Tag Archives: Medicare Appeals Council

Hospitals Face Medicare Appeal Backlog Crisis

Part II — Attorney Adjudicators (AAs) Proposed to Help Administrative Law Judges (ALJs) handle Medicare Appeal Backlog Crisis

The backlog in appeals is so long that for all practical purposes the entire system has come to a halt. It has crashed. In Part I of this series we examined a few statistics behind the backlog. We noted that much of the appeals backlog can be explained by the astounding number of errors made by the audit contractors. In Part II we will examine the proposal to add a new role for Attorney Adjudicators (AAs) who can take over part of the Administrative Law Judge’s (ALJ) work during the appeals process. In Part III we will examine the proposal for bulk settlements based on a simple percentage of claims, but with no review of the claims themselves — the “Eighty Percent Rule”. In Part IV we will examine financial strategies being used by Hospitals to handle the massive impounding of their claim payments.

CMS recently published in the Federal Register(*) a proposal to relieve the burden on ALJs by adding a new class of persons to be called Attorney Adjudicators (AAs). As reviewed previously, the number of pending appeals now is more than 1,100,000 cases, and there are only 77 Administrative Law Judges. From 2009 until 2014, the number of requests for an ALJ hearing went up 1,222 percent! In 2014, each ALJ issued 1,048 decisions and 456 dismissals. There is a capacity for around 77,000 appeals per year, and that is expected to go up to 92,000 appeals per year by the end of 2016.  Still it is not enough. It does not take much math to realize there is a crisis.

OMHA has three strategies to address this backlog. First, try to get a larger budget; Second, “take administrative actions to reduce the number of pending appeals” (but we don’t know what these actions will be); Third, hire more adjudicators and “streamline” the appeals process.

Attorney Adjudicators

Another part of the proposed solution will involve Attorney Adjudicators. It is noted that “well-trained attorneys” should be able to do a number of things that today are done by the ALJ.  These include (1) performing reviews of the administrative record; or (2) drafting the appropriate orders.  Examples of orders that might be drafted by the AAs include (a) issuance of dismissals, (b) remanding appeals in order to obtain additional information needed for a decision, or (c) carrying out reviews of QIC dismissals.

The Attorney Adjudicator is defined as someone who is a licensed attorney “employed by OMHA having knowledge of Medicare coverage and payment laws and guidelines”.

Consideration also is being given to allowing AAs to decide cases that are submitted without a request for an oral hearing. This would allow the AAs instead of ALJs to issue decisions when it is not required that an ALJ conduct an oral hearing.

An AA decision would have the same authority as one issued by an ALJ. For example, it would be possible to reopen or appeal AA decisions, just as if they were issued by an ALJ. The time frames involved, escalation options or rights of appeal to the Medicare Appeals Council would remain the same. By the way, from no on, the Medicare Appeals Council is to be referred to only as “The Council”.

The proposal also includes a pathway for the AA to pass along a case to an ALJ.  Example: The parties have agreed to waive their right to an oral hearing. The AA reviews the case and concludes that an oral hearing may be needed in order to clarify some crucial issue in the case. The AA then can refer the matter to an ALJ asking them to determine if an oral hearing should be ordered.

In sum, the Attorney Adjudicator proposal takes several important parts of the appeals work that today is done through the ALJ and hands it over to non-judges who have authority to make a narrow range of decisions. Not much is known about whether or not any aspect of the appeals process as seen from the outside will change significantly.  We must assume that appeals would be submitted the same way, and under the same set of statutory guidelines for timing that now are impossible to fulfill.

In addition, it is not clear why the proposal is not simply to hire more ALJs instead of creating an even more complex process. It may be a case of simply hiring judge-like people on the cheap, or “outsourcing” part of the work of the ALJs so that they can focus more on complex matters.

The comment period for this change has recently expired, so we are waiting to see the outcome. Apparently several important provider associations opposed creation of Attorney Adjudicators.

In Part III we will examine the proposed “80% rule”, and in Part IV we will look at emerging financial bridge strategies being used by hospitals.

Note:
(*) See Federal Register 81(128):43790, July 5, 2016. See also comments by the American Bar Association here.

This was previously published in RACmonitor.

New Medicare RAC Bill

Medicare RAC Congressional Bill

A new Congressional bill, the Audit and Appeal Fairness, Integrity, and Reforms in Medicare (AFIRM) Act of 2015,  “provides for 119 new administrative law judge (ALJ) teams.”

But this does not solve the Medicare RAC backlog problem.

