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HHS Issues Final Rule to Address Record High Medicare Appeals Backlog

Medicare appeals backlog(January 20, 2017): The Medicare appeals backlog has reached its all-time worst. If you’re a healthcare provider or supplier waiting for a hearing before an Administrative Law Judge (ALJ) at the Office of Medicare Hearings and Medicare Appeals (OMHA) – the third level of the Medicare appeals process – you’ve likely been waiting years to have your case heard or, at least, you’re expecting such a wait. This wait time has persisted despite that ALJs are statutorily required to issue a decision within 90 days of receipt of a hearing request. The reasons for the backlog depend on who you ask: the American Hospital Association (AHA) and others have contended that the Recovery Audit Program is the “primary culprit in creating and sustaining” the backlog because Recovery Audit Contractors (RACs) “receive a cut of any improper payments they recover […] and can challenge claims going back as far as three years.”  The U.S. Department of Health and Human Services (HHS) agrees that the Recovery Audit Program has contributed to the backlog, but believes there are other reasons as well, like an increase in Medicare beneficiaries and a growing practice among some providers to appeal virtually every claim denial through ALJ review (coupled with only modest increases in funding for the agency, thereby limiting their ability to address the growing number of appeals and backlog).

I.  Statistical Overview of the Medicare Appeals Backlog:

In any event, the statistics are astounding:

  • The number of ALJ appeals filed grew 936%, from 41,733 to 432,534, between fiscal years (FY) 2010 and 2014.
  • By the end of FY2014, 767,422 appeals were pending at ALJ.
  • ALJ decisions are issued well after the 90-day statutory deadline: in FY2014, it took OMHA an average of 415 days to process an ALJ appeal; in FY2015, it took OMHA an average of 662 days to process an ALJ appeal; and in FY2016, it took OMHA an average of 877 days to process an ALJ appeal.

The backlog has been a significant source of frustration for healthcare providers and suppliers (and their representatives) stuck in the lingering appeals process – and not just because it takes so long to achieve a final judgment by the Secretary. The delay often has significant financial consequences because Medicare can statutorily recover the alleged overpayment shortly after a second level (reconsideration) appeal decision issues, despite that the appeals process is not over and despite that the first two levels of appeal are littered with problems (e.g., we see chronic misapplication of Medicare coverage and payment rules by appeals contractors at the first two levels of appeal).

II.  Order by the U.S. District Court:

Thanks to the efforts of AHA and other plaintiffs who sought relief in court, we may see the backlog resolve over the next few years. On 12/05/2016, the United States District Court for the District of Columbia ordered that the HHS Secretary reduce the backlog according to the following timeline:

  • 30% reduction from the current backlog of cases pending at the ALJ level by 12/31/2017;
  • 60% reduction by 12/31/2018;
  • 90% reduction by 12/31/2019; and
  • 100% reduction by 12/31/2020.

III.  Other HHS Efforts to Address the Medicare Appeals Backlog:

In an effort to meet these mandated backlog reduction timelines, HHS issued a final rule on 01/17/2017 titled “Medicare Program: Changes to the Medicare Claims and Entitlement, Medicare Advantage Organization Determination, and Medicare Prescription Drug Coverage Determination Appeals Procedures”. The final rule includes an assortment of initiatives to reduce the backlog which become effective 03/17/2017, including:

  • Giving select Medicare Appeals Council decisions precedential effect. The final rule provides that designated “Medicare Appeals Council decisions […] have precedential effect and are binding on all CMS components, on all HHS components that adjudicate matters under the jurisdiction of CMS, and on the Social Security Administration to the extent that components of the Social Security Administration adjudicate matters under the jurisdiction of CMS.” This is significant because, currently, even if the Medicare Appeals Council interprets a Medicare authority or provision in a specific way in a decision, that interpretation only applies to the case at hand (even though the decision represents the final decision of the Secretary). In other words, an Appellant can’t contend that the interpretation of a Medicare authority or provision in a previous Medicare Appeals Council matter is binding in their case as well, even if the facts and issues are very similar. HHS hopes the precedential nature of Medicare Appeals Council decisions as of 03/17/2017 will create consistency in the appeals process. It’s possible, though, that the discretion given to the Departmental Appeals Board (DAB) Chair to decide which cases have precedential effect may impact how effective this change will ultimately be.
  • Expanding the pool of adjudicators at OMHA to include attorney adjudicators. An attorney adjudicator is a licensed attorney employed by OMHA with knowledge of Medicare coverage and payment laws and guidance, and authorized to take the actions on requests for ALJ hearing and requests for reviews of QIC dismissals. HHS estimates that the expansion of the pool of adjudicators at OMHA could redirect approximately 24,500 appeals per year to attorney adjudicators who would be able to process these appeals at a lower cost than would be required if only ALJs were used to address the same workload.
  • Creating process efficiencies. These include, for example, allowing ALJs to vacate their own dismissals rather than requiring Appellants to appeal a dismissal to the Medicare Appeals Council and using telephone hearings for certain Appellants.

