Healthcare Business News

Hospitals sue HHS over sluggish RAC appeals

By Joe Carlson
Posted: May 23, 2014 - 1:15 pm ET

Administrators at Baxter Regional Hospital in Mountain Home, Ark., say they have so much money tied up in endless Medicare appeals that they can't afford to replace the roof over their surgery department or buy new beds for their intensive-care unit.

Baxter joined two other hospital-care providers and the American Hospital Association on Thursday in a federal lawsuit against HHS asking a judge to force the agency to meet its statutory requirement to decide Medicare-payment appeals within 90 days instead of the current average of 16 months.

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Some hospitals could wait up to five years to get decisions on routine payments because of a massive backlog in the appeals process that has been created by the aggressive post-payment review program known as recovery auditing. That's due in part to HHS' administrative law judges announcing a two-year moratorium on docketing new Medicare appeals for hospitals.

The four recovery auditing companies say their work has saved the Medicare trust fund billions of dollars since they started working nationwide in 2010.

Hospitals, though, complain that the companies are retroactively overturning physicians' medical decisions, particularly in cases where patients are admitted for expensive inpatient care and auditors deny payment because those cases should have been in cheaper outpatient settings. Hospitals say the auditors see those denials as particularly lucrative because they get to keep between 9% and 12% of the reclaimed Medicare money.

The auditing program has resulted in a gigantic spike in appeals that has delayed timely decisions, but hospitals continue to appeal because they say they win 72% of the cases that make it to HHS' administrative courts.

In 2009, before the national launch of the RAC program, HHS' administrative courts received 35,831 appeals of Medicare payment decisions. For 2013, that number jumped to 384,651, according to statistics from HHS.

“Part of our argument is that these delays are creating significant financial difficulties for facilities,” AHA Assistant General Counsel Lawrence Hughes said.

Baxter, a 209-bed hospital in northern Arkansas, says in the lawsuit that it has $4.6 million in disputed Medicare payments tied up in various stages of the appeals process. The not-for-profit hospital's tax forms say the organization had $2.3 million left in the bank in 2012 after paying all of its expenses. Baxter got about 47% of its total revenue from Medicare that year.

“The delays in the appeals process have had a crippling effect on Baxter's cash flow,” according to the lawsuit. “Funds tied up in appeals are funds that cannot be used to meet Baxter's essential needs.”

The case is AHA v. Sebelius, filed in U.S. District Court in Washington. The other plaintiffs are seven-hospital Covenant Health, Knoxville, Tenn.; and 139-bed Rutland (Va.) Medical Center.

Follow Joe Carlson on Twitter: @MHJCarlson

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