Recent Developments in Medicare Audits and Appeals

Andrew B. Wachler, Esq.
Jessica C. Forster, Esq.

In the past few months, important developments have occurred that directly impact Medicare providers, particularly hospitals. It is important for providers to be aware of these developments and modify their audit appeals strategy appropriately. First, in February 2014, the Centers for Medicare & Medicaid Services (CMS) announced that effective February 22 Recovery Audit Contractors (RACs) suspended sending additional documentation requests (ADRs) to providers for post-payment audits and RACs can continue to conduct automated reviews through June 1, 2014. February 28 was the last day that Medicare Administrative Contractor (MACs) could send prepayment ADRs for RAC Prepayment Review Demonstration. CMS stated in its announcement that because it is in the procurement process for the next round of Recovery Audit Program contracts, it is important for CMS to transition down the current contracts so that the RACs can complete all outstanding claim reviews and other processes by the end date of the current contracts. CMS also announced that it will not conduct post-payment patient status reviews for claims with dates of admission October 1, 2013 through October 1, 2014. Although RAC audits will return, this is an important reprieve for Medicare providers.

In addition, in March, in a bipartisan effort two senators unveiled a proposed bill titled the “Two-Midnight Rule Coordination and Improvement Act of 2014.” The proposed bill would require a number of important changes, including the Secretary of the Department of Health and Human Services to consult with interested stakeholders, including hospitals, to determine criteria for short-stay inpatient admissions. The bill would also require CMS to develop a payment methodology for shorter inpatient stays. The bill describes the payment as “…a reduced payment amount for such inpatient hospital services than would otherwise apply if paid…or be an alternative payment methodology.” This is an important development and if passed would allow hospitals a clear and efficient means to be paid for shorter inpatient stays.

Finally, another important update involves the Office of Medicare Hearings of Appeals’ (OMHA) announcement that effective July 15, 2013 it temporarily suspended the assignment of most new Administrative Law Judge (ALJ) hearing requests for 24 months. OMHA announced that the delay is due to a large increase in appeals, which has caused a backlog in pending cases at the ALJ level. In February 2014, OMHA held a Medicare Appellant Forum with the purposes to inform OMHA appellants on the status of OMHA operations, discuss initiatives to reduce the growing backlog of OMHA-level appeals and suggest steps that appellants can take to make the administrative appeals process more efficient. Although OMHA provided steps for providers to incorporate into their appeals to increase the efficiency of the process, the primary concern for providers was the delay in the assignment of ALJ hearing requests. OMHA’s temporary suspension contradicts 42 C.F.R. 405.1016 which requires an ALJ to issue a decision no later than 90 days from the date OMHA receives a timely filed request for ALJ hearing. The delay raises due process issues for providers, particularly for providers facing post-payment audits. After an unfavorable reconsideration decision, providers challenging a post-payment audit cannot prevent recoupment of alleged overpayments. When the ability to recoup overpayments after the reconsideration level of appeal was originally allowed, it was with the understanding that an ALJ would issue a decision within 90 days from the receipt of an ALJ hearing request. However, with the two-year delay of an assignment of claims to ALJs, providers will have to withstand recoupment of alleged overpayments for more than two years. This could cause providers facing large overpayment demands to experience significant financial strain, and possibly go out of business, before they have an opportunity to present their case at an ALJ hearing, and thus, is an issue ripe for a due process challenge.