OIG report on Medicare appeals seeks to make it harder to win your appeal

ByDavid M. Glaser, JD

If you have had a Medicare overpayment appeal, you are likely to cheer the title of the Office of Inspector General report, “Improvements are Needed at the Administrative Law Judge Level of Medicare Appeals” (See: https://oig.hhs.gov/oei/reports/oei-02-10-00340.asp), but reading the report is likely to curb your enthusiasm. The report is not about the seemingly growing delay in having a hearing or receiving a decision. (In my experience, 12-month to 18-month waits are common). In fact, the report claims that while cases were decided slowly in 2005 and 2006, “timeliness improved” thereafter.

The “problems” identified by the Office of Inspector General (OIG) are quite different. In short, the “problem” with the system is that physicians win too many appeals! The OIG is also troubled because it feels there are too many appeals. The OIG recommends discouraging what it labels as “frequent fliers” by imposing a filing fee on administrative law judge (ALJ) requests from anyone other than beneficiaries. The report notes that ALJ staff are concerned with those submitting frequent appeals, and wrote, “several [ALJ] staff noted that some of these appellants appeal every payment denial. A few staff said that these appellants have an incentive to appeal because the cost is minimal and a favorable decision is likely.” It is stunning that the fact that most appeals are successful results in a conclusion that the government should make it more difficult to appeal. The fact that ALJs are regularly ruling on behalf of physicians and hospitals should prompt a conclusion that claims are being unfairly denied, and that it should be easier to appeal or perhaps that the earlier level of appeals are improperly ruling against practitioners. Instead, the OIG suggests raising barriers to appeals.

The study asserts that 56% of appeals are successful, but there was considerable variation across different types of practitioners and based on whether the appeal involved Medicare Parts A, B, C or D. Practitioner appeals under Part B received a fully favorable decision 60% of the time. (Note that additional claims were partially favorable, but the report did not contain that data.) By contrast, appeals under Medicare Parts C and D were successful 19% and 18% of the time, respectively.

Criticisms from the OIG

The report notes that one reason ALJs rule in favor of appellants so frequently is that they are less strict when interpreting Medicare policies than qualified independent contractors (QICs). The report notes that “ALJs often decided in favor of appellants when the intent, but not the letter, of a Medicare policy was met.” The report recommends that CMS train ALJs and QICs so they are more consistent in applying CMS policy. While the report does not explicitly state that this training should include chastising the ALJs for focusing on the intent of the law, that implication seems clear. This report is aimed at lowering the success rate of appeals.

The OIG also criticizes ALJs for being too lenient in allowing the introduction of new evidence. Generally speaking, evidence can be allowed at the ALJ level only when it was it was presented at the QIC level unless there is good cause. The report believes that ALJs are too liberal in finding good cause, and that regulations should be changed to indicate that if the appellant could have obtained the evidence earlier, it is to be excluded.

The OIG also asserts that providers who are under government investigation often appeal claims and use the successful appeal as a defense to the investigation. The OIG finds this troubling, and wants to change the law to prevent organizations that are under investigation from filing ALJ appeals.

Variation across ALJs

The report also notes that CMS prevails in a higher percentage of appeals when CMS participates in the hearing. (Interestingly, this difference was minimal for Part A appeals with appeals successful 62% of the time when CMS did not participate, and 59% of the time when they did.) The report recommends that CMS participate in more hearings.

The report also recommends a quality assurance program to review ALJ decisions. In a recommendation that few could object to, it also recommends that there be an effort to make the ALJ case file electronic.

A final finding that will not surprise people who have filed multiple appeals: there is a great deal of variation across ALJs. Some ALJs are far more likely to find for appellants than others. The judges seem to be aware of this variation. As part of the interview process, one ALJ said, “I go towards protecting the Medicare Trust Fund.” By contrast, a staff member said another ALJ “will listen to the treating physician and will give deference to the physician’s opinion.” The report advocates steps to eliminate this inconsistency. But it seems clear that the authors’ hope is that it will lower the success rate of appeals.

Pause for the health care industry

In closing, it is important to recognize that appeals statistics can be used in misleading ways. For example, it would be unfair to say that the fact that 60% of appeals are successful proves that 60% of the denials made by Medicare Administrative Contractors are incorrect. Some denials are not appealed. It is possible that the denials that are not appealed were decided correctly, though it is certainly possible that if those decisions were appealed, a high percentage would be reversed.

In short, you must use some care when drawing conclusions based only on reversal rates. I would interpret the appeals data differently than the OIG. I find it to be strong evidence that the QICs do not apply the law correctly. By contrast, the OIG interprets it as evidence that ALJs are out of control and disregard the law. The fact that the OIG is seeking to lower the success rate of appeals should give everyone in the health care industry pause.