For more information on these and numerous other initiatives, please refer to the Federal Register. The hope is that the finalization of this rule and the Secretary’s accountability to the District Court – the Court retained jurisdiction of the case to review the quarterly status reports the Secretary is required to prepare and to rule on any challenges to unmet deadlines – will achieve the intended result: complete elimination of the backlog by 2020.

The Centers for Medicare and Medicaid Services (CMS) has taken steps in the past to improve the appeals process, and these steps have not always achieved the intended result. For example, with regard to appeals stemming from a post-payment review, CMS directed redetermination (first level) and reconsideration (second level) appeals contractors – effective August 2015 – to restrict their review on appeal to (in most cases) only the issues alleged by the reviewing contractor (i.e., the contractor that requested the records and issued the initial audit results). The purpose was to avoid a moving ball – where one Medicare contractor alleges one issue and the Appellant addresses it, but then another contractor alleges another issue, requiring the Appellant to then address a different issue with regard to the same claim. However, we have seen the redetermination and reconsideration appeals contractors repeatedly disregard this CMS directive and continue to try and add new denial reasons to the administrative record. We have also seen the initial auditing contractors increasingly allege more than one denial reason, throwing everything but the kitchen sink at providers and suppliers. It seems that Medicare is hoping for at least one denial reason to persist through the appeals process.

Judicial oversight is the difference this time around and could be the key to reducing the backlog. We’ll be monitoring HHS’s progress closely and hoping for expeditious relief for our current and future clients, and healthcare providers and suppliers everywhere.

Lorraine Ater, JDHealthcare Lawyer is a health law attorney with the firm Liles Parker.  She is also a Certified Medical Compliance Officer (CMCO) and a Certified Medical Reimbursement Specialist (CMRS).  Lorraine represents healthcare providers and suppliers around the country in connection with Medicare audits and appeals.  Liles Parker is a boutique health law firm with offices in Washington, DC; across the State of Texas; and in Baton Rouge, LA.  Need assistance?  For a free consultation, please call: (202) 298-8750.



AHA v. Burwell, 2016 U.S. Dist. LEXIS 126840 (D.D.C. Sept. 19, 2016).

AHA v. Burwell, 2016 U.S. Dist. LEXIS 167291, 2016 WL 7076983 (D.D.C. Dec. 5, 2016).

Federal Register, Volume 82, Number 10, Pages 4974-5140, “Medicare Program: Changes to the Medicare Claims and Entitlement, Medicare Advantage Organization Determination, and Medicare Prescription Drug Coverage Determination Appeals Procedures” (01/17/2017). Available at

HHS, “FACT SHEET: HHS Issues Final Rule to Improve the Medicare Appeals Process”.

HHS, OMHA, “Average Processing Time By Fiscal Year” (11/18/2016). Available at

Fed Up Over Burdensome RAC Appeals Process, Hospitals Sue HHS

RAC Appeals(May 28, 2014)  Frustrated by an arduous Medicare administrative appeals process, three hospitals have joined with one of the nation’s largest hospital associations in a federal lawsuit against The Department of Health and Human Services (HHS). The lawsuit seeks to compel HHS to meet the statutory deadlines for administrative review of Recovery Audit Contractor (RAC) claims denials for Medicare reimbursements.  The plaintiffs include The American Hospital Association, the Baxter Regional Medical Center in Mountain Home, Arkansas, Covenant Health, located in Knoxville, Tennessee, and the Rutland (Vermont) Medical Center.  Their complaint contends that “[l]engthy, systematic delays in the Medicare appeals process” are far exceeding the statutory timeframes.  As a result of the delays caused by the filing of an overwhelming number of RAC appeals by hospitals, all Medicare providers are being severely harmed.

I.     The Medicare Appeals Process:

In order to receive payment for their services, Medicare providers submit claims to HHS. These claims are then processed through the Centers for Medicare & Medicaid Services (CMS) and its Medicare Administrative Contractors (MACs). If a claim is denied, it is generally denied through a post-payment review process. Increasingly however, claims are also being denied before reimbursement occurs.

Under the post-payment review process, third party contractors will commonly scrutinize a provider’s medical judgment. Through this practice, these contractors are generally overturning original payment decisions by claiming that certain services were not medically reasonable or necessary. Providers must then pay back the funds previously reimbursed even if a later review determines that the contractor’s determination was incorrect.

