Articles Posted in Appeals

bloglogo2.jpgIf a Medicare provider’s claim for payment is denied or if a Recovery Audit Contractor (RAC) determines that a past payment was made improperly, the provider may appeal the denial. Medicare provides a 5-level appeal process that begins with a request that the Medicare Administrative Contractor (MAC) make a redetermination on the claim. If that is unsuccessful, the provider may seek reconsideration from a Qualified Independent Contractor (QIC). If the QIC agrees that the denial was proper, the provider may request a hearing before an Administrative Law Judge (ALJ) in the Office of Medicare Hearings and Appeals (OMHA).

ALJ.jpgOMHA was established by § 931of the Medicare Drug, Improvement and Modernization Act of 2003. In § 931(b)(2), Congress provided that:

The Secretary shall assure the independence of administrative law judges performing the administrative law judge functions … from the Centers for Medicare & Medicaid Services and its contractors. In order to assure such independence, the Secretary shall place such judges in an administrative office that is organizationally and functionally separate from such Centers.

There are currently 65 OMHA ALJs in 4 regional field offices. The ALJs are organized into teams and supported by OMHA attorneys, paralegals and legal assistants. While OMHA ALJs hear appeals involving, among other things, an individual’s eligibility for Medicare and coverage determinations under Parts C and D, the largest part of the ALJs workload comes from Part A and B provider appeals of pre and/or post payment denials by one of Medicare’s audit contractors.

The Effect of RAC Audits on the ALJ’s Caseload.

up_arrow.jpgAccording to the latest appeal statistics from CMS, RACs issued payment denials for 903,372 claims in fiscal year 2011 and providers filed 56,620 appeals in fiscal year 2011. According to statistics maintained by OMHA, it received 132,446 appeals in fiscal year 2012. Out of the 132,446 appeals filed, 40,386 or 30.5% were filed from RAC denials by Part A hospitals. By comparison, Part A hospitals filed just 1,545 appeals in FY 2011.

The increase in ALJ appeals is certainly not unexpected as a result of the nationwide expansion of the RAC program in 2010. The increased caseload has already impacted the ALJ’s ability to comply with the regulatory mandate set forth at 42 C.F.R. §405.1006 that appeals to the ALJ be decided within 90 days. There is little doubt that as more and more appeals reach the ALJs, providers will experience ever increasing delays in decisions by the ALJs. While some delay may be acceptable, a restrictive CMS policy regarding the payment of reasonable and necessary Part B services provided by a hospital to a beneficiary may cause such an increase in the level of ALJ appeals as to make timely decisions by an ALJ impossible and deprive a provider of the legally required prompt resolution of its appeal.

Appeals for Payment of Part B Outpatient Services Will Further Delay ALJ Decisions
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bloglogo2.jpgIn a July 21, 2012 post I discussed the case of Palomar Medical Center v. Sebelius which raised the question of whether the “good cause” requirement set forth in 42 CFR § 405.986(a) governing a RACs reopening of a claim paid more than one year earlier could be challenged by a provider during the administrative appeal process or in federal court. The answer, at least in the Ninth Circuit, is no.

In a unanimous decision filed on September 11, 2012, the Ninth Circuit held that CMS correctly interpreted its regulations that preclude an appeal of a RAC’s decision to reopen a paid claim, that the regulations were reasonable and that because the decision to reopen cannot be appealed, federal courts do not have jurisdiction to review a RAC’s decision to reopen a paid claim. In sum, the Court rejected every argument advanced by Palomar.

In my July 24th post I discussed the decision in St. Francis Hospital v. Sebelius in which a District Court in the Eastern District of New York came to a contrary result. According to the Ninth Circuit, the different result in St. Francis Hospital is based on the Constitutional due process argument advanced by St. Francis but abandoned by Palomar at an earlier stage of the litigation.

Is the “GOOD CAUSE” Fight Over?

As I suggested in my earlier post, I think the argument that the regulations permit a provider to litigate the question of good cause is extremely weak and expect that other Courts that consider the issue will come to the same conclusion as the Ninth Circuit. At this point, I believe that any hope of raising this issue is dependent upon a finding that by denying a provider the right to litigate the good cause requirement, the regulations deny the provider due process, a question not considered or decided by the Ninth Circuit.