As Bob Soltis points out in Rac Monitor,

  • “Needing some work is its proposal to remand files back to the Medicare Administrative Contractor (MAC) if new evidence is submitted to the ALJ or the Medicare Appeals Council while allowing the Centers for Medicare & Medicaid Services (CMS) and its contractors an exception to the mandatory remand. Why not make CMS offer its evidence with its denial letters? Of further concern is U.S. Sen. John Thune’s amendment making Medicare magistrates contractors instead of federal employees.”

Read more about the activities, and what you can do, in When the RACSs Attack? Write your Congressman and Fight Back!

RAC Audit Medicare Data Snapshot

RAC Medicare Audit  Data  From Senate Chairman Hatch

RAC Medicare Audits recovered over $3 billion

  • A large portion of the initial payment determinations are reversed on appeal.  The Department of Health and Human Services Office of Inspector General reported that, of the 41,000 appeals made to Administrative Law Judges in FY 2012, over 60 percent were partially or fully favorable to the defendant.
  • In Fiscal Year 2014, Medicare covered health services for approximately 54 million elderly and disabled beneficiaries at a cost of $603 billion.
  • Of that figure, an estimated $60 billion, or approximately ten percent, were improperly paid, averaging more than $1,000 in improper payments for every Medicare beneficiary.
  • The large number of appeals being filed can’t be put on the docket of the Office of Medicare Hearings and Appeals for 20-24 weeks.
  • In FY 2009, the majority of appeals were processed within 94 days.  In Fiscal Year 2015, the average for an appeal is 604 days.

Source: Hatch Statement at Finance Markup of the Audit & Appeal Fairness, Integrity, and Reforms in Medicare Act of 2015 (June 3, 2015) Senator Hatch (R-Utah) is the Chair of the Senate Finance Committee.

The Barraclough Blog features latest news on events and policies, as well as original Barraclough features and blogs  about Litigation support for Medicare and Medicaid appeals and statistical overpayment extrapolations.

RAC Contingency Fees

When do the RACs get paid their contingency fees?  

Generally, it is after the first level of appeal.    This rule is about to change, so that the RACs will get their fee only after the matter is completely decided, after the second appeal, or perhaps beyond.

What is the timing involved?   Generally, a first level appeal takes 100 days.   This means that the RAC gets their fee in about three months.   But if the new rules come into effect, then the RAC will need to wait to see if their audit withstands the second-level appeal, but that is an average of 400 days long — more than one year!

So obviously this would have an effect on the cash flow for the RACs.

This “second appeal” proposed rule appears to be a compromise because these matters often are decided at the Administrative Law Judge (ALJ) level at a hearing.   When does that take place?  The data is fuzzy, but it appears to be frequently more than 750 days, that is, more than two years later.

If the health care providers had their way, then the RAC would not get paid until a final decision is made.   Yes, the RAC would have to wait to get its money, it would not have the “free use” of money that it can hold until a final decision.

This is important because many ALJ decisions over-turn RAC audits.

Two  RACs evidently have protested this new rule.   The protestors include HMS Holdings (HealthDataInsights) and CGI Federal (which was fired after it botched the roll-out of the Obamacare enrollment website).     This new rule, after all, would disturb their financial model because they would not get paid until they actually earn their money.

What is the right answer to this?

There is no answer that is acceptable to everyone, but lets look at the dynamics.   Under the current “100-day” system, the RAC has every incentive to rush as quickly as possible through the first level of appeal.   In that way, it gets its money as fast as possible.   But after the first level appeal, the RAC has zero incentive to do anything but drag its feet and slow down the process.    It is incentivized to delay the process, because the longer the delay, the more it can hold on to money that later might be taken away should the final decision go in favor of the health care provider.

This delay behavior frequently is done through the standard practice of taking every day of available time to fulfill even the smallest request.   Even if something takes 10 minutes of work, if the RAC has 60 days to do it, then it will complete the 10 minutes of work on the 60th day.   The longer the RAC delays, the longer it holds on to its money.

The health care provider, however, suffers immensely from this practice.   It is guaranteed that the RAC will work for as long as possible and using every possible tactic to lengthen the appeal time.   There is little if any attention given to the difficulties faced by the health care provider.

So under the proposed system, the RAC will have have incentives to operate efficiently up through the second level appeal, then it can continue to drag its heels beyond that.

It is a compromise.

Barraclough has been in dozens of cases involving the statistical extrapolation part of Medicare appeals.   It always has amazed us how long it takes for the RACs to respond to even the most basic information.   This lack of responsiveness slows down the process, harms the health care provider, and perverts the course of justice.   Anything that can be done to curb these practices is a good thing.

