ALJ backlog update for Medicare appeals

For most of the 2010s, Medicare’s appeal process had become severely overdue. The Office of Medicare Hearings and Appeals (“OMHA”) is responsible for administering the Administrative Law Judges (“ALJ”) hearing program for appeals arising from Medicare claims and disputes. Pursuant to 42 USC § 1395ff (d) (1) (A), an ALJ is legally required to provide an appellant with a hearing within ninety (90) days of the hearing request. However, due to a large backlog of appeals, appellants would end up waiting three (3) to five (5) years for this hearing. This caused a lot of concern because the disputed payments were being collected from vendors and suppliers during this waiting period, but they were deprived of the opportunity to defend themselves in a timely manner. Clawing back Medicare payments for 90 days is often not detrimental to providers and providers. However, being salvaged for 3-5 years can have a significantly detrimental impact on suppliers and supplier companies.

Due to the backlog, a series of litigation ensued. The most common request was a Temporary Restraining Order (“TRO”) and preliminary injunction against the Department of Health and Human Services (“HHS”), ordering them to withhold recoveries until the hearing of the ALJ. Providers and suppliers would claim irreparable harm as they would be forced to shut down their businesses due to the bankruptcy of the extended payback period. In addition, to support a TRO or preliminary injunction, aggrieved parties would have to demonstrate a likelihood of success on the merits of their underlying claim. To demonstrate a likelihood of success, these parties typically allege a due process violation or an ultra vires violation. Federal circuit courts have varied on whether to grant or deny these claims, but all have agreed that HHS must reduce the backlog to further reduce damage to vendors and suppliers.

Because the ALJs did not adhere to this 90-day statutory period, in 2018 the American Hospital Association (“AHA”) filed a lawsuit against the HHS. the DC Federal District Court ruled in favor of the AHA and called on HHS to completely clear the backlog by 2022 so that ALJs comply with legal timing requirements. More specifically, the order book reduction schedule is: a reduction of 19% by the end of the fiscal year (“AF” 2019); a 49% reduction by the end of fiscal 2020; a 75% reduction by the end of fiscal 2021; and the elimination of the backlog by the end of fiscal year 2022. To ensure that HHS makes active efforts to reduce the backlog, the court also asked the HHS secretary to file reports of quarterly situation until the end of 2022.

From the most recent HHS situation report, released on March 26, 2021, a total of 131,961 appeals remain pending at the OMHA, representing a reduction of just over 69% of the backlog. This was only the Q1 2021 update, and HHS is set to have a 75% reduction by the end of fiscal 2021, which appears to be an achievable goal based on Q1 numbers.

Looking back, there are five likely reasons for the extreme backlog of calls over the past 10 years: (1) more beneficiaries enrolling in Medicare; (2) rollout of new Medicare coverage and payment rules; (3) the increase in state Medicaid calls; (4) implementation of the national Medicare fee-for-service program; and (5) a national shortage of ALJ.

The successful reduction of the backlog is, in part, due to the implementation and enforcement by CMS of numerous alternatives to the appeal process which have removed some cases entirely from the ALJ hearing process. Alternatives include the Settlement Conference Facilitation Program (“SCF”) and Targeted Sonde and Educate (“TPE”) audits. The SCF was initially implemented in July 2014, but was significantly expanded on June 15, 2018. The TPE was initially rolled out as a pilot program in a few states, but was rolled out nationally on June 1, 2018. October 2017. The SCF program gives Medicare callers the right to negotiate a lump sum settlement with CMS in one day of facilitation, rather than going through the entire appeal process. TPE seeks to prevent upstream calls by asking Medicare administrative contractors to identify billing errors and helping the provider or supplier correct those errors before an audit is necessary.

Additionally, the successful reduction was also the result of a $ 182.3 million increase in funding by Congress as of March 23, 2018. This funding enabled the OMHA to hire an additional 70 JLAs across the country. The OMHA predicts that this increase in the number of ALJs will allow the OMHA to adjudicate on more than 300,000 appeals per year. This is a stark contrast to the number of appeals the OMHA had the capacity to adjudicate before the backlog reduction efforts began, which was approximately 75,000 appeals per year.

The increased capacity of the ALJ, along with new alternatives to the appeals process, creates a double-edged sword for healthcare providers and providers. The backlog has prompted CMS to restrict contractors and force them to slow down Medicare audits. As the backlog ends, these restrictions will likely be relaxed, and providers and providers could see a substantial increase in Medicare audits. Implementing an effective compliance program including an internal audit policy is more crucial than ever.

This article originally appeared in Healthcare Michigan, June 2021.

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