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Jun 2016

Medical Appeals Backlog Spiraling Out–of-Control

Despite Uncle Sam’s efforts, the number of Medicare appeals from health care providers and patients challenging denied Medicare claims continues to rapidly spiral out-of-control. The jaw-dropping increase in the backlog of cases is setting off alarms in the health care industry. According to a recent Government Accountability Office (“GAO”) study, the delays are pushing many Medicare decisions well beyond the timeframes set by law.

The study, according to a Kaiser Health News article, made it perfectly clear that the staggering backlog “shows no signs of abating.” The study called for the Department of Health and Human Services (“HHS”) to improve its oversight of the appeals process so that it is more streamlined to allow prior decisions to be taken into account, while repetitive claims are handled more efficiently.

So just how bad is it?

In 2009, the average Medicare appeal wait time for a provider was 94.9 days. That number grew to 220.7 days in 2013. Then the wait time exploded to 661.1 days in 2015. The current wait time for the second quarter of 2016 set a new all-time high of 860.6 days (or 2.5 years). In other words, a newborn baby is walking and speaking in full sentences by the time a claim is now resolved.

The GAO investigators “cited significant increases in cases filed at each of four stages of appeals.” The investigators found a 62 percent increase in the first level from 2010 through 2014. For the same time period, appeals filed by providers and patients at the third stage — which are heard by an administrative law judge (“ALJ”) had a nearly 10-fold increase.

HHS officials have acknowledged the problem. Although a judge is required to issue a decision within 90 days, the average time from hearing a request to making a decision is slightly more than two years, according to the report. With the Medicare population continuing to explode, there is no sign of the backlog improving any time soon.

The GAO report also indicated that HHS attributed the rapid rise in appeals to a greater interest by hospitals and physicians to file appeals, coupled with Uncle Sam’s stepped-up efforts to check for inappropriate payments, including a controversial program known as recovery audits (“RAC”), in which contractors inspect hospital payment records to find any errors. The recipe for disaster was almost inevitable.

U.S. Senators Orrin Hatch, Ron Wyden, and Richard Burr requested the GAO report. The bipartisan effort noted that the report’s findings underscore the need for Congress to fix the problem. The Senators have offered a bill, approved by the Senate Finance Committee, that the politicians say would address many deficiencies by improving HHS oversight and establishing a voluntary dispute resolution process, among other solutions.

“The voices of too many patients, providers and states are going unheard because the gears of the Medicare audit and appeals system have ground to a halt,” said Senator Ron Wyden to Kaiser Health News.

In response to the findings, HHS issued an 11-page response describing how federal government officials have tried to manage the situation. One well-known solution included an intervention that let hospitals settle their disputed Medicare claims for 68 percent of the value in 2014. HHS officials also offered ideas for streamlining the appeals process. These solutions include:  investing in new resources at each level of appeal; administrative actions to encourage resolution of cases earlier in the dispute process; supporting legislation by providing additional funding; and expanding the agency’s powers.

For example, the agency is proposing that Medicare claims involving disputes of less than $1,500 should be reviewed by its senior government attorneys rather than holding a hearing before an Administrative Law Judge (“ALJ”) .

The appeals office is already working to help curb the backlog by converting to an electronic case management system. Beginning in August of 2016, Medicare appeals can be filed by computer. One can only hope Uncle Sam selects a software program that can handle the volume of appeals and be efficient.

For hospitals and physicians, the exasperating appeals delay has tied up billions of dollars in disputed claims, according to the American Hospital Association (“AHA”). Not surprisingly, the AHA is suing dear old Uncle Sam to speed up the decisions. The hospitals have argued that Medicare’s RACs have unnecessarily rejected payments with statistics showing that hospitals frequently win the RAC appeals.

“We are skeptical that anything short of fundamental reform that addresses the RACs’ contingency fee structure, which encourages them to inappropriately deny claims, will have a lasting impact on the backlog,” said Melissa Jackson, the AHA’s senior associate policy director, to Kaiser Health News.

At least Uncle Sam admits there are serious issues. The question still remains if the federal government can solve the crush before the economic damage to U.S. hospitals forces more to close.

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