Something potentially good from the Government Accountability Office (GAO).

 

 

Original Medicare (Parts A and B Fee-For-Service) Appeals Process

There are five levels to the Medicare Appeals Process, and the timing appears to be ample for what is required.  Here is the amount of delay involved if you wait until the last minute:

120+180+60+60+60=480 days or 16 months.  However, it appears that most if not all cases take much longer than that, particularly as higher levels of appeals are confronted.

Original Medicare (Parts A and B Fee-For-Service) Appeals Process

Original Medicare (Parts A and B Fee-For-Service) Appeals Process

There is a detailed write-up by Elissa K. Moore, R. Brent Rawlings, and Jessica L. Smith of McGuireWoods here.  Title:  “A Primer on RAC Appeals“. Moore also is associated with the Annals of Health Law published at Loyola University Chicago School of Law.

Federal Precision Standards for Medicare and Medicaid Statistical Sampling and Extrapolations

As we have seen from other entries to this blog, Recovery Audit Contractors (RACs) operating under the Centers for Medicare & Medicaid ServicesRecovery Audit Program who are involved in conducting Medicare and Medicaid audits of health care providers have been granted an incredible bit of leeway in acceptable standards for their work.   It is not uncommon to see precision that is far more than +/- 20%, and even when the precision is as poor as +/- 49%, the Medicare Appeals Council (MAC) as well as Federal Courts will not throw out the extrapolation.

So the question that arises is this:  Are contractors free to employ any accuracy they wish in their work, or are there standards that have been suggested or published by the Federal Government?

As it turns out, there appears to be some guidance from two sources.

Source One:

In the May 5, 2010, report by the Acting Administrator and Chief Operating Officer of the Centers for Medicare & Medicaid Services (CMS)  On page 3 of that report, the section titled “Precision-level requirements” states:

“[Office of Management and BudgetOMB Circular A-123, Appendix C, states that Federal agencies must produce a statistically valid error estimate that meets precision levels of plus or minus 2.5 percentage points with a 90-percent confidence interval or plus or minus 3 percentage points with a 95-percent confidence interval.”

There is a note in the document: Under these assumptions, the minimum sample size needed to meet the precision requirements can be approximated by the following formula, which is used in the examples:

BLOG_ACCURACY_FORMULA.001Where n is the required minimum sample size and P is the estimated percentage of improper payments (Note: This sample size formula is derived from Sampling of Populations: Methods and Applications (3rd edition); Levy, P. S. & Lemeshow, S. (1999); New York: John Wiley & Sons; at page 74. The constant 2.706 is 1.645 squared.

Source Two:

In the CMS-issued Federal Register, 72 Fed. Reg. 50490, 50495 (Aug. 31, 2007), the error estimate should meet precision levels of plus or minus 2.5 percentage points with a 90-percent confidence interval, and the State error estimates should meet precision levels of plus or minus 3 percentage points with a 95-percent confidence interval.”

So it appears that these standards, which are fairly good, have been twice promulgated by the Federal Government.

The question is:  Why are they routinely ignored by Administrative Law Judges (ALJs), and the Medicare Appeals Council (MAC)?

 

John Balko & Associates d/b/a Senior Healthcare Associates v. Kathleen Sebelius Secretary U.S. Department of Health and Human Services

John Balko & Associates operates Senior Healthcare Associates (SHA)and is located in Hermitage, Pennsylvania.    The company was audited and received a demand letter for approximately $680,000 dollars.  The case went through a number of appeals and eventually the Medicare Appeals Council (MAC) ruling was appealed for review by a Federal District Court.

This is a case filed April 30, 2012 in the United States District Court for the Western District of Pennsylvania.  (The PACER number is Case 2:12-cv-00572-AJS)  The case went through several stages prior to being appealed.  (See figure.)

BALKO_CHRONOLOGY.001

Source: Memorandum Opinion re: Parties’ Cross-Motions for Summary Judgment, files 12/28/2012, and Barraclough analysis.

A number of arguments were made that established clearly that the statistical work was faulty, and from a scientific point of view was completely invalid.

BALKO_ARGUMENTS_1.001BALKO_ARGUMENTS_2.001Arthur J. Schwab the United States District Judge wrote in his opinion “Balko is not entitled to the best possible statistical sample of claims that it submitted . . . Instead, Balko is only entitled to a statistically valid random sample.”  (Memorandum Opinion, p. 23.)

Question:  Is a “statistical valid random sample” one that is so poor that it lacks any scientific credibility?

