Changes Proposed to Medicare Appeals Process
September 2016 Issue
CMS Tries to Pull a Fast One on the ALJ 90-Day Decision Deadline
Many O&P professionals and practices have experienced extensive Medicare contractor audits that required them to pursue the administrative appeals process, usually resulting in a hearing before an Administrative Law Judge (ALJ). With Recovery Audit Contractors (RACs) poised to ramp up activity, the need to pursue additional appeals will continue well into the future. RACs and the Durable Medical Equipment Medicare Administrative Contractors (DME MACs) have particularly focused on lower-limb prostheses and certain types of orthoses in the recent past. For the O&P professionals who have gone through this process in the past few years, the appeals backlog and resulting delay in securing final appeal decisions have become major sources of frustration.
It is apparent that the Medicare appeals process is severely flawed, with little hope of getting an appeal through the process in a reasonable time frame. The ALJ delay grows longer every day, and the increasing dissatisfaction and desperation on the part of providers and suppliers who are stuck in the system has reached fever pitch. Given the 750,000 cases in the ALJ backlog and the capacity of the Office of Medicare Hearings and Appeals (OMHA) to decide approximately 77,000 cases each year, the backlog could be as long as ten years at this point. With more cases coming into the system each day, the problem will only worsen unless major reforms are implemented. The Medicare statute requires ALJs to decide each appeal within 90 days, but OMHA reports that the average time it currently takes to get a case through the ALJ level of appeal is 832 days.
The Notice of Proposed Rulemaking (NPRM) that was published unexpectedly in the Federal Register on July 5 includes some important statistics on the current state of the appeals backlog (available at www.opedge.com/link/338). The Centers for Medicare & Medicaid Services (CMS) states that OMHA anticipates increasing its adjudicatory capacity by an additional 15,000 appeals per year by the end of fiscal year (FY) 2016, for a total of 92,000 appeals annually. Unfortunately, given the massive backlog of pending cases and the 1,222 percent increase in hearing requests between FY 2009 and FY 2014, largely as a result of the RAC audits, even this significant capacity increase will not be enough to meaningfully address the backlog of appeals at OMHA.
There is legislation in the House and Senate that would significantly reform the Medicare audit and appeals system, including specific provisions that impact the O&P profession in a positive way. The O&P Alliance supports these legislative approaches and is working to help advance them as soon as possible. But to date, Congress has not acted. To their credit, CMS and OMHA have made attempts to address the ALJ delay-from instituting an electronic tracking and filing system to clarifying the reasons for which denials may be made at the different levels of administrative review-but little headway has been made in reducing the backlog or the resultant delay. Now, the U.S. Department of Health and Human Services (HHS) is pursuing another approach. Namely, trying to alter the administrative appeal process for Medicare claim and entitlement determinations via the NPRM (81 Fed. Reg. 43,790).
The NPRM contains several proposals that could significantly impact the appeals process. Most notably it includes a proposal to remove the mandatory nature of the ALJ decision deadline, in addition to many minor corrections and clarifications. CMS also proposes to create precedential decisions, add attorney adjudicators, and alter ALJ procedures, among other revisions. CMS solicited comments that were due on August 29; the National Association for the Advancement of Orthotics and Prosthetics (NAAOP) and the O&P Alliance submitted comments on behalf of O&P.
Change to the ALJ Deadline Regulation
The most egregious proposal is removal of the mandatory nature of the 90-day deadline for ALJ decisions. Currently, the regulation governing the deadline for issuing an ALJ decision states that the ALJ "must issue" a decision in 90 days. This regulation is consistent with the Medicare statute, which also requires ALJ decisions to be issued within 90 days. CMS proposes to remove the word "must," thereby indicating that the 90-day deadline for rendering a decision is not absolute. CMS' rationale for this proposed change is the existence of the "escalation" procedure of appeals that may be brought to the Medicare Appeals Council (Council) if the deadline is breached.
