You might be likely to cheer the recent U.S. Department of Health and Human Services Office of Inspector General (HHS OIG) report’s title: “Improvements Are Needed at the Administrative Law Judge Level of Medicare Appeals” . But reading the report is likely to ebb your enthusiasm.

After all, the report is not about the growing delay in having a hearing or receiving a decision in a particularly important matter (in my experience, 12-to-18 months waits are common). In fact, the report claims that while cases were decided slowly in 2005 and 2006, “timeliness improved” thereafter.

The “problems” identified by the OIG are quite different. One significant “problem,” according to the report, is that some organizations are filing too many appeals. The OIG recommends discouraging what it labels as “frequent (filers)” by imposing a filing fee on ALJ requests from anyone other than beneficiaries. The report notes that ALJ staffers are concerned with those submitting frequent appeals, noting that “several (ALJ) staff noted that some of these appellants appeal every payment denial” and that “a few staff said that these appellants have an incentive to appeal because the cost is minimal and a favorable decision is likely.” 

It is stunning that the fact that most appeals are successful yields a conclusion that the government should make it more difficult to appeal. The fact that ALJs regularly are ruling on behalf of hospitals and other providers should prompt a conclusion that claims are being unfairly denied, and that it should be made easier to appeal – or, perhaps, that the earlier levels of appeal are improperly ruling against providers and practitioners. Instead, the OIG suggests raising barriers.

The study asserts that 56 percent of all appeals are successful, but also that there is considerable variation between different types of practitioners, hinging on whether the appeal involves Medicare Parts A, B, C or D. Seventy-two percent of all Medicare A appeals filed by hospitals were fully favorable, as were 62 percent of the home health/hospice appeals. Practitioner appeals under Part B were fully favorable 60 percent of the time (note that additional claims were partially favorable). By contrast, appeals under Medicare Parts C and D were successful 19 and 18 percent of the time, respectively. 

The report indicates that one reason ALJs rule in favor of appellants so frequently is that they are less strict than QICs when interpreting Medicare policies. The report notes that “ALJs often decided in favor of appellants when the intent, but not the letter, of a Medicare policy was met,” and officials recommend that the Centers for Medicare & Medicaid Services (CMS) train ALJs and QICs so they can become more consistent in applying CMS policy. While the report does not explicitly state that this training should include chastising ALJs for focusing on the intent of the law, that implication seems clear. This report appears to support the aim of lowering the success rate of appeals.

The OIG also criticizes ALJs for being too lenient in allowing the introduction of new evidence. Generally speaking, evidence can be allowed at the ALJ level only when it was it was presented at the QIC level, unless good cause exists to make an exception. The report suggests that ALJs are too liberal in finding such good cause, and that regulations should be changed to indicate that if the appellant could have obtained the evidence earlier, it is to be excluded. 

The OIG also asserts that providers under government investigation often appeal claims and use successful appeals as a defense in the investigations. The OIG finds this troubling, and the agency wants to change the law to prevent such organizations from filing ALJ appeals at all. 

The report also notes that CMS prevails in a higher percentage of appeals when CMS officials participate in a hearing (interestingly, this difference was minimal for Part A appeals, with appeals proving successful 62 percent of the time when CMS did not participate, and 59 percent of the time when they did). The report recommends that CMS generally participate in more hearings. 

The report also recommends the implementation of a quality assurance program to review ALJ decisions. In a recommendation few could object to reasonably, it also recommends that there be an effort to make ALJ case files electronic. 

One final finding won’t surprise anyone who has filed multiple appeals: There is a great deal of variation across ALJs. Simply put, some ALJs are far more likely to rule for appellants than others. The judges themselves even seem to be aware of this variation. As part of the interview process, one ALJ said “I go towards protecting the Medicare Trust Fund.” By contrast, a staff member said another ALJ “will listen to the treating physician and will give deference to the physician’s opinion.” The report advocates steps to eliminate this inconsistency, but it seems clear that the authors’ hope is that doing so will lower the success rate of appeals.

In closing, it is important to recognize that appeal statistics can be used in very misleading ways. For example, it would be unfair to say that the fact that 72 percent of hospital Part A appeals are successful proves that 72 percent of the denials by MACs are incorrect. Some denials are not appealed, after all. It is also possible that some denials that are not appealed are decided correctly, though it is certainly possible that if those decisions were appealed, a high percentage would be reversed. In short, you must use some care when drawing conclusions based only on reversal rates.

Still, I would interpret the fact that nearly three-fourths of QIC hospital Part A denials ultimately are reversed very, very differently than the OIG. I find it to be strong evidence that the QICs do not apply the law correctly. By contrast, the OIG interprets it as evidence that ALJs are out of control, and disregarding the law. The fact that the OIG is seeking to lower the success rate of appeals should give everyone in the healthcare industry pause.

About the Author

David M. Glaser is a shareholder in Fredrikson & Byron’s Health Law Group and helped establish its Health Care Fraud & Compliance Group. David helps healthcare entities negotiate the maze of healthcare regulations, providing advice about risk management, reimbursement and business planning issues. He has considerable experience in healthcare regulation and litigation, including compliance, criminal and civil fraud investigations, and reimbursement disputes.

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RACs Expanding Audits Outside of Hospitals

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