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bloglogo2.jpgIn 1991, in the case of Chaves County Home Health Service Inc. v. Sullivan, the Court of Appeals for the District of Columbia Circuit approved the use of sample.jpgstatistical sampling and extrapolation by Medicare contractors, currently known as MACs or ZPICs, in conducting post payment reviews. Specifically, the Court held that the Secretary of HHS was authorized to employ statistical sampling and extrapolation as set forth in Health Care Financing Administration (HCFA, now known as CMS) Ruling 86-1 since the Medicare Act did not prohibit statistical sampling and such a procedure was consistent with the Secretary’s duty to prevent overpayments. On January 8, 2001, in Transmittal B-01-01, CMS updated the procedures a contractor was to follow in employing statistical sampling and extrapolation during a post payment review. As in Ruling 86-1, the new procedures imposed no limitation on when the contractor could determine the amount of an overpayment in a universe of claims by extrapolation from an analysis of a sample of the claims in that universe.

In § 935 of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003, Congress added a new subsection (f)(3) to 42 U.S.C/ § 1395ddd. This subsection states:

Limitation on use of extrapolation
A medicare contractor may not use extrapolation to determine overpayment amounts to be recovered by recoupment, offset, or otherwise unless the Secretary determines that–
(A) there is a sustained or high level of payment error; or (B) documented educational intervention has failed to correct the payment error.
There shall be no administrative or judicial review under section 1395ff of this title, section 1395oo of this title, or otherwise, of determinations by the Secretary of sustained or high levels of payment errors under this paragraph.

The meaning of this section became the central issue in the case of Gentiva Healthcare Corp. v. Sebelius.

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Thumbnail image for Thumbnail image for Thumbnail image for Thumbnail image for Thumbnail image for Thumbnail image for Thumbnail image for Thumbnail image for Thumbnail image for Thumbnail image for bloglogo2.jpgOne of the best “investments” available today is the current 10.5% rate of interest paid by CMS on money improperly held by its contractors. The rules on when CMS will pay interest and how appeals affect interest paid on amounts recouped are set forth in 42 C.F.R. § 405.378 and 42 C.F.R § 450.379.

us check.jpgMedicare pays and charges interest from the date of a “final determination,” which is defined in §405.378(c) and generally is the date of the written advice of payment or demand for repayment. Interest starts to accrue 30 days after the notice date and is calculated in 30 day increments thereafter. This means if CMS pays or is repaid the full amount due within 30 days, there will be no interest. If CMS pays or is repaid on the 45th day, the interest due is that calculated as of the 30th day, not the 45th day.

The interest rate applied to the amount due is the higher of the rate fixed by the Secretary of the Treasury after taking into consideration private consumer rates of interest prevailing on the date of final determination or the current value of funds rate. This means that if, for example, the ALJ overturns a repayment demand that has been previously recouped or repaid, the interest rate applied to the amount repaid by CMS is the interest rate in effect on the date of the ALJ’s decision, not the rate in effect on the date of the initial repayment demand. A list of the interest rates paid by CMS since February 2001 is here so you can verify that the MAC is using the correct rate in calculating the interest due.

Section 405.378(g) provides that in the event of partial payments made over time, the amount paid is first applied to the outstanding interest and then to the principal, the same method used by credit card companies when the bill is not paid in full.

How do Requests for Redetermination by a MAC and Reconsideration by a QIC Affect the Interest Paid?

Pursuant to 42 C.F.R. § 405.942(a), a provider may seek a redetermination of an initial 544232_calendar_series_4.jpgrepayment demand “[w]ithin 120 calendar days from the date a party receives the notice of the initial determination.” However, if the amount claimed to be due has not been promptly repaid in full, § 405.379(d) permits a Medicare contractor to begin recouping the amount due from other amounts CMS owes the provider 41 days after the date of the initial repayment demand. Recoupment can be prevented or stopped, however, by a provider request for redetermination. If the provider is unsuccessful, 42 C.F.R. § 405.962(a) provides that a request for reconsideration to a QIC may “[b]e filed within 180 calendar days from the date the party receives the notice of the redetermination.” If the request for reconsideration is filed within 60 days of the adverse redetermination notice, recoupment continues to be stayed pursuant to §455.379(e)(ii). If no request for reconsideration is filed within 60 days, recoupment may be resumed, but will be stopped again by filing a reconsideration request at any time during the 180 day period. Recoupment will resume if the decision of the QIC is unfavorable.

