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Tag: adminstrative law judge (ALJ) hearings

Talking Medicare: Low Volume Settlement Option

Written by Brian Werfel on . Posted in Medicare, Reimbursement, Talking Medicare.

Low Volume Settlement Option – A Viable Solution to the ALJ Backlog?

The Centers for Medicare and Medicaid Services (CMS) recently announced a new initiative to help relieve some of the appeals backlog at the ALJ level. Titled the “Low Volume Settlement Option,” this new initiative appears, on its face, to offer ambulance providers and suppliers a viable alternative to the multi-year wait for an ALJ hearing.

First some background. In January 2017, CMS announced that there has been a 1,222% increase in the number of appeals submitted to the Office of Medicare Hearings and Appeals, which operates the ALJ hearing system. The dramatic increase in the number of appeals was the result of several program integrity initiatives implemented by CMS in prior years, most notably, the creation of the Recovery Audit Contractor Program (RACs). As a result, there were more than 650,000 appeals pending at the ALJ-level as of September 30, 2016. CMS simultaneously disclosed that it currently processed approximately 92,000 appeals per year.

Doing the math, this meant that CMS could clear the existing ALJ backlog in a little over 7 years at its current pace. Of course, that made no allowance for new appeals that would be filed during that 7-year period. Moreover, appeals are not treated equally at the ALJ level. Appeals filed by beneficiaries are given priority, with the intent of issuing a decision within 60-90 days of filing. This necessarily means that appeals filed by providers and suppliers are moved to the end of the queue. A good metaphor would be airport security, with beneficiaries being given TSA Preè, and providers and suppliers being stuck in the normal lane of traffic.

Enter the American Hospital Association. On behalf of its members, who were disproportionately targeted by the RACs, the AHA filed suit seeking a writ of mandamus that would require CMS to adjudicate ALJ-level appeals within the 60-day time limit prescribed in the regulations. This case bounced back and forth between the circuit and appeals courts for several years, until December 2016, when a district court judge ordered CMS to eliminate the ALJ backlog by 2020.

CMS appealed that decision, arguing that it would be impossible for the agency to comply with the judge’s order without either (1) a massive increase in its funding level or (2) offering mass settlements to entire classes of appellants. CMS argued that only Congress could appropriate additional funds. CMS simultaneously argued that existing law prohibited it from offering mass settlements. Essentially, CMS was arguing that it lacked the authority to take the only step (i.e., mass settlements) that could reasonably be expected to alleviate the ALJ backlog. In August 2017, the U.S. Court of Appeals for the D.C. Circuit sided with CMS, and remanded the case back to the district court to determine whether CMS could legally comply with the order to reduce the backlog.

That brings us to the Low Volume Settlement Option (LVSO). Despite CMS’ previous argument that it lacked the authority to offer mass settlements, that is precisely what the LVSO does. Providers and suppliers will be given the option to settle eligible claims at 62% of the net allowed amount, regardless of the merits of the appealed claims.

How will it work? Providers and suppliers will submit an Expression of Interest (EoI) through a CMS web portal, indicating that they would like to explore the option of settlement. Depending on the provider’s or supplier’s NPI, they will need to submit their EoI during one of two 30-day periods, with the first (for NPIs ending in an even number) starting on February 5, 2017. CMS will determine the provider’s or supplier’s eligibility, and then provide a list of the claims it believes are eligible to be settled. The provider or supplier will have the ability to suggest additions or removals from that list. Once the list is finalized, the provider or supplier will have to make a decision on whether to settle all of the claims on that list. In other words, CMS’ offer is an all-or-nothing proposition.

There are some additional criteria for eligibility. Perhaps the most important one is the requirement that the provider or supplier have fewer than 500 total Medicare appeals across all of its associated NPIs. Once the provider or supplier is determined to be eligible, there are also restrictions on the types of claims that can be settled. To be eligible for settlement, the claims must have been appealed on or before November 3, 2017, and must still be pending. The total billed charges for all claims in a particular appeal must total less than $9,000. The claims must also be fully denied, i.e., they must not be denied in part or downgraded. Finally, this settlement option only applies to Fee-For-Service Medicare claims, i.e., it does not apply to Medicare Advantage claims.

Providers and suppliers that elect to accept the settlement offer can expect to receive payment within 180 days.

Brian, that is all fine and good, but will this actually help my organization?

Ultimately, that is a determination that every provider or supplier will need to make for itself. If you have already been given an ALJ hearing date and are 100% convinced you will win your appeal, there is little benefit in settling the appeal. If you are convinced you will loss the appeal, the offer to settle at 62% probably looks like a windfall. However, it is unlikely that your appeal falls close to one of those two extremes. The main difficulty in valuing CMS’ offer is not knowing how long you might wait to get an ALJ hearing. A year is one thing, a 10-year wait is something else entirely.

That being said, there is little harm in submitting an Expression of Interest, and seeing which claims CMS would be willing to settle. For that reason, my recommendation is for every A.A.A. member to enroll in the program, and to wait for CMS to provide the spreadsheet of the claims it would be willing to settle before making any decision.

If you are interested in learning more about the Low Volume Settlement Offer, the AAA hosted a recent webinar on the initiative. Order the webinar on demand.

Have an issue you would like to see discussed in a future Talking Medicare blog? Please write to me at bwerfel@aol.com

Federal Judge Offers Hope for Reduction in ALJ Appeal Backlog

Written by Brian Werfel on . Posted in Medicare, Reimbursement.

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!

 

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