OIG report says reconsideration bids on RAC requests fail 90 percent of the time – But so what?

An October 2012 report titled The First Level of The Medicare Appeals Process, 2008-2012:  Volume, Outcomes, and Timeliness (http://oig.hhs.gov/oei/reports/oei-01-12-00150.asp) examined the results of the first level of Medicare appeals: reconsideration.

The report noted that there has been a dramatic increase in the number of appeals of inpatient claims by hospitals, with that figure rising by 523 percent over the time period reflected in the report’s title. The portion of the report that garnered the most attention, however, was the fact that “as the volume of RAC-related redeterminations grew substantially in 2011 and 2012, the favorable rate declined substantially, (with) just 11 percent of RAC-related redeterminations decided fully or partially in favor of appellants (providers/suppliers) in 2012.”

Some articles trumpeted this finding with the suggestion that it is now nearly pointless to appeal RAC denials, because so few RAC-related redetermination requests succeed.

Such advice is terribly misleading. The redetermination level is the first level of a Medicare appeal. After the redetermination, a Qualified Independent Contractor (QIC) conducts a reconsideration, then an administrative law judge (ALJ) holds a hearing. After that, the case can be reviewed by the Medicare Appeals Council of the Departmental Appeals Board before finally going to federal district court. 

Last November, the U.S. Department of Health and Human Services (HHS) Office of Inspector General (OIG) came out with a report complaining about the high frequency with which ALJs ruled in favor of providers and suppliers, reversing the findings of the QICs. The latest OIG report only looks at the very first level of appeal, without offering any data about the QIC or ALJ level.

Suggesting that providers shouldn’t appeal because they win only a small percentage of redeterminations is akin to saying a baseball team should give up if it is behind after the first inning. The higher levels of appeal consistently have been far more favorable to the medical community. 

The report suggests that, historically, redeterminations reversed a substantial percentage of RAC cases. I can say that in my personal experience, my clients and I have had very little success at the redetermination level. Reconsideration has been slightly more rewarding.

The real success, however, has come at the ALJ level. I have only had two significant cases in which I felt that the client deserved a better result than they received at the ALJ level. The ALJ hearings have been incredibly fair, and the judges have understood the facts and the law. Unfortunately, the judges are also terribly overworked, so the decisions often have been greatly delayed. But despite the burden of work, the judges have consistently given the parties appropriate amounts of time to present their cases.

The bottom line is that the new OIG report isn’t really that important. So, why did I write about it? Because if you see some of the news coverage of the report, it may cause you to think that appeals are futile. They aren’t. When you believe a claim has been denied improperly, you have good odds of success if you file an appeal and take it up to the ALJ level if necessary.  In fact, the only way to ensure that the system remains fair is for providers and suppliers to vigorously appeal when claims are denied unfairly.

About the Author

David 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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