Is the Medicare Appeals Backlog Finally Breaking?

Feb. 22—Facing a court order to eliminate its Medicare appeals backlog, the Trump administration has seen early success.

Alex Azar, secretary of the U.S. Department of Health and Human Services (HHS), in a Feb. 22 address identified reductions in his agency’s years-old appeals backlog.  

Specifically, the Office of Medicare Hearings and Appeals (OMHA) eliminated more than 224,000 appeals from its backlog in FY18. At the end of FY18, 417,198 appeals remained pending at OMHA, according to HHS.

And the Departmental Appeals Board, which oversees the next level of appeals, reduced its backlog by more than half, Azar said.

The backlog reductions coincided with a November 2018 court order that HHS reduce the backlog of 426,594 appeals by:

• 19 percent by the end of FY19
• 49 percent by the end of FY20
• 75 percent by the end of FY21
• 100 percent by the end of FY22

Azar’s report of early progress in decreasing the backlog drew mixed reactions from attorneys representing hospitals and other providers.

“It doesn’t surprise me that they were successful in removing all of those appeals,” said Jessica Gustafson, JD, an attorney at The Health Law Partners.

The early success likely stemmed from the launch of alternatives to the traditional five-level appeals process, Gustafson said in an interview. The Part A and B Medicare appeals levels are: Medicare administrative contractors (MACs); qualified independent contractors (QICs); OMHA; the Medicare Appeals Council (part of the Departmental Appeals Board); and Federal District Court.

 In late 2017, the Centers for Medicare & Medicaid Services (CMS) launched the Low Volume Appeals Initiative and expanded the Settlement Conference Facilitation (SCF) initiative. Starting in November 2017, the SCF initiative was expanded to include all appeals at the administrative law judge (ALJ) level (third level) or the appeals council level (fourth level) that met a certain dollar threshold.

Many of Gustafson’s provider clients pursued the SCF arbitration process, in which they were offered “very reasonable” settlements—ranging from 40 percent to 60 percent of the initial claims—and many accepted the offers, she said.

“The SCF process is how a lot of the appeals have gotten taken off the docket,” Gustafson said.

Jacob Harper, JD, an attorney at Morgan, Lewis & Bockius, has not seen many of his provider clients getting out of the Medicare backlog. They are generally wary of the alternative appeals processes and prefer the established ALJ system.

“A lot of times when providers are appealing Medicare claim [denials], they reasonably believe that the payments are appropriate and this sort of negotiation and horse trading isn’t really worth it,” Harper said in an interview. “You’d rather have a judge make a decision as to coverage.”

However, the alternative processes may be better choices for providers with disputed claims that fall well within “gray areas” or that have financial pressures that require a quicker resolution of their appeal, he said.

Clients with appeals pending for about four years have become common in the HHS appeals system over the last 10 years, Harper said. The typical two- to four-year wait for an ALJ hearing after the initial filing has remained unchanged in recent months.

Harper has seen reductions in appeal times at the first two levels (MACs and QICs), although their determinations usually are unfavorable to appealing providers.

“That moves the ball forward, and now you are in position to file an ALJ appeal faster,” Harper said.

However, ALJs remain unable to meet their statutorily required time frame of hearing appeals within 90 days. 

“A year would be pretty good, but I’m still not seeing that,” Harper said.

Other OMHA initiatives aimed at the backlog include a partnership with CMS to use the QIC Telephone Discussion Demonstration Project and the CMS Serial Claims Initiative.

New Judges

Another prong in the Trump administration’s effort to reduce the appeals backlog is the addition of new ALJs and other staff to handle appeals. Congress appropriated $182 million in 2018 to target the appeals backlog, and the administration planned to use it to increase the number of ALJs from 90 to 170, according to a 2018 court filing and a department spokesman. The expanded staff was projected to allow OMHA to resolve nearly 188,000 appeals per year, more than double the FY17 rate of about 85,000 appeals.

OMHA has already hired 17 ALJs as part of the expansion, and additional judges are expected by the third quarter of FY19, said an HHS spokesman.

Nick Alarif, JD, an attorney at McDermott Will & Emery, said his provider clients also prefer the ALJ appeals process

“Outside of the backlog, it’s been a successful avenue for fair adjudication, normally,” Alarif said about the ALJs. “So, there is a little reluctance to dip your toe into something you don’t understand.”

Alarif has yet to see any new ALJs start hearing cases. However, OMHA has opened several new regional offices, including in Albuquerque and New Orleans.

Steps that HHS has implemented include allowing attorney adjudicators to resolve appeals at the ALJ level if the cases are procedural and don’t require a hearing.

“So that leaves the judges with the substantive hearings and should help at the margins,” Alarif said in an interview.

 Harper also has not yet seen new ALJs, with delays possibly stemming from extensive training requirements.

Although an HHS spokesman said the department remains on track to meet the court order to clear the backlog by the end of 2022, attorneys going through the system were uncertain.

Additional Issues

The backlog reduction sprint has raised its own concerns.

Some have begun to wonder what happens after 2022, when the backlog is eliminated.

“Now they have double the adjudication capacity, does that mean they have to do double the auditing?” Gustafson said. “They’re all ramped up to clear out this backlog, but what happens when they catch up?”

Providers facing the prospect that Medicare auditors will find some high-cost claims to be invalid should consider using the 60-month extended repayment plan option that many contractors offer, Harper said.

“Even if the backlog is still there and even if it takes three or four years to get through it, you haven’t gone bankrupt in that time frame,” Harper said.

Alarif urged providers to watch for renewed auditing activity from recovery audit contractors.

“We haven’t seen much activity there, but it could come creeping back,” Alarif said. “If they come back and they start identifying new targets at hospitals or health systems, that could increase the backlog again.”