A federal District Court in the District of Columbia on Monday denied the U.S. Secretary of Health and Human Service’s request for a stay of proceedings in a federal action brought by the American Hospital Association (AHA) and other providers seeking judicial relief compelling the Secretary to process Medicare appeals in compliance with statutorily designated time frames.

The Secretary requested a temporary stay in the legal proceedings to allow the Department of Health and Human Services (HHS) more time to implement and pursue administrative and legislative efforts to reduce the growing backlog of Medicare appeals. In denying the Secretary’s request, the court noted that “the best medicine can sometimes be hard to swallow.”

Notably, this case was before the Court for a second time, having been remanded from the D.C. Circuit Court of Appeals. In its initial dispositive ruling, the Court, after balancing the interests of the parties, ultimately denied the plaintiffs’ request for a writ of mandamus, finding that mandamus relief was not warranted because HHS’s delays in adjudicating Medicare claims were not so egregious as to warrant relief.

The plaintiffs then appealed to the D.C. Circuit, which reversed and remanded the case to the federal District Court with instructions on determining whether compelling equitable grounds existed to issue plaintiffs’ requested writ. In weighing considerations for and against granting the writ, the Court of Appeals indicated that the District Court might order the Secretary to cure the systemic failure to comply with deadlines. Conversely, the Court of Appeals explained that had Congress and the Secretary been making “significant progress towards a solution,” issuance of the writ might be premature and the District Court instead might consider ordering the agency to submit status reports.

After the case was remanded, the Secretary requested a stay in proceedings until the close of the next full appropriations cycle, that being Sept. 30, 2017. Ultimately, the Court determined that the Secretary did not show that there was “significant progress towards a solution” to the Medicare appeals backlog to justify pausing the litigation.

In rejecting the Secretary’s claims that significant progress had been made, the Court addressed each of the Secretary’s cited administrative and legislative interventions.

Regarding administrative interventions, the Secretary cited efforts to promote settlements, changes to the administrative appeals process, front-end limitations on provider activity, and changes to the Recovery Audit Contractor (RAC) Program.  Specifically, the Secretary cited CMS’s 68-percent settlement, which resolved 260,000 inpatient hospital claims and the Office of Medicare Hearings and Appeals’ (OMHA’s) settlement conference facilitation (SCF) program for Part A claims. The Secretary projected that the SCF process will reduce the number of appeals currently pending before OMHA by 27,000 by the end of the 2020 fiscal year.

In addition to other changes to the administrative appeals process, the Secretary pointed to OMHA’s senior attorney advisor program, statistical sampling and extrapolation project, and temporary reemployment of retired administrative law judges (ALJs). Regarding “front-end limitation on provider activity,” the Secretary explained that in certain jurisdictions, providers and suppliers are now required to obtain pre-authorization from a Medicare Administrative Contractor (MAC) prior to providing particular items and services.

Lastly, the Secretary discussed modifications to RAC contracts purportedly designed to reduce the number of RAC appeals pending before OMHA. Specifically, before referring a claim to the MAC for recoupment, a RAC must offer providers the opportunity to discuss the claim and submit additional documentation; RACs are limited on the number of reviews they conduct on any given topic unless given approval from CMS for further reviews. Also, RACs will be paid only if their determination is upheld by the QIC at reconsideration or if the time frame to file an appeal at the first two levels has expired. In sum, the Secretary estimated that these administrative interventions will result in 50 percent fewer backlogged OMHA appeals in 2020 than would exist otherwise.

Regarding legislative efforts to reduce the backlog, the Secretary cited the President’s budget for the 2017 fiscal year and the Audit & Appeal Fairness, Integrity, and Reforms in Medicare Act of 2015 (AFIRM Act). Together, the Secretary argued, these two initiatives would increase OMHA and Departmental Appeals Board (DAB) appropriations by over $1.3 billion over 10 years. With the additional funding, the Secretary explained, OMHA could expand ALJ review, on-the-record adjudications (i.e. adjudications without a hearing, based on the paper filings), and SCF efforts.

The Secretary estimated that the legislative and administrative initiatives together would reduce the number of pending OMHA cases to 50,000 by 2020 and totally eliminate the backlog of pending OMHA cases older than 90 days by 2021.

