Legislators Disparage Broken Medicare Payment Appeals Process

By Christine Kern, contributing writer

Legislators concerned vigorous federal investigations of potential Medicare fraud could result in innocent providers being unfairly punished.

Since passage of the ACA, the Obama administration has prioritized reducing Medicare fraud and waste. Just in the last five years, for example, the Health Care Fraud and Abuse Control Program has recovered $19.2 billion in improper payments to providers, more than double the amount taken in during the previous five years.

During a recent congressional hearing, there was bipartisan concern by Legislators that vigorous federal investigations of potential Medicare fraud could result in innocent providers being unfairly punished.

Although legislators agree that transgressors should be punished, lawmakers worried that the Medicare appeals system is so broken that it cannot help providers that have been wrongly denied reimbursement for treatment they delivered. Once again, it is clear that it is much easier to “talk the talk” than “walk the walk” when it comes to cracking down on Medicare fraud and abuse.

“The due process system is clearly broken,” said Rep. Michelle Lujan Grisham (D-NM), the ranking minority member of the Committee on Oversight and Government Reform's subcommittee on Energy Policy, Health Care and Entitlements, according to Modern Healthcare.  “These small providers are spending an incredible amount of time being administratively reviewed.”

The subcommittee's chairman, Rep. James Lankford (R-OK) compared the contractors utilized by the CMS to track down wrongful payments to “bounty hunters” seeking enrichment.

Dr. Shantanu Agrawal, director of the CMS Center for Program Integrity, faced tough questions about the agency's enforcement actions during Tuesday's hearing. He stated, “CMS must strike an important balance while overseeing the Medicare program: limiting the administrative burden on legitimate provider and suppliers to preserve beneficiary access to necessary healthcare services while fulfilling our obligation to ensure taxpayer dollars are not lost to waste, abuse, and fraud.”

Of particular object of scrutiny was the troubled appeals process for Medicare payments. Agrawal testified that while the first two levels of appeals, handled directly by the agency, currently are functioning efficiently, with most determinations made within 60 days, the process breaks down when providers seek further review by the Office of Medicare Hearings and Appeals (OMHA). Last year when the caseload became overwhelming, the agency introduced a two-year moratorium on assigning new appeals to administrative law judges. OMHA expects the backlog of appeals to top 1 million this year.

In January, the American Hospital Association sent a letter to the CMS Administrator Marilyn Tavenner criticizing the moratorium and mounting backlog of appeals. Rick Pollack, the AHA's executive vice president, pointed out that hospitals prevail in nearly 70 percent of their OMHA appeals.

“Excessive inappropriate denials by Medicare Recovery Audit Contractors (RACs) are a direct driver of the ALJ backlog,” Pollack wrote. “Hospitals have been put in an untenable position in which the nearly unfettered ability of RACs to churn out erroneous denials forces them to pursue appeals in order to receive payment for medically necessary care, while the inability of OMHA to manage the appeals process within the timeframes required by the Social Security Act holds that payment hostage.”

Legislators voiced similar concerns, particularly that small facilities with tight margins might not be able to afford the laborious appeals process and will therefore be denied proper payments. “Large hospitals and large hospital groups can afford to wait a decade potentially,” Grisham said. “Small hospitals cannot.”