Providers are finding success when arguing their case before an ALJ – and finding trouble beyond that point.
I have been handling appeals of extrapolated overpayments for a very long time now, and the truth is, while I know that there are five levels of appeal, the majority of my work has been at the third level: the administrative law judge (ALJ) level. Why? Well, because the first two levels (reconsideration and redetermination), while required to advance to the third level, are mostly a rubber-stamped waste of time, and it has been quite rare for me to engage at levels four and five. Level four is an administrative review of the records by the Medicare Appeals Council, and does not include any testimony, and level five is a judicial review in federal district court. The latter (level five) is a very time-consuming and expensive step, and only the largest of overpayment demands usually end up there. In fact, in the past 10 years, I have only been involved in a few cases that were elevated to the fifth level of appeal.
For most providers, the ALJ has traditionally been the last-ditch effort to have their appeal heard by an independent arbiter. And with more than 70 percent of decisions either fully favorable (16.6 percent), partially favorable (2.0 percent) or dismissed (54.1 percent), it’s no wonder that there has been such a rush to the ALJ. But contrary to what many may believe, the ALJ is not the be-all end-all of the appeals process – and over the past few years, I have seen a significant number of mostly favorable ALJ decisions being appealed, by the contractor, to the Medicare Appeals Council. By official description, the Council is independent of both the Centers for Medicare & Medicaid Services (CMS) and the Office of Medicare Hearings and Appeals (OHMA), as their judges are officially part of the U.S. Department of Health and Human Services (HHS) Department of Appeals Board (DAB).
The Council deals with an administrative review of the ALJ hearing records, evidence, and transcripts, and as such, this should be considered or classified as a hearing, per se. If one is so inclined, he or she can conduct a search of Council decisions to get a better handle on what these hearings are about. For example, in one case I looked at involving a physician, the Council decided, on its own, “to review the Administrative Law Judge’s (ALJ’s) decision, dated February 25, 2014, because there is an error of law material to the outcome of the claims and because the decision is not supported by a preponderance of the evidence.” In this case, the ALJ invalidated the statistical sampling methodology employed by the auditors. Consequently, the ALJ limited the overpayment to the amount identified in claims actually reviewed by the auditors.
Now, one should note that these kinds of decisions (invalidating the extrapolation) can cost CMS millions, if not billions, of dollars over time. And while some government contractors (auditors) are paid a direct commission based on how many dollars they claim have been overpaid, others are either provided a bonus based on how much they recover (or are under some minimum amount to just keep their contracts with CMS). As such, it’s not hard to imagine why the auditors’ work is so often invalidated at the ALJ level – and why they are appealing so many of their losses to the Council.
The decision on this case, as it has been for too many lately on which I have been engaged, was as follows:
“The Council has carefully considered the record that was before the ALJ, as well as the CMS memorandum and the appellant’s responsive briefs. Based upon that review, the Council reverses the ALJ’s unfavorable analysis regarding the sampling methodology utilized for this overpayment.”
So, in this case, the provider successfully argued their case in front of a judge, only to have it thrown out at level four. Options? If they meet the criteria, the provider can appeal the Council decision to the fifth level of appeal: federal court. Imagine how much that is going to cost.
