Battling the Backlog at the ALJ

A federal judge ordered the government to reduce the massive backlog of healthcare hearings – and if recent events are any indication, it may finally be happening.

I imagine that pretty much everyone who touches on coding and billing compliance in our industry is painfully aware of just how broken the audit/appeals process is. To begin with, we have five levels of appeal, and it just seems that, if the process were fair, standardized, and reasonable, we wouldn’t need that many levels.

According to the Center for Medicare Advocacy, the percentage of favorable findings at the first level (redetermination) is around 2.5 percent, which makes sense, because it is pretty much the same people reviewing the audit that either performed or approved the audit. This is not only dismal, it is likely counterproductive. If 98.8 percent of improper findings are upheld at level one, why not just eliminate that level of appeal? For the most part, it only serves to clog up the system. 

The second level of appeals is not much better than that, and again, it shouldn’t be a surprise, because it is the same system, with a vested interest in high numbers of denials, conducting these reviews. But the results change dramatically at the third level of appeal, where the complainant gets the opportunity to be heard by a truly independent arbiter of the facts: an administrative law judge, or ALJ. And here is where we see much of the good news and much of the bad news.

The good news is that, at the ALJ level, the rate of reversal in favor of the provider is somewhere between 48 and 85 percent, depending on what study you read and who you choose to believe. The low estimate comes from the Centers for Medicare & Medicaid Services (CMS), but they count each level of the appeal in the stats. For example, if you lose at reconsideration, lose at redetermination, and then win at the ALJ level, the denominator is three (all three levels of appeal) and not one (just the level at which you prevail). Assuming that this is correct, then the higher percentages are likely the most accurate.

The bad news is that it can take over three years to schedule the hearing date. And if you add in the time from when the appeals process starts, it can take significantly longer than that. Last week, I testified as a statistical expert in an ALJ hearing from an analysis I did in 2014. And the purpose of this article is not to point the finger or to find someone to blame for these massive delays, but I can’t help but think about George Wilson from the 1993 movie Dennis the Menace, where he says that “a tragedy of this magnitude has to somebody’s fault, Martha!”

I want to take a moment to address the issue of the backlog for an ALJ hearing – which, as I understand it, is now some 1,057 days. That should be shocking to everyone, because between the time of the request for the ALJ hearing and when that hearing occurs, some three years later, the practice is normally required to pay the money back to CMS, which will then hold it until after adjudication. And lest you think that the ALJ hearing is the be-all end-all, I am here to tell you that it is not. In particular, when it comes to extrapolation, the auditor often appeals a reversal decision to the fourth level of appeal, the Medicare Administrative Contractor (MAC), which often sends it back down to the ALJ, with instructions to reconsider the decision. It’s a mess! But I digress. 

Much of the blame for the substantive increase in the wait times for ALJ hearings can be placed at the feet of the Recovery Audit Contractors (RACs) – and maybe not for the reason you think. It would be a fair assumption that just the frequency of the RAC audits, due to their expansion, was the cause. But if their findings were fair and reasonable, we would likely not have seen the dramatic increase in the number of appeals that we have over the past five years. And if the first two levels of appeal held any merit at all, then likely, much of the burden could have been absorbed at those levels. 

Based on my experience, however, this is not the case.  It is due to the fact that the RAC audits are so egregiously error-ridden that pretty much everyone appeals, in order to just set the financial record straight. Remember, at the ALJ level, anywhere from half to over three-quarters of the auditor’s findings are reversed back in favor of the provider. In fact, from the hospital perspective, it is so bad that U.S. Department of Health and Human Services (HHS) offered a number of deals whereby the provider pays some fraction of what is owed, allowing them to skate on the rest. These include the Statistical Sampling Initiative, Settlement Conference Facilitation, and Senor Attorney Advisors and On-The-Record Decisions. If you think about the billions of dollars that are being given up here, one can only assume that they are doing this to avoid the cost of losing billions of dollars more from the ALJ decisions in favor of the provider.

To deal with the issue of the backlog, a lawsuit was filed against HHS. In November 2018, Judge James E. Boasberg of the U.S. District Court for the District of Columbia reinstated a deadline-based order that requires HHS to reduce the backlog of appealed Medicare claims annually by a specific percentage amount. HHS was ordered to reduce the backlog by 19 percent by the end of the 2019 fiscal year (FY), by 49 percent by the end of FY 2020, and by 75 percent by the end of FY 2021. By the end of FY 2022, the court expects HHS to fully eliminate the growing Medicare appeals backlog. 

Now, I am not exactly sure where we are on that, but I can tell you from my own personal experience that there has been a significant increase in the number of hearings at which I have been scheduled to appear. I probably testified at four ALJ hearings for all of 2019 and 2020. Since February of this year, I have already testified at four ALJ hearings, and have four more scheduled between now and the end of June (and I fully expect to schedule more in the near future). And these are from cases I worked in 2014 and 2015.

So, maybe it’s working, and maybe this is just a coincidence. I guess one way to find out is to follow the money. Legal theory is that a failure to reduce the backlog by 2022 could likely result in a default judgement in favor of the providers – something that HHS would fight tooth and nail to avoid. If this is in fact true, then it’s both a good and a bad thing. The good thing is that the problem may be getting fixed. The bad part is that it likely could have been fixed a lot earlier than this, and countless practices have been out a lot of money waiting for nothing more than a shot at the promise of due process.

And that’s the world according to Frank.