Premier and FAH Support Ways and Means Effort to Reduce Medicare Appeals Backlog

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By Michael D. Williamson

Dec. 26 — The Premier healthcare alliance and the Federation of American Hospitals separately said they support provisions to clear the Medicare appeals backlog found in a House committee's draft bill.

Premier, which counts over 3,400 hospitals as members, in a Dec. 18 letter to the House Ways and Means Committee, said it appreciates the committee's effort to address problems created by the long appeals backlog. In particular, Premier said it “supports the bill’s provisions offering a voluntary opportunity for providers to settle claims that are pending” at the administrative law judge (ALJ) level. A congressional report recently said 750,000 appeals are in the backlog.

In addition, the Federation of American Hospitals (FAH) said in a Dec. 23 letter it “appreciates and supports the Committee’s focus in the draft legislation to highlight concerns with the current ALJ backlog, and applauds its efforts to provide an avenue for providers to mitigate that problem.”

The letters from Premier and the FAH are in response to a discussion draft of the Hospital Improvements for Payment Act of 2014, or HIP. Rep. Kevin Brady (R-Texas), chairman of the Ways and Means Subcommittee on Health, released the discussion draft in November.

Expand Appeals Settlement

According to Premier, the increase in denials of hospital admissions by the recovery audit contractors (RACs) has led “to a dramatic increase in appeals by providers and beneficiaries, resulting in a three-year backlog of cases” at the ALJ level of review. Although Premier praised language in the bill offering providers a voluntary settlement of claims pending at the ALJ level, it also said it is disappointed “that the settlement offer would apply only to denials within medical DRGs [diagnosis-related groups] and not also to surgical DRGs.” Premier said, “We encourage the committee to expand the scope of the settlement option to include surgical DRGs.”

In August, the Centers for Medicare & Medicaid Services, in an effort to reduce the volume of patient status claims pending in the appeals process, offered an “administrative agreement” to certain hospitals willing to resolve their appeals in exchange for a timely partial payment. In a letter Sept. 15 to Health and Human Services Secretary Sylvia Mathews Burwell, Brady questioned whether the HHS has the statutory authority to institute the administrative agreement.

Mixed Reaction to RAC Language 

Premier had a mixed reaction to the draft's language on the RAC program. “Premier supports the provisions in the bill to improve the RAC program, such as reducing the RAC look-back period from four to three fiscal years; granting providers and suppliers a 30-day period to discuss reviewed claims before a denial (partial or full) is issued; requiring the Secretary of Health and Human Services (HHS) to report RAC data to the public; and creating a RAC Compare website,” the alliance said.

Premier also said, however, that the changes weren't enough. “We urge the committee to limit the RACs’ scope of work to reviewing the medical necessity of inpatient admissions only in situations where there appears to be a pattern of abuse,” it said.

Moreover, Premier said, “Absent evidence of a pattern of abuse, RACs should not be allowed to deny a medical admission ordered by a physician.” It also recommended that the draft “include a provision requiring the Secretary to evaluate RACs based on their overturn rate and to impose penalties on RACs with high overturn rates.”

For its part, the FAH said it “appreciates the Committee’s recognition that the RAC program needs significant improvement.” It also said, “While the proposed changes would be a step in the right direction, we believe additional changes to the RAC program are needed to achieve fundamental RAC reform that would address properly the underlying problems with the RAC program that have resulted in a massive Medicare appeals backlog.” The group said it “has developed extensive policy on RAC reform,” and it urged the committee to include several of its RAC program improvements in its legislative proposal.

Among the FAH's suggested RAC reforms were:

• specifying that the scope of RAC reviews should exclude any medical necessity matter involving physician judgment;

• delaying the recouping of hospital payments until after a final resolution of an ALJ appeal confirming an overpayment;

• requiring RAC denials to be reviewed and approved by a physician on staff at a RAC before being issued to a provider;

• limiting the RAC look-back period to original claims filing dates within the prior Medicare fiscal year; and

• subjecting RACs to a financial penalty when their post-payment denials are overturned on appeal at a significant rate.

Physician-Owned Hospitals

The FAH also said it strongly opposes language in the draft that may weaken “current law with respect to physician self-referral to physician-owned hospitals.”

Section 201 of the draft bill would repeal the moratorium on physician-owned hospitals and allow full building and bed expansion of physician-owned hospitals. Generally, the Stark law prohibits Medicare and Medicaid reimbursements for physician referrals to facilities in which the physician or his or her immediate family has an ownership or investment interest.

In its letter, the FAH said, “The dangers of self-referral are well-documented, and the current provision, which grandfathered existing facilities and those under development at the time Congress enacted the provision into law, allows for appropriate expansion of such facilities when warranted.”

Other Provisions 

In its letter, Premier also said it supported the draft's proposed repeal of the two-midnight rule. Under the two-midnight policy, a Medicare beneficiary isn't an “inpatient” unless the admitting physician expects that beneficiary to need care in the hospital for a period spanning at least two midnights. Hospital and other health-related groups say the two-midnight rule shortchanges hospitals because it leads to incorrect reimbursements by the CMS.

In addition, Premier outlined its opposition to the bill's call for a site-neutral hospital prospective payment system (HPPS). Premier said a site-neutral HPPS would be too complex and disruptive to providers. Moreover, the alliance said it would adversely affect payment adjustments for teaching hospitals, disproportionate share hospitals, rural hospitals, sole community hospitals, Medicare-dependent hospitals and low-volume hospitals.

Premier also said it opposes provisions in the bill that would lift the moratorium on physician-owned hospitals.

The American Hospital Association Dec. 18 said the draft bill contains good ideas but has areas that need clarification.

To contact the reporter on this story: Michael D. Williamson in Washington at

To contact the editor responsible for this story: Brian Broderick at


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