According to HHS, a backlog exists of more than 800,000 appeals from health care providers challenging denied Medicare claims, most of them generated by the program’s Recovery Audit Contractors (RACs). That is about 10 times as many as the program can adjudicate in a year at its current funding levels. However, a federal appeals court has given new life to a lawsuit that seeks to force the government to complete the appeals more quickly. The court’s ruling sends the case back to the district court for reconsideration. This moved was quickly celebrated by the American Hospital Association.
We have previously reported on problems related to RACs, including an OIG report suggesting CMS may not be catching sufficient numbers of overpaid claims. The report found problems with CMS’ action–or inaction–regarding improper payment vulnerabilities and referrals for potential fraud, as well as with RAC performance evaluations. While CMS identified 46 vulnerabilities that resulted in improper payments, it only took corrective action to address 28 of them and failed to evaluate the effectiveness of these actions. The OIG pointed out that by not evaluating corrective actions CMS could not determine if they effectively reduce improper payments.
What are RACs?
Congress authorized the program in the Medicare Modernization Act of 2003 and made permanent in the Tax Relief and Health Care Act of 2006. Its intended goal is to detect and correct improper Medicare payments. Over a billion claims are submitted to Medicare each year and it is estimated 3.9% of the dollars paid do not comply with coverage rules. This has been confirmed by GAO reports and as a result, there has been a renewed interest by the DOJ and the OIG to combat health care fraud and protect Medicare in the process. The RAC program is designed to detect improper payments, both under and overpayments, and corrects errors by collecting money or repaying money depending on the original payment.
Appeals Process
The RAC appeals process mirrors the five-level Medicare claims appeal process through which fee-for-service providers appeal reimbursement decisions. The five levels of appeal include:
1. Redetermination by the Fiscal Intermediary
2. Reconsideration by a Qualified Independent Contractor
3. Administrative Law Judge Hearing
4. Medicare Appeals Council Review
5. Judicial Review in U.S. District Court
If RAC determination appeal requests are not filed within the specified timeframe for the applicable level of appeal, the opportunity to appeal is lost.
AHA Lawsuit
According to FiereceHealthFinance, the American Hospital Association (AHA) filed the suit in 2014 to try and clear a backlog of RAC appeals at the administrative law court level. There were at least 800,000 appeals at that level as of 2014. A lower federal court had dismissed the lawsuit due to lack of jurisdiction, concluding because Congress was working on trying to procure more funding to review claims, it did not yet have the authority to act further. However, the case was recently reinstated by an appeals court.
The AHA notes that in December 2013, with the large backlog of appeals mounting, HHS imposed a two-year moratorium on assigning new appeals of claim denials. The court’s opinion observed that the department “has the capacity to process only about 72,000 appeals per year, a far cry from the almost 400,000 appeals it received in fiscal year 2013, or from the more than 800,000 appeals that composed its backlog in July 2014. These figures suggest that at current rates, some already filed claims could take a decade or more to resolve.” That administrative logjam delays billions of dollars in Medicare reimbursements to hospitals, the AHA noted.
This was illustrated in 2014 when, as an example, it was reported administrators at Baxter Regional Hospital in Mountain Home, Ark., said it had so much money tied up in endless Medicare appeals that it could not afford to replace the roof over their surgery department or buy new beds for their intensive-care unit. Baxter joined other providers with the AHA in the 2014 lawsuit.
Next steps?
Modern Healthcare reported a number of potential next steps after this ruling. The outlet cited Jessica Gustafson from Health Law Partners, who called the decision a “positive development for hospitals,” but did say she would be surprised if the district court mandated HHS to more quickly address the appeals. There is legislation in Congress introduced last year that would make changes to the appeals process and reduce the backlog.
Other suggested possibilities include an added push on Congress to pass the bill, but that court action may be necessary if the political will is not there. Should the lower court force HHS to comply with the statutory timelines, HHS may need to find ways to reduce audits or hire more administrative law judges. The court could also not make an order, or ask HHS to issue status reports on efforts to deal with the backlog.