Since HHS is engaged in litigation with the American Hospital Association over this issue, the proposal is stunning. The proposal seeks to simply change the rules during the game. It also suggests implementation of a regulation that is clearly inconsistent with the statutory language of the Medicare law. If this proposal were to become final, it would bolster the federal government's argument that escalation provides an alternative avenue for appellants when OMHA fails to meet its required deadline for issuing decisions, a key issue in the legal case. This presents a troubling attempt by CMS to recast its statutory duties and calls into question the sincerity of other approaches proposed in the NPRM.
Precedential Medicare Appeals Council Decisions
Another significant proposed change would give precedential value to some Council decisions, the level of review above the ALJ level. Not every Council decision would create a precedent, but select Council decisions would create precedents if designated by the chair of the Departmental Appeals Board (DAB). Precedential decisions would address common or important points of law or guidance and, more rarely, some factual conclusions. A decision designated as precedential would be binding on all other appeals that concern similar issues. Precedential Council decisions would be published in the Federal Register and be otherwise available to the public.
This could be beneficial for some appellants if it allows for favorable decisions to be applied to subsequent cases-something previously possible only through federal court precedents. But an unfavorable opinion could have significant negative effects on all Medicare providers and suppliers, including O&P providers. Given the Council's past history of being a less-than-hospitable venue for appellants, the ability of the chair of the DAB to pick and choose could be very detrimental to all Medicare providers and suppliers and their patients.
Another major proposal is the creation of attorney adjudicators, who would decide certain cases. These adjudicators are very different from the Medicare magistrates proposed by the Audit and Appeals Fairness, Integrity, and Reforms in Medicare (AFIRM) Act, S. 2368, in the Senate or the president's FY 2017 budget policies. Attorney adjudicators would handle issues that do not require any findings of fact by an ALJ, such as demands for additional information from CMS or its contractors or the withdrawal of a hearing request.
They could also conduct reviews of dismissals by the Qualified Independent Contractor (QIC) that are appealed to OMHA, the agency that houses the ALJs. Generally, attorney adjudicators would be authorized to act when a decision can be issued without an ALJ conducting a hearing. Decisions by attorney adjudicators would be subject to appeal to the same extent as if issued by an ALJ. This proposal actually could help speed up the OMHA backlog by clearing the ALJs' dockets of mostly procedural issues. However, as always, the devil is in the details. It will be important to clarify the situations where attorney adjudicators should not be used, especially in instances where a party's appeal rights to an ALJ hearing and decision on the merits is placed at risk.
Participation in Hearings by CMS and Its Contractors
CMS also proposes extensive changes to the process for CMS and its contractors to participate in hearings. The changes include allowing only one entity to enter the appeal as a party, allowing only one entity to enter the appeal as a participant, allowing two separate opportunities for election of party or participant status, clarifying the role of a participant versus a party, and clarifying the consequences of an invalid election or failure to properly notify other parties of participation or party status.
While these changes sound legalistic, they actually constitute additional barriers for Medicare contractor participation and are an interesting approach given the great emphasis CMS has placed on Medicare contractor participation in hearings over the past few years. Appellants, including O&P providers, would likely welcome these changes because they would make hearing scheduling easier, limit the number of adversaries in such hearings, and provide clear guidance for ALJs to apply consequences to the contractors for failure to follow the rules.
Specifically, the NPRM proposes that CMS or its contractor could elect to participate or enter the appeal as a party either (1) within 30 days of being notified that a request for hearing was filed, or (2) within ten days of receiving a notice of hearing. Under the changes, the first entity to file a notice of intent to participate will be permitted to do so, with subsequent entities permitted only to file a position paper or written testimony, unless otherwise permitted to participate at the ALJ's discretion. Similarly, the first entity to file a notice of intent to enter as a party will be permitted to do so, with subsequent entities demoted to participant status (and subject to the limitation on participation noted above). An invalid election or failure to properly notify the other parties of CMS' or its contractors' intent to participate or enter as a party would result in the entity being prevented from participating or entering as a party. In addition, failure to file position papers, written testimony, or other evidence within the permitted time period (i.e., no later than five days prior to the hearing, with copies to the other parties) would result in that submission not being considered in deciding the appeal.
