared with 60% of the ALJ decisions in cases where CMS did not participate.
B. Information Derived From Interviews
  • Both CMS and OMHA interviewees reported significant problems with case files. Case files at the ALJ level of review often differ in content, organization, and format from the case files considered by a QIC. Frequently, incomplete files result in delays in the scheduling of an ALJ hearing or remand back to a QIC.
  • Case file problems stem in part from the fact that QIC files are usually electronic in format, while ALJs only consider paper case files. Thus, a QIC must convert its electronic case files to paper format before sending them to OMHA for the scheduling and holding of an administrative hearing.
C. OIG Findings
  • Our findings highlight a number of inconsistencies and inefficiencies in the Medicare appeals process. Together, they demonstrate that OMHA and CMS must take action to improve the appeals system, while maintaining ALJs’ independence.
D. OIG Recommendations
  • DHHS should revise the governing regulations to establish clearer standards for ALJs to apply when considering the introduction of “new” evidence.
  • CMS and OMHA should jointly develop and provide training on Medicare policies for QIC and ALJ staff.
  • CMS and OMHA should establish standards for developing and maintaining standard case files. In addition, OMHA should expedite its Electronic Records Initiative to transition from paper to electronic files.
  • OMHA should establish a Quality Assurance Process with respect to ALJ decisions.
  • OMHA should determine whether ALJ specialization would improve efficiency in the processing and deciding of cases.
  • OMHA should seek statutory authority to impose a “modest filing fee” on providers and suppliers seeking ALJ review.
  • CMS should the increase the level of its participation in ALJ appeals. Specifically, “CMS should make strategic decisions about which contractors are in the best position to represent CMS and which appeals most warrant CMS participation.” Further, “CMS should establish participation guidelines and incentives for each type of contractor and should track the results of their participation.”

IV. The Medicare Appeals Process in 2013 – Observations

The Medicare appeals process today continues to be challenged by an ever-increasing number of appeals and insufficient resources. Providers and suppliers believe that to receive a proper and complete adjudication of their claims for Medicare payment, cases need to be appealed to the ALJ and Medicare Appeals Council levels of review. It is at the ALJ level that a provider or supplier can present expert testimony regarding the medical condition of a beneficiary, and explain medical records and related documentation supporting payment of a claim. The following issues are typically adjudicated at the ALJ level:

  • Is there is a statutory benefit category for claimed item or service?
  • Is there a statutory preclusion to coverage of claimed item or service?
  • Is a claimed item or service reasonable and necessary, as required by section 1862(a)(1) of the Act (42 USC § 1395y(a)(1))?

Fifteen years after the first OIG review of the Medicare appeals process, many of the identified problems continue. The volume of appeals has continued to grow and it is still “a provider dominated process.” Since decisions of the Medicare Appeals Council are not afforded “precedential status,” providers and suppliers file multiple appeals raising similar issues. This greatly increases the number of appeals pending at OMHA and the Medicare Appeals Council. During FY 2012, OMHA:

  • Received 131,735 appeals, involving 312,897 individual claims;
  • and Decided 64,196 appeals, involving 184,619 individual claims.

As of February, 26, 2013, OMHA had 113,761 appeals pending, involving 276,854 individual claims. During FY 2012, the Medicare Appeals Council:

  • Received 3128 appeals, involving 14,917 claims;
  • and Decided 2515 appeals, involving 26,704 claims.

At the end of FY 2012, 2800 appeals, involving 14,873 claims were pending at the Medicare Appeals Council. It is clear that the resources allocated to the Medicare process are inadequate. Currently OMHA has 68 ALJs. And the number of dedicated judges on the Medicare Appeals Council between 1998 and today has doubled from two to four. The OIG’s 2002 finding that the Medicare appeals system is “backlogged, overwhelmed, and untimely” remains valid today. More resources are needed to ensure that Medicare appeals are decided in a timely and comprehensive way. Essential to establishment of an efficient, cost-effective, and timely Medicare appeals process is the development and implementation of an electronic system for the filing and processing of appeals, as well as for the compilation and review of case records at all levels of review. A coordinated and comprehensive electronic process needs to be established to process claims appeals from the issuance of a Medicare initial determination by a Medicare contractor, through the redetermination, reconsideration, ALJ hearing, and Medicare Appeals Council review of appeals. Similarly, appellants need to be able to file appeals and evidence electronically at all levels of review. In addition, while controversial, consideration should be given to establishing a filing fee at the ALJ and Medicare Appeals Council levels of review to help support their operations and reviews. Only through the allocation of additional administrative and fiscal resources will the Medicare appeals process be able operate in a timely and effective manner. In conclusion, it is clear that the Medicare appeals process needs increased attention and focus by DHHS to achieve the goals articulated ten years ago for achieving a “more timely, efficient, and less costly administrative review process.”

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