Third Time Might Be the Charm: District Court Orders HHS to Clear the Medicare Appeals Backlog by 2022

On November 1, 2018, the US District Court for the District of Columbia issued a mandamus order requiring the Department of Health and Human Services (HHS) to clear the backlog of Medicare administrative appeals by the end of 2022. The order arises from a long-standing dispute between the American Hospital Association and HHS regarding the appeals backlog. As of 2018, the Office of Medicare Hearings and Appeals (OMHA) has 426,594 appeals pending, with decisions averaging three years, and with some providers waiting up to five—a far cry from the 90-day statutory deadline. The court’s decision was facilitated by a dedicated $182.3 million appropriation passed in March 2018, which is expected to more than double OMHA’s capacity to adjudicate claims, allowing the court to conclude that the appeals backlog could be eliminated by the Secretary within four years.

History and Causes of the Backlog

As we explored previously in “Medicare Appeals Backlog: A Setback and New Opportunities for Providers,” the number of administrative appeals of Medicare payment decisions has grown substantially since 2011. This is partially attributable to the aging of the baby boomer generation, resulting in a significant increase in Medicare beneficiaries. It is also attributable to an increased emphasis on identifying and recouping improper payments. In 2005, at the direction of Congress, HHS implemented the Recovery Audit Contractor (RAC) program as a 3-year demonstration project, under which contractors review Medicare claims and identify overpayments. It expanded nationwide in 2010, leading to significant growth in the number of challenged Medicare claims and, as a result, appeals.

Appeals have been getting stuck at the third level of review, which is supposed to provide for a hearing before an Administrative Law Judge (ALJ) with a decision rendered within 90 days from the date of the request. Despite the growth in appeals, however, OMHA was not provided with additional resources to manage the additional volume. Between 2010 and 2015, the appeals workload grew by 442 percent, but during the same time period, there was only a nominal increase in appropriations to provide resources to adjudicate the claims.

The DC Circuit’s Recent Decision

In 2014, after continued frustrations regarding OMHA’s inability to process administrative appeals, the American Hospital Association—joined by three other hospitals—filed suit to compel HHS to comply with the 90-day statutory deadline. Initially, the DC District Court declined to intervene, noting that HHS faced budgetary constraints and was actively seeking to solve the problem. On appeal by plaintiffs, the DC Circuit Court reversed, instructing the district court to evaluate whether “compelling equitable grounds” required it to issue a writ of mandamus and noting that such a writ would “likely” be required.

On remand, the district court concluded that a writ was, indeed, appropriate under the circumstances and sought proposals from the parties regarding how to best tackle the backlog. It ultimately decided to impose yearly deadlines with targeted backlog reductions that would require HHS to eliminate the backlog entirely by 2020. This time, HHS appealed, arguing that it was simply impossible to comply with the order without rubber-stamping appeals, thereby violating the Medicare statute. The circuit court agreed that the order would be improper if it were, in fact, impossible for HHS to comply with it. It therefore remanded the case for a second time, instructing the district court to determine whether compliance would be impossible.

The competing considerations put the district court in quite a bind; on the one hand, it seemed clear that equity required some relief for the plaintiffs, while on the other hand, it seemed difficult to craft additional feasible remedies beyond those that HHS was already implementing. On March 23, 2018, however, the district court’s task suddenly became easier when Congress appropriated $183.2 million to HHS for the specific purpose of eliminating the backlog.

The new funding will double OMHA’s capacity to adjudicate claims, prompting it to estimate that it can process all appeals by the end of 2022. Because of this new development, the district court was able to dispose of the “impossibility” problem, since HHS’s own projections provide a timetable for eliminating the backlog by 2022. In line with those projections, the court ordered OMHA to reduce the backlog by 19 percent in 2019, 49 percent in 2020, 75 percent in 2021, and 100 percent in 2022.

Unlike the district court’s two prior decisions, this order may have the elements needed to stick. The plaintiffs received their principal relief via the imposition of deadlines to ensure that HHS promptly and efficiently works through the backlog, while HHS itself has devised the deadlines based on its internal projections. There remains one potential hiccup: if Congress were to modify its appropriations levels, it may become impossible for HHS to comply with the FY 2022 deadline. In such a scenario, HHS would have to return to the district court and request a modification.

Court Denies Plaintiffs’ Additional Requests

Although plaintiffs succeeded in their aim to obtain court-imposed deadlines, they did not prevail on three other requirements that they sought to impose on HHS. Specifically, they requested that the court (1) reduce interest charged on disputed claims not yet repaid to HHS, (2) permit providers to rebill their claims for 6 months following the order and (3) require HHS to continue current alternative programs designed to eliminate the backlog. The first request has significant financial implications for providers since they are charged 10.75 percent interest on claims after a qualified independent contractor issues a reconsideration decision (the second level of appeals). Given that some of these claims have been in limbo for more than three years, providers could end up owing significant amounts to HHS if their appeals are not ultimately resolved in the their favor.

The district court denied these requests, however, on the grounds that they were not directly linked to the plaintiffs’ underlying claim that HHS was violating its statutory mandate to issue ALJ decisions within 90 days.

Multiple Opportunities for Resolution

The district court’s order provides some comfort to providers that any current appeals will be resolved by 2022. However, only time will tell if OMHA will be able to keep pace with the mandamus order and its own internal projections for clearing the backlog. Furthermore, OMHA’s projections for clearing the backlog rely—at least in part—on the notion that providers will continue to utilize its alternative initiatives to the traditional appeal process. As noted in our prior discussions (see Medicare Appeals Backlog: A Setback and New Opportunities for Providers and CMS Announces New Settlement Initiative Addressing Medicare Appeals Backlog, Enhancing Provider Appeal Options), OMHA and CMS have instituted a number of programs that allow providers to receive a decision much sooner. These programs include the Statistical Sampling Initiative, under which OMHA adjudicates a small sample of claims and then extrapolates its findings to the entire universe of an appellants selected claims; the Settlement Conference Facilitation, under which the provider and OMHA go through a form of dispute resolution to resolve the claims; and the expired Low Volume Appeals Settlement, under which providers were able to settle eligible appeals for a partial payment of 62 percent of the net approved amount.

Although the district court declined to issue an order requiring OMHA to continue to operate these programs, it has not indicated that it will make any changes to them in light of the new backlog deadlines. Indeed, in its status filing to the court in 2018, HHS touted the success of these programs and emphasized its continued expansion of such programs. Indeed, it is a likely possibility that CMS and OMHA will expand current initiatives or launch programs in an attempt to ensure OMHA meets the newest mandamus order.

Conclusion

The district court’s latest order is a welcomed development for providers that have long been frustrated by OMHA’s inability to render appeals decisions within a reasonable timeframe, much less the statutory 90-day requirement. There is still a possibility that HHS will appeal the decision back to the DC Circuit. However, thanks to increased funding, OMHA is well equipped to eliminate the full backlog by 2022, bringing this long-standing dispute to a resolution. Providers should continue to monitor developments at CMS and OMHA as new or expanded initiatives may be promulgated, which may offer additional options for providers. Even if new or expanded initiatives are not initiated by OMHA or CMS, providers have a number of alternative resolution options that are currently available, such as Settlement Conference Facilitation or the Statistical Sampling Initiative, to resolve their appeals. The most optimal appeal strategy, however, will differ based on a particular provider’s unique situation and priorities in Medicare claims resolution.