In response, the Court emphatically rejected the Secretary’s detailed discussion of its administrative initiatives, stating that it “sounds like ‘significant progress toward a solution,’ doesn’t it? Alas, no. As is often the case, the devil is in the details.”

The Court explained that even assuming that the Secretary’s administrative initiatives are implemented and successfully carried out, OMHA’s backlog will still grow every fiscal year between 2016 and 2020, from 757,090 to 1,003,444 appeals. Regarding the Secretary’s RAC-related initiatives, the Court summarized that the Secretary’s changes to the RAC contracts that were estimated to reduce the backlog by 22,000 appeals represents only 7 percent of the current RAC-related OMHA backlog. As the Court noted, “’significant progress towards a resolution’ cannot simply mean that things get worse more slowly than they would otherwise. It has to mean real movement towards statutory compliance. The process must improve. By the Secretary’s own numbers, the proffered administrative fixes do not clear that bar.”

Regarding the proposed legislative initiatives, the Court acknowledged that it had been seven months since the Court of Appeals issued its order of remand, and in that time Congress had taken no action to address and reduce the Medicare appeals backlog. In fact, the Court noted, Congress rejected the proposed increase in budget authority for expanded OMHA adjudication capacity recommended in the President’s 2016 budget.  Additionally, the Court noted that it had been 21 months since the AFIRM Act was reported by the Senate Finance Committee to the full Senate, and since that time no debate or vote has been scheduled. In sum, the Court concluded that Congress is unlikely to deliver legislative relief for the ever-growing Medicare appeals backlog.

The Court acknowledged the practical impacts of the adjudication delays on human health and welfare. Specifically, the Court recognized that providers are forced to reduce costs, eliminate jobs, forgo providing services, and generally scale back while huge sums of money are tied up for years in the Medicare appeals process. The Court additionally noted that these problems are only likely to increase as the backlog continues to grow.

Although the Court acknowledged that providers are in need of relief, the Court warned that it “does not possess a magic wand that, when waved, will eliminate the backlog” and cautioned that requesting that the Court order HHS to resolve each of the pending appeals by the statutorily prescribed deadlines was “extremely wishful thinking.”  

Regardless of the Court’s reluctance to intervene in the Secretary’s administration of the Medicare appeals process, the Court’s ruling is welcome recognition of the severity of the Medicare appeals backlog, and it echoes the concerns many providers have voiced for months: the Secretary’s initiatives employed to date simply do not go far enough in tackling the issue. Furthermore, the Secretary cannot linger on the sidelines, anticipating that Congress will legislate a silver bullet to remedy the backlog.

An obvious solution in light of Congress’ inaction and the Court’s inability to fully remedy the backlog is for the Secretary to drastically curtail the RAC program, which is often recognized as a leading root cause of the issue. Indeed, Congress granted the Secretary discretion to both implement the RAC program and determine its scope, such that the Secretary could limit the program as necessary to allow OMHA to meet statutory deadlines and satisfy the due process rights of providers participating in the Medicare appeals process.

Until the executive, legislative, and judicial branches of government take meaningful action to reduce the backlog, providers must continue to encourage the Secretary and Congress to initiate and implement further initiatives to address this problem.

About the Authors

Andrew B. Wachler is the principal of Wachler & Associates, P.C.  He graduated Cum Laude from the University of Michigan in 1974 and was the recipient of the William J. Branstom Award. He graduated Cum Laude from Wayne State University Law School in 1978. Mr. Wachler has been practicing healthcare and business law for over 25 years and has been defending Medicare and other third party payor audits since 1980.  Mr. Wachler counsels healthcare providers and organizations nationwide in a variety of legal matters.  He writes and speaks nationally to professional organizations and other entities on a variety of healthcare legal topics.

Erin Diesel Roumayah is an associate attorney at Wachler & Associates, PC. Ms. Roumayah represents healthcare providers and suppliers in Medicare, Medicaid, and third party payer audits. She devotes a substantial portion of her practice representing healthcare providers and suppliers in the audit administrative appeals process.  In addition, Ms. Roumayah represents healthcare providers in regulatory compliance matters and healthcare litigation. Ms. Roumayah graduated from Wayne State University Law School.


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