The ALJ Backlog Dissolves – and SMRC Audits Escalate

The long-running backlog at the ALJ may soon be a non-issue.

The administrative law judge (ALJ) backlog will soon be no more. Yes, the 4-6-year waiting period between the second and third level of medical appeals will be back to 90 days, within the statutory requirement, by sometime this year.

What precipitated this drastic improvement? Money. This past year, the Centers for Medicare & Medicaid Services (CMS) budget increased substantially, mostly due to the Medicare appeals backlog. The Office of Medicare Hearings and Appeals (OMHA) was given enough funding to hire 70 additional ALJs, and to open six additional locations. That brings the number of ALJs ruling over provider Medicare appeals to more than 100. OMHA now has the capability to hear and render decisions for approximately 300,000 appeals per year.

This number is drastically higher than the number of Medicare appeals being filed. The backlog will soon be nonexistent. This is fantastic for all providers, because while CMS will continue to recoup alleged overpayments after the second level, providers will be able to have their cases adjudicated by an ALJ much speedier.

Now, the bad news. Remember when the Recovery Audit Contractor (RAC) program was first implemented, and the RACs were zealously auditing, which is the reason that the backlog exists in the first place? RACs were given free rein to audit whichever types of service providers they chose to target. Once the backlog got out of hand, CMS restricted the RACs. They only allowed a three-year lookback period, whereas other auditors can go back six years, as with the Supplemental Medical Review Contractor (SMRC) audits. CMS also mandated that the RACs slow down their audits, and put other restrictions on RACs.

Now that OMHA has the capacity to adjudicate 300,000 Medicare appeals per year, however, expect that those reins that have been holding the RACs back will by 2021 or 2022 be fully loosened for a full gallop.

Switching gears: two of the lesser-known audits exclusive to CMS are the aforementioned SMRC audits and the Targeted Probe-and-Educate (TPE) audits. Exclusivity to CMS just means that Medicare claims are reviewed, not Medicaid.

The SMRCs in particular create confusion. We have seen durable medical equipment (DME) SMRC audits on ventilator claims, which are extremely document-intensive. You can imagine the high amounts of money at issue, because, for ventilators, many people require them for long periods of time. Sometimes there can 3,000 claim lines for a ventilator claim.

These SMRC audits are not extrapolated, but the amount in controversy is still high. SMRCs normally request the documents for 20-40 claims. It is a one-time review. It’s a post-payment review audit. It doesn’t sound that bad, until you receive the request for documents for 20-40 claims, all of which contain 3,000 claim lines, and you have 45 days to comply.

Lastly, in a rare act, CMS has inquired as to whether providers prefer TPE audits or continuing with post-payment review audits for the remainder of the pandemic. If you have a strong opinion one way or the other, be sure to contact CMS.

Programming Note: Listen to Knicole Emanuel and the Monitor Mondays RAC Report every Monday at 10 a.m. Eastern.