HHS Tossed Lifeline in Medicare Appeals Backlog Fight

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By Eric Topor

The Medicare agency has received a reprieve in the fight over how it must resolve a backlog of more than 600,000 Medicare administrative appeals ( Am. Hosp. Ass’n v. Price , 2017 BL 281068, D.C. Cir., No. 17-5018, 8/11/17 ).

The U.S. Court of Appeals for the District of Columbia Circuit ruled Aug. 11 that the Health and Human Services Department should get another chance to explain why it’s impossible to eliminate the backlog given current budget levels. The court, in a 2-to-1 decision, found a lower court order requiring HHS to eliminate the backlog in four years failed to give adequate consideration to the HHS secretary’s argument that meeting the deadline was simply impossible.

The HHS has long stated that eliminating the backlog is impossible given the logistical and fiscal constraints of the Office of Medicare Hearings and Appeals—the HHS department that handles administrative law judge appeals. The only way to resolve the backlog is through additional congressional appropriations, HHS has argued.

The HHS received at least acknowledgment of its position from the White House in President Donald Trump’s fiscal year 2018 budget, which more than doubled OMHA funding to $242 million per year, but it’s unclear whether or when such a funding increase will be approved by Congress.

Judge Robert L. Wilkins’s majority opinion said the district court must determine whether meeting that timeline is impossible. However, he cautioned that the district court was free to reissue its order “without modification” if the agency fails to satisfy this “heavy burden” of demonstrating impossibility.

Roughly $6.6 billion in disputed Medicare reimbursements is currently tied up in the appeals backlog, court filings said. These represent significant sums for individual hospitals that count on Medicare revenues to sustain their operations.

In a dissent, Judge Karen LeCraft Henderson noted that Medicare reimbursements make up two-thirds of revenue for plaintiff Baxter Regional Medical Center. It claimed that the millions in reimbursements held up in appeals prevented it from purchasing hospital beds and upgrading hospital infrastructure, she noted.

The appeals court was critical of the HHS secretary for strenuously arguing that the proposals for eliminating the backlog put forth by the plaintiffs—the American Hospital Association (AHA) and several named hospitals—wouldn’t work, even though he didn’t offer any proposed solutions of his own. The HHS predicted in a June 5 status report that, rather than going down, the number of backlogged Medicare appeals at the ALJ level would rise to roughly 950,000 by the end of fiscal year 2021.

An AHA spokesperson told Bloomberg BNA Aug. 11 the organization was reviewing the court’s decision, “but we don’t believe the government will be able to meet the high standard of impossibility set out by the appeals court.”

RAC Appeals Get Attention

Of note was the court’s skepticism of the HHS’s claim that the recovery audit contractor (RAC) program, which produced a huge number of backlogged appeals starting in FY 2013, wouldn’t be a continuing source of Medicare appeals claims going forward. The court pointed out that the sharp reduction in RAC appeals in FY 2015 was due to the renegotiation of RAC contracts with the HHS.

The court said the minimal revisions to the RAC review process implemented by the HHS so far, expected to reduce incoming appeals by just 22,000 annually, were “curiously weak medicine” for an agency facing court-directed action on the backlog. Nevertheless, while the D.C. Circuit said the district court should pay particular attention to the HHS’s proposed revisions to the RAC program on remand, it acknowledged that incoming Medicare appeals will still outpace the OMHA’s ability to process them by over 100,000 per year. And that is assuming a complete suspension of the RAC program.

LeCraft Henderson said in her dissent that there was no requirement for the district court to have made an official finding that it was impossible to comply with the four-year backlog elimination schedule. Further, she insisted that the district court made such a finding by “expressly rejecting HHS’s claims of impossibility.”

She predicted that the HHS will again fail to meet the burden of showing impossibility, and the majority’s order to remand back to the district court “will tell us only what we already know and almost certainly produce a third appeal.”

The HHS declined to comment on the decision.

Hogan Lovells US LLP represented the AHA. The Department of Justice 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: Peyton Sturges at psturges@bna.com

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