dr-r-wuebkerUnder Medicare guidance, and especially in the current audit environment, hospitals must have robust processes in place – not only for accurate DRG assignment, but also for compliant admission review as it pertains to medical necessity. Hospitals should understand their rights regarding claim appeals, gain an understanding of the Recovery Auditor (RA) appeal process and identify some strategies for mounting successful appeals.

Documentation Is Key

Before discussing the appeals process, it is important to note that the best defense to an audit is getting it right (with documentation of the process) the first time by ensuring that patients receive the proper level of care, thereby ensuring that the hospital receives the appropriate reimbursement. Of note is that RAs, formerly known as RACs, will look back at cases from as long as three years ago – so if your processes are not yet solid, the time to act is now. By following the rules and making the correct determination at the time of admission, hospitals will be well-positioned to challenge denials through the appeals process.

The Appeals Process

There is ample data available evidencing that the ALJ level of appeal is currently the best level at which to secure a favorable decision. While there is no readily available public data on the overturn rate at the first level of appeal (the redetermination), it is commonly accepted that this rate is very low. There is data available for the overturn rate at the second level of appeal (the reconsideration), but that rate is also low. Q2 Administrators, the Administrative Qualified Independent Contractor (AdQIC), publishes statistics on appeals processed by MAXIMUS Federal Services, the Qualified Independent Contractor (QIC), online here: https://www.q2a.com/Statistics.aspx. The Part A statistics from the fourth quarter of the 2011 fiscal year show that only 13 percent of the cases reviewed by the QIC resulted in favorable decisions. Despite these relatively low overturn rates, hospitals should take advantage of the Medicare appeals process for any claim believed to be valid; a claim cannot be won if the hospital does not appeal.

Again, the third level of appeal, with an ALJ, has the highest likelihood of overturning a denial. While there are differing theories as to why the overturn rate is so much higher at the ALJ level, it is likely because: a) the Office of Medicare Hearings and Appeals (OMHA) operates independently from CMS; b) there is a required independent review of each specific case; and c) the provider has the opportunity to present live testimony, if necessary. It is important to note that an ALJ has the discretion to render a wholly favorable decision “on the record,” without a hearing, if the record supports such a decision. Therefore, it is important to ensure that an appeal has the appropriate documentation in the medical record and that the appeal letters are sent with solid medical and regulatory arguments.

If the ALJ decides to hold a hearing, a hearing memorandum should be drafted and submitted prior to the hearing. This memorandum not only serves to frame the discussion in the hearing, but it also affords another opportunity to convince the ALJ to render an “on-the-record” decision. Generally, the ALJ memorandum should provide medical reasoning illustrating that the beneficiary’s condition warranted an inpatient admission pursuant to factors presented in the Medicare Benefit Policy Manual, as well as an explanation of why the inpatient admission was medically reasonable and necessary (as opposed to an outpatient stay). One possible strategy to use when drafting an ALJ memorandum is to tailor a response to the rationale presented in the reconsideration decision from the QIC. To that end, a provider should take the opportunity to request from the ALJ a copy of the Medical Panel Review Form drafted by the QIC, as it is part of the record and contains the rationale of the medical reviewer, as well as their credentials.

If the ALJ decides that a hearing is necessary, procedural knowledge and preparation are essential. Each ALJ has a different style that can result in different experiences and outcomes, and recent changes to the case distribution process could result in providers appearing before many different ALJs for the first time. Thorough preparation for the hearing is vital and should include a complete review of the chart to note the existence, location and content of the inpatient admission order; the history and physical; the ordered services; any extenuating circumstances, and the discharge summary.  The information in these portions of the medical record will assist in making a compelling argument. Finally, it is essential not only to provide clinical evidence regarding the beneficiary’s condition, but to prove that the clinical scenario required an inpatient admission under Medicare requirements.

Contractor Participation at the Hearing

A recent development that providers should be prepared for is the potential for the Recovery Auditor to participate in the ALJ hearing. These types of hearings are drastically different from hearings held without the participation of a Medicare contractor. When the RA participates in a hearing, it is essential for the provider not only to understand the clinical merits of the case, but also to be knowledgeable regarding Medicare regulations. For example, the RAs often argue that because a specific procedure is not on the inpatient-only list, it should be considered outpatient.  However, being prepared with a counterargument (and citations) to support that there is a regulatory requirement for beneficiary-specific analysis for procedures not on the inpatient-only list, one can discredit such a statement easily.



The appeal process is critically important to ensuring that the rights of providers are protected. Providers must be prepared to defend their decision-making processes, and this preparation starts well in advance of the actual start of the appeals process. Even with the implementation of compliant practices, a provider may need to take advantage of the appeals process in order to defend against improper RA denials.

About the Author

Ralph Wuebker, MD, MBA, currently serves as Vice President of Executive Health Resources’ (EHR) ACE (Audit, Compliance and Education) Team. This group of physicians conducts audits and regular visits to EHR’s client hospitals to provide ongoing education on a variety of topics including Medicare and Medicaid compliance and regulations, medical necessity, Recovery Audit Contractors, utilization review, denials management and length of stay.

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