Statistical Sampling and Extrapolation
For appeals involving challenges to statistical sampling or extrapolation, the NPRM proposes that the request for hearing must include required information for each sampled claim appealed and assert the reasons the appellant disagrees with the sampling methodology or extrapolation. But, appellants would now have additional time to file an appeal of an extrapolated determination, with the deadline for appeal proposed as 60 days after the date the party received the last reconsideration for the sampled claims, even if the reconsideration decision for that last claim is favorable. This would help streamline such appeals and allow for more strategic appeals, consolidated at the ALJ level. Again, these proposed changes could assist providers and suppliers more than the agency or its contractors, and given the tendency of the contractors to apply extrapolation to O&P claims, these changes are welcome news.
Other Modifications to ALJ Procedures
The proposed rule includes several changes to the required contents of the request for hearing, including a requirement for a telephone number for the appellant, a statement about whether the appellant is aware that the appellant or the claim is the subject of an investigation or other proceeding by the Office of Inspector General (OIG) or other law enforcement agency, and the amount in controversy (AIC)-based generally on the Medicare allowed amount, if reasonably ascertainable.
CMS also focuses on notice to other parties of requests for hearings. CMS proposes four methods for proving that copies of a request for hearing were sent to the other parties as required by current regulations. The proposed rule also includes steps for addressing requests for hearing that are not complete. In both these instances, it also includes a time frame for complying with those requirements and gives permission for ALJs or attorney adjudicators to dismiss the appeal if not completed within that time frame.
Parties (including CMS and its contractors) would be required to submit a list of the specific individuals who will be attending/participating in the hearing along with the response to the notice of hearing. The NPRM includes two additional examples of when good cause exists for rescheduling a hearing: (1) the party or its representative has a prior commitment that cannot be changed without significant expense, and (2) the party or representative asserts that he or she did not receive the notice of hearing and is unable to appear at the scheduled time and place. Any changes to the date or time of the hearing would be required to be transmitted to the parties in a written "amended notice of hearing."
The proposed changes include a mechanism to challenge an ALJ or attorney adjudicator's remand of a case back to the QIC by asking for review by the chief ALJ or his or her designee. An ALJ or attorney adjudicator could also vacate his or her own dismissal of an appeal within six months. Requests for escalation to the Council are proposed to be filed with OMHA, with no requirement for a subsequent filing with the Council itself. Requests for expedited access to judicial review (EAJR) could only be directed to the DAB.
The NPRM presents a mixed bag of changes to the ALJ appeals process that could alternately benefit or disadvantage appellants, including O&P providers. Some of the proposals are highly prejudicial against providers and suppliers, especially the provision that removes the mandatory nature of the ALJ decision deadline. This was strongly opposed by healthcare providers and patients alike through the public comment process. While some of the proposals would benefit providers and patients, the actual impact of most of the changes could be minimal.
Given the disproportionate impact the appeals backlog has had on the O&P profession it is critical that careful attention be given to the changes proposed by CMS. Unfortunately, there is little in the proposal that promises to make much of a dent in the appeals backlog. A cynic might say that the proposal as a whole constitutes window dressing for the controversial change proposed with respect to the 90-day ALJ decision deadline. Nevertheless, the proposed rule provided an excellent opportunity for the O&P community to offer its views to CMS about the current appeals process, the negative impact the backlog is having on O&P providers, and suggestions as to how to improve the system.
Peter W. Thomas, JD, is general counsel for the National Association for the Advancement of Orthotics and Prosthetics (NAAOP). Christina A. Hughes, JD, MPH, is counsel at Powers Pyles Sutter & Verville, Washington DC.