If the provider is successful at either the 1st or 2nd level appeal, it is entitled to interest on any money held by the Medicare contractor for more than 30 days, whether received by payment from the provider or by way of recoupment. However, §405.378(j) imposes an interest penalty on providers who do not immediately pay the amount demanded in full and are not successful until appealing to an ALJ or the Medicare Appeals Council.

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Thumbnail image for Thumbnail image for Thumbnail image for Thumbnail image for Thumbnail image for Thumbnail image for bloglogo2.jpgPart 1 of this post provided information on the number of appeals being filed by providers from RAC repayment demands and, for those appeals already decided, the extraordinary success providers have had in getting RAC decisions overturned. In some cases, the Equal Access to Justice Act (EAJA) opens the door to the recovery of the fees and costs incurred by the provider in prosecuting the appeal if the provider prevailed in an “adversary adjudication” before an ALJ, and if the position of CMS was not “substantially justified.”

What is an “adversary adjudication?” – Handron v. Secretary Department of Health and Human Services

Psychologist.jpgIn 2003, Dr. Handron, a psychologist, received a demand to repay $604,038 from a Medicare contractor because his documentation did not support the services billed. The amount to be repaid was extrapolated from a nurse’s review of 2,500 of Dr. Handron’s claims. Dr. Handron retained counsel and after losing his initial appeal, appealed to an ALJ. The ALJ determined that of the 2,500 claims reviewed by the nurse, Dr. Handron had been overpaid only $5,434.48 and that because the statistical sampling procedure used by the contractor was unreliable, the extrapolation was invalid. Although the ALJ requested that a representative of the contractor or CMS appear as a non-party participant at the hearing, none did so. However, again at the ALJ’s request, CMS did provide the ALJ with documents related to the sampling procedure and extrapolation used by the contractor.

After prevailing on the vast majority of the claims in his appeal, Dr. Handron filed an application for fees and expenses under the EAJA. The ALJ, the Medicare Appeals Council and the District Court all denied Dr. Handron’s claim based upon a HHS regulation found at 45 CFR § 13.3 that defines an “adversary adjudication” as one in which CMS is represented by counsel at the ALJ hearing. The Third Circuit disregarded the regulation and held that:

[C]ongress chose language that left open the possibility that the government’s position could be represented in some other manner and by someone other than a lawyer. This indicates Congress’s recognition that the position of the United States can be represented in many ways and its desire to grant judges some discretion in determining whether particular action “represents” the government’s position. It does not suggest that the government’s position can only be represented at a hearing if a government representative physically stands before the decision-maker…
Accordingly, we have little doubt that some forms of written advocacy submitted to an ALJ can constitute a representation of the government’s position, so as to make an agency proceeding an “adversary adjudication” for purposes of the EAJA.

images (1).jpgAlthough Dr. Handron won the attorney battle, he lost the war when the Court held that something more than the provision by CMS of the claim files and documents explaining the statistical sampling methodology was required to make his ALJ proceeding an “adversary adjudication.” The Court held that for an ALJ proceeding to be an adversary adjudication, the Government must engage in:

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Thumbnail image for Thumbnail image for Thumbnail image for Thumbnail image for Thumbnail image for bloglogo2.jpgAccording to the latest statistics from CMS, between October 1, 2010 and September 30, 2011, Part A providers filed 27,158 appeals from RAC repayment demands while 20,406 appeals were filed by Part B providers and an additional 9,056 appeals were filed by DME companies. The FY 2011 budget of the Department of Health and Human Services estimated that in FY 2011, Medicare ALJs would receive 282,000 non-RAC appeals and an additional 54,000 RAC specific appeals. Because of delays in the nationwide implementation of the RAC program, the Department’s FY 2012 budget estimates that only 41,000 RAC specific appeals will be filed with the Office of Medicare Hearings and Appeals by September 30, 2012. In FY 2011, CMS reports that of the Part A appeals decided, 6,226 were favorable to the provider, 14,352 Part B appeals were decided favorably and 3,930 DME appeals were favorably decided. CMS did not, however, provide the total number of appeals decided in any category, so it is impossible to calculate the provider’s “win” percentage from the CMS data.