In another case, the ALJ ruled that the extrapolation calculation was invalid because the auditor failed to consider the value of the underpayments when extrapolating the overpayment amount. The judge did not invalidate the use of extrapolation, but rather ordered the extrapolation to be recalculated, including the underpaid claims. I read this case, and it was quite apparent that the judge was correct in his assessment of the evidence and the testimony. The provider argued that the auditor excluded zero paid claims and ignored the underpayments, including only the overpayments to calculate the extrapolated overpayment amount. This is a clear violation of Section 18.104.22.168 of Chapter 8 of the Medicare Program Integrity Manual. But, lo and behold, the “Council reverses the ALJ’s decision that the sampling and extrapolation must be recalculated to include all claims (including zero paid claims)…”
But below is the most disappointing part, because it involves the Council setting a standard that is both contrary to common sense as well as increasing the burden on the provider, rather than the government. On the issue of underpayments, in general, the Council opined:
“The Council need not find that CMS or its contractor undertook statistical sampling and extrapolation based on the most precise methodology that might be devised in order to uphold an overpayment extrapolation based on that methodology. Rather, as the above-quoted authorities make clear, the test is whether the methodology is statistically valid. CMS argues that applicable guidance, including CMS Ruling 86-1 and the MPIM, establishes that the reasons cited by the ALJ in support of his decision to invalidate the sampling methodology in this case do not, in fact, demonstrate that the methodology was invalid. CMS further argues that the ALJ erred in placing the burden on the PSC to demonstrate that the sampling methodology was appropriate, and not the appellant to demonstrate that the methodology was invalid.”
Scary stuff, at least if you are a provider of medical services.
You should note that this was a big part of my experience as a statistical expert testifying in many ALJ hearings over the years. At one point, we were seeing the ALJ reverse the extrapolation decision in well over 70 percent of our cases – not because I was so good, but because the auditors’ work was so bad. But because the auditor faced significant penalties due to the potential loss of recoveries to the Trust Fund, they started appealing ALJ favorable, partially favorable, and dismissal decisions to the Council as a matter of course – and more often than not, the Council would reverse the ALJ decision and/or send it back to the ALJ for reconsideration. In the process, the appellant would provide their response to the Council, and the mess continued.
A RACmonitor reader named Jack wrote in last week, in response to my prior article on ALJ hearings, and he asked some great questions. Like, what percentage of ALJ decisions end up at the Council (for whatever reason)? And then, what percentage of those decisions are reversed? Great questions, and as of the writing of this article, I have not yet heard back from anyone at CMS or OHMA to provide me with those statistics. But his point is well-taken; if a large percentage of favorable, partially favorable, and outright dismissals are reversed by the Council at the fourth level of appeal, then this would begin to make the ALJ hearings about as useless as reconsideration and redetermination are now.
From the Medicare Appeals Backlog Primer, we read:
“Section 1869(d)(2)(A) of the Act contemplates that the Council render a decision or remand the case to the ALJ within 90 days from the date the request for review is timely filed. If the Council does not render a decision within 90 days, the appellant may request that the appeal be escalated to Federal district court. Due to an overwhelming number of Council review requests over the past several years, the Council has not been able to meet the 90-day timeframe for adjudication in some cases, resulting in a backlog of appeals at the Council.”
I interpret this as evidence that, just as the failure of appeals levels one and two to fairly consider providers’ objections has caused this significant backlog in ALJ hearings, so too the rush to overturn every favorable decision by the ALJ will be the cause of the upcoming Medicare Appeals Council bubble.
So, what’s the solution? Maybe a better question is: is there a solution? I have long felt that, if we held the auditors accountable for their mistakes, as payors do with providers, we would see a significant shift downward in the number of claims found to have been billed in error, as well as the number of appeals, as the need would begin to diminish. But if each level simply cosigns the incompetence of the process, then maybe the only solution is that there isn’t one.
It reminds of a few verses in the book “The Sneetches” by Dr. Suess. It goes like this:
“Off again! On again! In again! Out again! Through the machines they raced round and about again, changing their stars every minute or two. They kept paying money. They kept running through until neither the Plain nor the Star-Bellies knew whether this one was that one or that one was this one or which one was what one…or what one was who. And when every last cent of their money was spent, the Fix-it-Up Chappie packed up and he went. And he laughed as he drove in his car up the beach, ‘no they never will learn; you can’t teach a Sneetch.’”
And that’s the world according to Frank.
Programming Note: Listen to Frank Cohen report this story live during the next edition of Monitor Mondays, May 3, 10 a.m. Eastern.