Medicare providers can contest payment denials (whether pre-payment or post-payment) through a four-level appeals process within HHS.[1] Each level is governed by specific timeframes in which a decision must be rendered following receipt of the appeal. At the third level of the appeals process, providers have a right to have their claims reviewed by an Administrative Law Judge (ALJ) within the HHS Office of Medicare Hearings and Appeals (OMHA)[2]. ALJs are statutorily required to hold a hearing and render a decision within ninety (90) days from a provider’s filing of its appeal with OMHA.[3]

III.     RACs Appeals Have Created a Massive Backlog in the Medicare Appeals Process:

Over the past few years, extraordinary delays in the Medicare administrative appeals process have effectively obstructed providers from challenging payment denials.  In fact, it is taking much longer than 90 days for ALJs to even docket new requests for an ALJ hearing, let alone render a decision.  Currently, there is a 20 to 24-week delay for a claim to get docketed.  This delay has allowed over 460,000 claim appeals to sit idly in the appeals process by the end of 2013. When a decision is finally rendered, the average time is 16 months after the appeal has been filed.  Over the last decade, HHS, through CMS, has implemented and expanded its Recovery Audit Program. Recovery Audit Contractors (RACs) are tasked with identifying and correcting improper payments through the detection and collection of overpayments made on claims of health care services provided to Medicare beneficiaries.

However, RACs have become increasingly aggressive with their pre-payment and post-payment review and are incentivized to do so.  RACs are paid based on the amount of Medicare reimbursement they recover from providers for “improper” payments. Aggressive and widespread auditing activity by the RACs predictably has affected the number of hospital claim appeals. In fiscal year 2009, the last full fiscal year before the permanent RAC program was instituted, there were 35,831 appeals filed with OMHA for ALJ review. In fiscal year 2013, after the RAC program had been fully implemented, 384,651 appeals were filed—more than a tenfold increase in only four years.[4]

To add to this problem, OMHA announced in December 2013 a moratorium on assignment of provider appeals to ALJs for at least the next two years.  This moratorium will only further exacerbate the problem as new appeals are filed and old ones never get heard. There are 15,000 new appeals filed each week and as of February 12, 2014, there are over 480,000 claim appeals awaiting assignment with OMHA.  As a result, some providers could wait up to five years to get decisions on routine payments because of a massive backlog in the appeals process that has been created by the aggressive post-payment review program known as recovery auditing.

IV.     Impact of the Backlog in the Medicare Appeals Process:

In their complaint, the hospitals contend that they are suffering financially from HHS’ refusal to render appeals in its statutorily-mandated manner. A denial at the pre-payment process means that a hospital never receives payment for the value of the services provided. A post-payment denial reflects that a hospital must repay the amount initially reimbursed before an appeal may ever be considered by an independent arbiter.

This deprivation of funds has created “a profound problem.” These funds could be used to render better patient care or to sustain the hospital’s infrastructure necessary to provide acceptable patient care.  For example, the complaint indicates that “[t]he delays in the appeals process have had a crippling effect on Baxter’s cash flow. Funds tied up in appeals are funds that cannot be used to meet Baxter’s essential needs.”

Covenant claims that it has “considered whether, in light of the severe ALJ delay, it is financially prudent” for it “to continue to offer the full scope of rehabilitative services to the entire population of patients it currently serves.” Plaintiff Rutland has also had to “implement a number of cost-cutting measures” due to the delays in order to accommodate its cash flow problems.

VI.     Final Remarks Regarding RAC Appeals and ZPIC Appeals:

The stakes are high for hospitals and other Medicare providers due to this onerous delay in the RAC appeals process. Billions of Medicare reimbursements hang in the balance and may otherwise not be able to be used to provide adequate patient care.

Has your hospital, practice, Home Health Agency, Hospice, DME Company, or PT / OT / ST Clinic been audited by a RAC or Zone Program Integrity Program (ZPIC)?  Just because there is a severe delay in the appeals process does not mean that RACs will not continue to target providers in pre-payment and post-payment audits.  It may only be a matter of time before your practice is negatively burdened by a RAC audit.  Despite your best efforts to follow Medicare’s directives, your organization may still be placed on prepayment review or subjected to a full-blown post-payment audit.  Should you receive a request for records from a RAC or ZPIC, being prepared (in advance of receiving an audit letter) can greatly assist your efforts to show that the care and treatment services you are providing do, in fact, qualify for coverage and payment.  If you have any questions or concerns regarding any ongoing – or future – RAC or ZPIC audit, please do not hesitate to give us a call. We would be more than happy to assist you with your compliance needs.

Healthcare LawyerRobert W. Liles, Esq., serves as Managing Partner at Liles Parker, Attorneys & Counselors at Law.  Liles Parker attorneys represent health care providers and suppliers around the country in connection with Medicare audits by ZPICs, RACs and other CMS program integrity contractors.  The firm also represents health care providers in HIPAA Omnibus Rule risk assessments, privacy breach matters, State Medical Board inquiries and regulatory compliance reviews.  For a free consultation, call Robert at:  1 (800) 475-1906.

[1] See 42 U.S.C. § 1395ff.

[2] Id. §§ 1395ff(b)(1)(E), 1395ff(d)(1)(A).

[3] Id.; 42 C.F.R. § 405.1016(a).

[4] Important Notice Regarding Adjudication Timeframes, Office of Medicare Hearings and Appeals, U.S. Department of Health & Human Services, available at Timeframes2 (last visited May 27, 2014).