Court Orders Second Look at Worsening Medicare Appeals Backlog

BNA’s Health Care Daily Report™ sets the standard for reliable, high-intensity coverage of breaking health care news, covering all major legal, policy, industry, and consumer developments in a...

By Eric Topor

Feb. 9 — A federal appeals court Feb. 9 ordered a lower court to re-evaluate whether the worsening backlog of Medicare provider appeals now requires a court order telling the HHS to redirect its resources to fix the problem.

The U.S. Court of Appeals for the District of Columbia Circuit acknowledged that the HHS was caught between two conflicting priorities: complying with the 90-day administrative law judge decision deadline prescribed by Congress, while administering the recovery audit contractor (RAC) program (also prescribed by Congress) responsible for both a large increase in Medicare overpayments and provider appeals.

The appeals court acknowledged that issuing a writ ordering HHS compliance with the deadline would likely “require the agency to make major changes to its operations and priorities,” including changes to the RAC program.

A federal district court denied a petition from the American Hospital Association in December 2014 that would have required the HHS to adhere to the statutorily mandated 90-day deadline for ALJ appeals, which stretched to an average of 572 days as of February 2015 and caused the HHS to suspend all new appeals for two years.

However, the appeals court said the extraordinary circumstances of the situation required the district court to re-evaluate whether the backlog is now bad enough that a writ of mandamus from the court to the HHS must be issued. Although the court left that decision to the district court on remand, the court said that without “meaningful progress” in reducing the ALJ decision wait time, “the clarity of the statutory duty likely will require issuance of the writ” by the end of “the next full appropriations cycle.”

The court's decision “affirms that hospitals simply cannot afford to have billions of dollars that are needed for patient care tied up indefinitely in the appeals process,” AHA's Senior Vice President and General Counsel Melinda Hatton said in a Feb. 9 statement.

Hatton added that the AHA “fully expect[s] that the lower court to rule in favor of hospitals when it reconsiders the case unless HHS and Congress makes meaningful progress to resolve the backlog.”

Courts Reluctant to Intervene

The trial court declined to issue the AHA's request for a writ of mandamus ordering the HHS Office of Medicare Hearings and Appeals (OMHA), which handles ALJ appeals, to abide by the 90-day deadline outlined in 42 U.S.C. §1395ff(d)(1)(A).

Among the trial courts' reasons for rejecting the AHA's request was the extraordinary nature of the issuance of a writ to direct the operations of an executive agency, coupled with the reality that the real cause of the backlog was a confluence of budget and politics that is best left to Congress and the HHS to solve .

The appeals court acknowledged the trial court's arguments in declining to issue the writ in December 2014, but said that since the district court decision, the problem is now “worse, not better.” The appeals court also credited the AHA's argument that a significant amount of legitimate hospital Medicare reimbursements are tied up for years in the appeals process, and have real impacts on patient care at hospital facilities.

The appeals court further cited several developments at the HHS and in Congress to reduce the backlog, including increased appropriations to OMHA allowing for additional ALJ and a bill under consideration that would increase OMHA funding by $125 million through the Audit & Appeals Fairness, Integrity, and Reforms in Medicare (AFIRM) Act of 2015 (S. 2368) . However, the appeals court acknowledged that the AFIRM Act's passage was uncertain.

Re-evaluation of Backlog Needed

The appeals court said the district court now must weigh whether the requirements for mandamus relief (a clear right to relief, agency violation of a clear duty and lack of alternate remedy) are now met based on the six factors outlined in In re Core Communications, Inc., 531 F.3d 849 (D.C. Cir. 2008).

Among those factors, the appeals court noted that the statute uses the mandatory language of “shall” in prescribing an ALJ decision timeframe, and calls the 90–day period a “deadline.”

The appeals court also rebuffed the government's argument that the deadline wasn't mandatory because a provider has the option to escalate an appeal after 90 days, stating that “providing a consequence for noncompliance” doesn't undermine the statutory command.

The appeals court did say that the availably of escalation was evidence that the providers had an alternative to mandamus relief, but added that the systematic breakdown resulting in the present appeals backlog was not likely intended by Congress. The appeals court said that the HHS had a “clear duty” to comply with the 90–day ALJ decision deadline, and appeal escalation was not an adequate remedy.

Hogan Lovells US LLP represented the AHA. The Department of Justice and the HHS represented the government.

To contact the reporter on this story: Eric Topor in Washington at etopor@bna.com

To contact the editor responsible for this story: Kendra Casey Plank at kcasey@bna.com