Legislators decry broken Medicare payment appeals process

Legislators from both sides of the aisle expressed concern during a congressional hearing Tuesday that vigorous federal investigations of potential Medicare fraud could result in providers that have done nothing wrong being unfairly punished.

While legislators stressed that they want transgressors punished, they worried that the system for appealing Medicare payment decisions is so broken that it offers little protection for providers that have been wrongly denied reimbursement for treatment they delivered. The hearing showcased once again why it's easy for politicians to talk about cracking down on Medicare fraud and abuse but devilishly hard to carry it out.

“The due process system is clearly broken,” said Rep. Michelle Lujan Grisham (D-N.M.), the ranking minority member of the Committee on Oversight and Government Reform's subcommittee on Energy Policy, Health Care and Entitlements. “These small providers are spending an incredible amount of time being administratively reviewed.”

The subcommittee's chairman, Rep. James Lankford (R-Okla.), compared the contractors utilized by the CMS to track down wrongful payments to “bounty hunters” seeking enrichment. “We want Medicare providers to be there; we want our seniors to have access,” Lankford said. “We're losing the good guys in this, and that's going to hurt us long term.”

Since passage of the Patient Protection and Affordable Care Act, the Obama administration has made cracking down on Medicare fraud and waste a priority. Over the last five years, for example, the Health Care Fraud and Abuse Control Program has recovered $19.2 billion in improper payments to providers, more than double the amount taken in during the previous five years.

Dr. Shantanu Agrawal, director of the CMS' Center for Program Integrity, faced tough questions about the agency's enforcement actions during Tuesday's hearing. “CMS must strike an important balance while overseeing the Medicare program: limiting the administrative burden on legitimate provider and suppliers to preserve beneficiary access to necessary healthcare services while fulfilling our obligation to ensure taxpayer dollars are not lost to waste, abuse and fraud,” Agrawal said.

The troubled appeals process for Medicare payments came under particular scrutiny. Agrawal testified that the first two levels of appeals, which are handled directly by the agency, are functioning efficiently, with most determinations made within 60 days. But administration officials acknowledged that the process breaks down when providers seek further review by the Office of Medicare Hearings and Appeals (OMHA). Last year, the agency introduced a two-year moratorium on assigning new appeals to administrative law judges because they couldn't handle the caseload. OMHA expects the backlog of appeals to top 1 million this year.

“A concerted effort by all key players—including CMS, OMHA and Congress—is needed to address this issue and to maintain the integrity of the appeals system,” said Brian Ritchie, acting deputy inspector general for evaluation and inspections at HHS' Office of Inspector General, during the hearing.

In January, the American Hospital Association sent a letter to the CMS Administrator Marilyn Tavenner (PDF), decrying the moratorium and mounting backlog of appeals. Rick Pollack, the AHA's executive vice president, pointed out that hospitals prevail in nearly 70% of their OMHA appeals. “Excessive inappropriate denials by Medicare Recovery Audit Contractors (RACs) are a direct driver of the ALJ backlog,” Pollack wrote. “Hospitals have been put in an untenable position in which the nearly unfettered ability of RACs to churn out erroneous denials forces them to pursue appeals in order to receive payment for medically necessary care, while the inability of OMHA to manage the appeals process within the timeframes required by the Social Security Act holds that payment hostage.”

Legislators voices similar concerns. In particular, they worried that small facilities with tight margins might not be able to afford the laborious appeals process and will therefore be denied proper payments. “Large hospitals and large hospital groups can afford to wait a decade potentially,” Grisham said. “Small hospitals cannot.”

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