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AHA urges CMS to address a growing delay in hearing RAC-related appeals

January 24, 2014

Hospitals are waiting longer for an administrative law judge (ALJ) to hear appeals of claims denied by Medicare’s recovery audit contractors (RAC). The AHA last week told the Centers for Medicare & Medicaid Services (CMS) it needs to fix the two-year backlog, and said the delays are driven by “excessive inappropriate” denials.

The association cited the growing backlog in writing congressional supporters of the “Medicare Audit Improvement Act,” H.R. 1250/S. 1012, that the “need for fundamental RAC relief has become even more apparent and urgent.”

The Department of Health and Human Services’ Office of Medicare Hearings and Appeals (OMHA) last month began notifying hospitals with high numbers of appeals that they would not be able to submit new cases until the existing backlog clears. OMHA said that could take two years or more.

OMHA said the nation’s 65 ALJs have a collective backlog of 357,000 appeals to work through before they can start to accept new appeals from hospitals. OMHA is the third level of administrative review in the Medicare claims appeals process.

“Delays of at least two years in granting an ALJ hearing for an appealed claim are not only unacceptable, they are a direct
violation of Medicare statute that requires an ALJ to issue a decision within 90 days of receiving the request for hearing,” wrote AHA Executive Vice President Rick Pollack in a Jan. 14 letter to CMS.

Pollack noted that nearly 70% of contested claims end up being ruled in the hospital’s favor.

“It is clear that the RAC program and the resulting volume of inappropriate claim denials are putting significant strain on the appeals process,” he said. “And hospitals are bearing the financial burden with over a billion dollars caught in a broken appeals process that takes several
years to issue a final determination.”

The AHA recommended the agency take a number of steps to fix the problem. They include: ? When a hospital appeals to

the ALJ level, CMS should not recoup the disputed funds until after the hospital has received an ALJ determination.

CMS should enforce the stat utory timeframes within which appeals determinations must be made by entering a default judgment in favor of the provider if an appeal has not been heard within the required time period.

CMS should address sys temic issues with the RACs that lead to avoidable claim denials and appeals and provide a mechanism for erroneous denials to be reversed outside the appeals process.

CMS should enforce the RACs’ deadline to issue a decision on a claim by denying a RAC its contingency fee for any claim for which it has missed its deadline.

“It is extremely frustrating to extend an already cumbersome and protracted appeal process without a prospect of recovering a growing number of recouped payments,” said Wes Adams, Augusta Health’s director of revenues in Fishersville, VA. He said Augusta Health has 463 claims pending before an ALJ, with only nine set for a hearing. The 463 claims total $2.1 million in payments – or about 4% of the health system’s acute care inpatient Medicare payments in 2013.

“These recoupments, combined with the expense of defense and sequestration and other reductions, represent a substantial financial burden,” Adams says.

“It is difficult to understand how the federal government can design a process that appears to have adequate resources for recoupment, but inadequate resources for the due diligence required in accordance with the program design. Where is the justice?”

In a Jan. 14 letter to congressional supporters of RAC relief, the AHA’s Pollack urged the lawmakers to encourage CMS to adopt the measures contained in their legislation.

For more on the AHA’s letter to CMS, click on: http://tinyurl.comcom/kcldc6o. For more on the letter to Congress, click on: http://tinyurl.com/mk88qow.

Since the Medicare RAC program started in late 2009, it has collected more than $5.4 billion in overpayments. Critics say RACs are incentivized in a way that encourages them to find alleged overpayments quickly but underpayments too slowly.

The 180 representatives listed on this page support the House version, H.R. 1250, of the RAC relief bill (see Hill Head Count). The bill would establish annual limits on documentation requests from RACs, impose financial penalties on RACs if they fall out of compliance with program requirements, make RAC performance evaluations publicly available and allow denied inpatient claims to be billed as outpatient claims if necessary, among other measures. For example, the bill would limit the number of “additional document requests” to 2% of hospitals claims, with a maximum of 500 per 45 days.