In addition to CMS, the American Hospital Association, through its RACTrac Initiative, has been compiling data on the impact of RAC audits on its members. In its 1st Quarter 2012 report, the AHA reports that its data shows that through the first quarter of 2012, reporting hospitals have appealed 61,729 RAC repayment demands. Of the appeals decided so far, the hospitals have won 75% of the appeals, but 71% of all the appeals are still awaiting a decision.

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Thumbnail image for Thumbnail image for bloglogo2.jpgIn an earlier post, I discussed the case of Palomar Medical Center v. Sebelius presently pending before the Ninth Circuit Court of Appeals. In Palomar, the District Court agreed with CMS that pursuant to the regulations governing administrative appeals, Palomar could not raise and an ALJ could not decide whether “good cause” existed for the RAC to reopen a claim paid more than one year earlier. After hearing oral argument, the Ninth Circuit issued an order inviting the submission of amicus (friend of the court) briefs on the questions of (1) whether the regulations bar administrative review of a RACs compliance with the “good cause” standard and (2) if the regulations do bar administrative review, may the federal courts enforce RAC compliance with the “good cause” requirement. According to CMS, the response to the second question is no because a federal court can only review a “final decision” of an agency and there has been not yet been a final decision on this question. The amicus brief submitted by the AMA and supplemental briefs submitted by the parties may be found on this webpage established by the Ninth Circuit.

St. Francis Hospital v. Sebelius

1334532_ambulance.jpgAs part of the RAC demonstration project, Connolly Consulting reopened 225 paid claims submitted by St. Francis Hospital and then demanded, through St. Francis’ fiscal intermediary, Empire Medical Services (now NGS), repayment of $1.2 million dollars. St. Francis appealed each claim and as of the time it filed its Complaint in federal court, had won 104 of its appeals with 15 appeals still pending before an ALJ. Like Palomar, St. Francis sought to raise before the ALJ and the Medicare Appeals Council the RAC’s compliance with the “good cause” standard and like in Palomar, the ALJ and Medicare Appeals Council refused to consider this issue based on 42 CFR 926(l).

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Thumbnail image for bloglogo2.jpgPalomar Medical Center v. Sebelius involves a claim paid more than one year before it was reopened during a RAC audit. After losing the first two appeals, the hospital convinced an ALJ that the RAC had not shown it had good cause to reopen the claim. However, when the Medicare Appeals Counsel (MAC) reviewed the ALJ’s decision, it concluded, based on its interpretation of the relevant regulations, that the ALJ had no authority to review the RAC’s decision to reopen the claim.

68918_law_education_series_3.jpgThe relevant regulations, which are not easy to make sense of, appear in Title 42 of the Code of Federal Regulations (CFR). 42 CFR § 405.980(b) provides that:
A contractor may reopen an initial determination or redetermination on its own motion–

  • (1) Within 1 year from the date of the initial determination or redetermination for any reason.
  • (2) Within 4 years from the date of the initial determination or redetermination for good cause as defined in §405.986.
  • (3) At any time if there exists reliable evidence as defined in §405.902 that the initial determination was procured by fraud or similar fault as defined in § 405.902

According to 42 CFR § 405.986(a), “good cause” is established when:

  • (1) There is new and material evidence that–
  • &nbsp&nbsp&nbsp(i) Was not available or known at the time of the determination or decision; and
  • &nbsp&nbsp&nbsp(ii) May result in a different conclusion; or
  • (2) The evidence that was considered in making the determination or decision clearly shows on its face that an obvious error was made at the time of the determination or decision.

42 CFR § 405.980(a)(5) provides that:

  • The contractor’s, QIC’s, ALJ’s, or MAC’s decision on whether to reopen is binding and not subject to appeal.

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