A serious mature businessman standing in an office.

Provider frustrations over getting to the third level of appeal can be downright Shakespearean in scope.

“Get thee to a nunnery!” Hamlet tells his sister, Ophelia in Act 3 of Shakespeare’s masterpiece, frustrated by his mother marrying Claudius so quickly after his father’s death.

Similarly, any provider that has undergone a Medicare appeal understands the frustration of getting the appeal to the administrative law judge (ALJ) level (the third level of appeal). It takes years to do so, and it is the imperative step, instead of the lower-level rubber stamps. “Get thee to an ALJ!” one might advise.

Per regulation, once you appeal an alleged Medicare overpayment, no recoupment of the disputed funds occurs until after you receive the second-level review, which is usually marked by the Qualified Independent Contractor (QIC) upholding the overpayment. It is no secret that the first two levels of appeal under Medicare are basically an automatic approval process of the decision to recoup. “Something is rotten in the state of Denmark,” a provider might think.Hence the importance of the ALJ level.

There are five levels of Medicare appeals available to providers:

  • Redetermination;
  • Reconsideration;
  • ALJ;
  • Departmental Appeals Board (DAB); and
  • Federal court.

As noted, the third level is when you present your case to an ALJ, who is an impartial, independent entity. Unfortunately, right now it takes about five years between levels two and three, although with the Centers for Medicare & Medicaid Services (CMS) recently hiring 70 new ALJs, the Office of Medicare Hearings and Appeals (OMHA) is optimistic that the backlog will quickly dissipate. Last week, I attended an ALJ hearing for a client based on an audit conducted in 2016. Five years later, we finally appeared before the ALJ. When the ALJ was presented with our evidence, which clearly demonstrated that the provider should not pay anything, he actually said, “I’m shocked this issue got this far.” As in, this should have been reversed before this level.

In many cases, a premature recoupment of funds in dispute can financially destroy a healthcare provider, which should not be the purpose of any overpayment, nor the consequence of any program targeting fraud, waste, and abuse. We are talking about documentation nitpicking, not fraud – such as service notes signed late, according to best practices, or quibbles about medical necessity, or the definition of “inpatient” and the two-midnight rule.

You may have read my blogs about the Family Rehab case that came out of Texas in 2019. A court found that Family Rehab, a healthcare facility facing a $7 million alleged overpayment, required an injunction. The judge ordered that CMS be enjoined from prematurely recouping Medicare reimbursements from Family Rehab.

Now, be mindful, the judge did not enjoin CMS the first time Family Rehab requested an injunction; the Superior Court initially dismissed the case for lack of jurisdiction, based on failure to exhaust administrative remedies. But instead of giving up, which is what most providers would do, when faced with a dismissed injunction request due to emotional turmoil and finances, they asked: “to be, or not to be: that is the question:” Instead, Family Rehab appealed the dismissal to the Court of Appeals and won. The 5th Circuit held that the Superior Court does have jurisdiction to hear a collateral challenge on both procedural due process grounds as well as an ultra vires action. On remand, Family Rehab successfully obtained a permanent injunction.

The clinical issues supposedly in support of the overpayment were silly. In Family Rehab’s case, the Zone Program Integrity Contractor (ZPIC) claimed that homebound criteria were not met when the opposite was immediately evident by a reasonable review of the documents.

“Homebound” is defined as:

The patient must either:

  • Because of illness or injury, need the aid of supportive devices such as crutches, canes, wheelchairs, and walkers; the use of special transportation; or the assistance of another person in order to leave their place of residence;


  • Have a condition such that leaving his or her home is medically contraindicated.

If the patient meets one of these conditions, then the patient must also meet two additional requirements:

  • There must exist a normal inability to leave home; and
  • Leaving home must require a considerable and taxing effort.

In one of the claims for which the ZPIC found no homebound status, the consumer was legally blind and in a wheelchair! The injunction hinged on the court’s finding that because the ALJ stage is critical in decreasing the risk of erroneous deprivation, an injunction was necessary.

I look forward to the ALJ hearing. “The rest is silence.”

Programming Note: Listen to Knicole Emanuel’s RAC Report every Monday on Monitor Mondays, 10 Eastern.

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