A federal judge in the District of Columbia has asked the American Hospital Association for ideas on how HHS can work its way through its Medicare billing appeals backlog.
U.S. District Judge James Boasberg reportedly expressed frustration toward HHS during a hearing last week over the agency’s inability to find a solution for the staggering backlog. As of June 2017, the Office of Medicare, Hearing and Appeals (OMHA) had 607,402 appeals pending with a current estimated wait time of three years for an administrative law judge to process a provider’s appeal. At this rate, the backlog is predicted to reach 950,520 appeals by the end of Fiscal Year 2021.
Hospitals have been facing financial strain in recent years as Medicare margins continue to drop into the negative double digits. On top of that, the appeals process for unfairly denied claims can take as long as 4.5 years to conclude, according to a 2017 study in the Journal of Hospital Medicine. That could mean providers wait years for much needed funds to care for seniors and keep operations going.
AHA sued HHS in November 2012 over the appeals backlog, alleging the agency was illegally denying hospitals Medicare payments for audited outpatient procedures. The association alleged the payment uncertainty “wreaks havoc” on hospital financial planning and smaller hospitals often choose not to appeal Recovery Audit Contractor decisions because of the costly appeals process.
Boasberg told AHA last week to provide the court with a list of recommendations to cull the backlog by June 22. HHS will have until July 6 to respond to the suggestions.
Sean Marotta, an attorney for the AHA and senior associate at Hogan Lovells, told Modern Healthcare on Thursday that the association will suggest the CMS impose a financial penalty on Recovery Audit Contractors if the majority of their denials are overturned on appeal. Currently, RACS have strong financial incentives to deny claims, Marotta said.
Historically, the HHS’ Office of the Inspector General has found hospitals are successful in 72% of inpatient claims denial appeals. Some hospitals have reported success rates above 95%, AHA has noted.
The association may also suggest HHS eliminate RACs’ ability to deny claims based on medical judgment and transfer such cases to another type of Medicare contractor, known as a Quality Improvement Organizations. Those contractors tend to be run by clinicians and may be better suited to judge these claims, Marotta said.
Marotta said he hopes Boasberg will permanently put QIOS in charge of reviewing hospital claims.
Earlier this month, the Council for Medicare Integrity, which represents RACs, sent a letter to HHS Secretary Alex Azar asking him to allow RACs to audit more claims.
“RACs are very eager to ramp up and review new claims, and we’re afraid they are going to go after hospitals again, as that’s what they’ve done in the past,” Marotta said.
AHA also wants Boasberg to order HHS to offer reasonable settlements to providers who want to use mediation rather than the traditional appeals process, which could help drop the number of claims OMHA sees.
Starting this month, HHS said it plans to launch a settlement conference facilitation initiative where providers and HHS will meet with a settlement conference facilitator for mediation.
Marotta said he is aware of that HHS effort, but noted that the agency isn’t required to make an offer or counter offer during the talks.
“One of the concern hospitals have is that we’re not sure the secretary is going to negotiate in good faith with us,” Marotta said.
He noted that inpatient rehabilitation hospitals have been trying for months to settle appeals out of court, but HHS rejected their offer and did not counter.
The CMS also announced an effort last year to reduce its backlog by settling appeals at 62% of the net allowed amount, but that program only targets low-figure claims of up to $9,000 each.
Denied hospitals inpatient claims are much higher than that amount, Marotta said.
The Council for Medicare Integrity slammed the ideas outlined by AHA. It said RAC findings contribute less than 5% of the total backlog,
“As a result, the appeals backlog will not be materially impacted by any of these AHA’s recommendations,” Kristin Walter, a spokesperson for the group said.
She also added that AHA seems to be unaware that current RAC contracts ensure accuracy by incentivizing contractors to maintain a 95% accuracy rate, but also financially penalizes RACs if appeal overturns hit 10% or more.
HHS for its part is hopeful that that the recent omnibus bill will lead to a drop in the appeals backlog.
The omnibus spending bill Congress passed last week granted $182 million in appropriations for OMHA, compared to its FY 2017 appropriation of $107 million.
“The additional funding for OMHA which will allow the agency to hire a significant number of new (administrative law judges) and increase OMHA’s adjudicatory capacity,” a spokeswoman said. “Once these judges are hired, trained, and on the job, we expect that this backlog will decrease dramatically.”