As our industry prepares to close the book on 2016 and turns its eye to 2017, I want to focus your attention on a recent federal court ruling that has the potential to significantly reduce the current backlog of appeals pending Administrative Law Judge (ALJ) hearings.

The Medicare regulations require ALJs to conduct a hearing and issue a written decision within 90 days of the filing of an appeal. However, the average time to process decisions has skyrocketed in recent years, from 94.9 days in FY 2009 to nearly 2.5 years in FY 2016. Those statistics come from the CMS Office of Medicare Hearings and Appeals (OMHA). On their face, those numbers may seem discouraging; however, the reality is far worse. Those numbers reflect the average time to render a decision on appeals filed by both beneficiaries and health care providers. However, the law requires the ALJs to give priority to appeals filed by beneficiaries. OMHA has indicated that it continues to decide these cases within approximately 90 days.

Of course, if the appeals filed by beneficiaries continue to be decided within 90 days, the pending appeals filed by health care providers must be delayed even further. In July 2016, OMHA indicated that there were approximately 750,000 claims currently awaiting ALJ hearings. This statement was made in the context of OMHA taking credit for increasing its capacity for processing appeals to approximately 77,000 claims a year. In other words, it is possible that the expected time for a hearing on an appeal filed today could be close to 10 years.

Enter the American Hospital Association. In May 2014, the AHA filed a lawsuit in the federal District Court for the District of Columbia seeking a writ of mandamus (lawyer-speak for “I would really appreciate it if you forced this government official to do his or her job”) to compel the Secretary of Health and Human Services to comply with statutorily imposed deadlines for ALJ decisions. In other words, the AHA was asking the court to force CMS to eliminate the ALJ backlog.

District Court Judge James E. Boasberg initially dismissed the case for lack of jurisdiction. The AHA then appealed to the Court of Appeals for the D.C. Circuit, which, in 2016, reversed the dismissal, and remanded the case back to the lower court for further proceedings. The Circuit Court specifically instructed the judge to determine whether “compelling equitable grounds” existed to justify the issuance of the writ.

CMS then moved to stay further proceedings until September 30, 2017. This is the close of the next full appropriations cycle, and CMS argued that this would give it time to pursue various administrative and legislative efforts to reduce the ALJ backlog. The court denied that request, finding that sufficient grounds existed to justify the writ of mandamus. The court then asked the parties to submit written suggestions on the form such mandamus relief should take. Both CMS and the AHA then submitted suggestions for how to deal with the issue.

The AHA proposed two possible avenues to reduce the backlog:

1. CMS should: (i) offer reasonable settlements to broad groups of Medicare providers and suppliers (similar to its periodic settlement offers to hospitals over the past few years), (ii) defer the obligation for providers and suppliers to repay outstanding overpayments, and toll the accumulation of interest, while their ALJ appeal was pending, and (iii) impose financial penalties on RACs that have high reversal rates; or
2. Set specific numeric targets for reducing the backlog over a four year period. These targets would be: (i) a 30% reduction in the backlog by December 31, 2017, (ii) a 60% reduction by December 31, 2018, (iii) a 90% reduction by December 31, 2019, and (iv) the elimination of the backlog by December 31, 2020. The AHA also recommended that, to the extent a backlog still existed on January 1, 2021, that any provider or supplier with an ALJ appeal pending for more than 1 year be granted summary judgment.

CMS objected to each of these requirements. Instead, CMS continued to argue that time should be allowed for its recent initiatives to have the desired impact. However, CMS indicated that the ultimate elimination of this backlog would require legislative action.

On December 6, 2016, Judge Boasberg issued his ruling. In his decision, he stated that, while he was sympathetic to the challenges faced by CMS, he found CMS’ argument somewhat less than persuasive. Moreover, he indicated that CMS’ plan was largely contingent on Congressional intervention, which was by no means a sure thing. However, the Judge indicated that he was hesitant to intrude upon CMS’ specific decision-making process. For that reason, he rejected the specific proposals offered by the AHA. Instead, he elected to adopt the AHA’s proposed timetable for reducing the backlog. The Judge did refuse to grant the AHA’s request that providers automatically be granted summary judgment if the backlog was not eliminated by 2021, agreeing with CMS that this might create some perverse incentives for providers and suppliers to file non-meritorious appeals. Instead, he indicated that, to the extent the backlog is not eliminated by that date, individual providers or suppliers would have the option of moving for default judgment or to seek their own writ of mandamus to compel an immediate hearing. Finally, the Judge ordered CMS to provide status reports every 90 days on its efforts to reduce the backlog.

In sum, a federal court has now ordered CMS to eliminate the current ALJ backlog over the next four years. It is likely that CMS will appeal this decision, and, therefore, this is unlikely to be the last time the courts weigh in on this issue. Moreover, even if the court order stands, it is unclear how CMS could significantly reduce the backlog without securing additional financial resources from Congress. One option might be to expand its settlement offers to additional provider groups. Another might be slow-down the pre- and postpayment audits that feed the appeals pipeline. However, these are purely speculative at this time.

Thus, the court’s decision is unlikely to have a meaningful impact on appeals in the near future. However, it is almost 2017, and I for one am choosing to be optimistic.

Best Wishes for a Happy and Healthy New Year!

Have an issue you would like to see discussed in a future Talking Medicare blog? Submit your question!