What has happened in this case does not bode well for health care providers.   Here, statistical work that is demonstrably faulty and inferior and definitely not scientifically valid has been signed off on by the Medicare Appeals Council (MAC), and by the Federal Court that reviewed the case.

This type of sloppy scientific work never would be accepted in any other type of case before a Federal Court in which scientific evidence is evaluated in conformity with Rule 702 “Testimony by Expert Witnesses” of the Federal Rules of Evidence.   The question is why is this type of poor and inadequate scientific work OK for audits of health care providers but not OK anywhere else?

Barraclough NY LLC supplies experts for litigation support in Medicare and Medicaid appeals cases.

Documents reviewed:

John Balko & Associates d/b/a Senior Healthcare Associates, Plaintiff, v. Kathleen Sebelius Secretary U.S. Department of Health and Human Services, defendant. United States District Court for the Western District of Pennsylvania.  Case 2:12-cv-00572-AJS.

  1. Complaint (Filed 04/30/12)
  2. Answer to Complaint (Filed 08/20/2012)
  3. Brief in Support of Motion [for Summary Judgment] (Filed 11/15/2012)
  4. Brief in Opposition to Motion (Filed 12/04/12)
  5. Concise Statement of Material Facts (filed 11/16/12)
  6. Memorandum Opinion re: Parties’ Cross-Motions for Summary Judgment (Filed 12/28/2012)
  7. Judgment (Filed 04/08/14)
  8. Opinion of the Court (Filed 02/12/2014)

Note: There is another write-up of this ruling by Paige Fillingame at King & Spalding LLP with a free link to the ruling.

 

In Statistical Extrapolations, “Precision Not Required” by Medicare Appeals Council (MAC)

The case of Michael King, M.D. and Kinston Medical Specialists, P.A. before the Department of Health and Human Services, Departmental Appeals Board, Medicare Appeals Council (MAC), Docket M-10-321 offers one of the most distressing cases of acceptance of an unreliable statistical extrapolation.

MAC_King_Case.001

 Of particular note in this case is how the precision changed as the case moved from the original sampling through the Qualified Independent Contractor QIC reconsideration until after the Administrative Law Judge (ALJ) decision.

MAC_KING_PRECISION.001Another way to see this is to examine the range of precision allowed by the MPIM and that accepted in this case by the MAC.

MAC_KING_PRECISION_RANGE.001At Barraclough, we have been involved in a number of Medicare appeals, and unfortunately, we must report to you that this case is not atypical.

In our view, the type of statistical work routinely accepted by the Medicare Appeals Council (MAC) does not meet Federal Evidence Standards Rule 702Testimony by Expert Witnesses“.

A witness who is qualified as an expert by knowledge, skill, experience, training, or education may testify in the form of an opinion or otherwise if:

(a) the expert’s scientific, technical, or other specialized knowledge will help the trier of fact to understand the evidence or to determine a fact in issue;

(b) the testimony is based on sufficient facts or data;

(c) the testimony is the product of reliable principles and methods; and

(d) the expert has reliably applied the principles and methods to the facts of the case.

So here is our question:  Is =/- 40% a case of “reliably applied”?

 

The Case of John Sanders, M.D. – Medicare Appeals Council (MAC) Throws Out Extrapolation

This is a case in which the extrapolation was thrown out.

Here, the Medicare Appeals Council agreed with the “determination that the sampling was sufficiently flawed to preclude calculation of an overpayment by extrapolation”.

Although the appellant had made a number of arguments attacking the statistical extrapolation, the MAC relied on two errors in throwing out the extrapolation:

“The errors are: 1) the PSC provided the independent statistical expert with sample data which assigned some claims to the wrong stratum; and 2) the PSC provided the independent expert with a second CD containing an Excel set of sample data with significant discrepancies from the first set of data, and the PSC was unable to clarify the discrepancies, to identify which set of data was applicable, or to explain the significance of the second set of data.”

This provides at least three check points when providing litigation support to a health care provider:

First, always have the statistical expert carefully check that all claims in any strata strictly fit the definition of the strata;

Second, look for any instance in which inconsistent records have been handed over by the contractor; and

Third, demand detailed explanations from the contractor for each and every inconsistency found in the data.

The case is: In the case of John Sanders, M.D. (May 12, 2011). Medicare Appeals Council (MAC).

Unfortunately, it has been our experience at Barraclough that these arguments do not always result in an extrapolation being thrown out.   Rulings are inconsistent with each other – sometimes this argument works, sometimes it does not.