Hospitals persuaded a federal appeals court to give new life to their legal fight to force HHS to work more quickly through a backlog of disputed findings by Medicare's controversial recovery audit contractors.
A lower court had dismissed the case in December 2014, saying the delay in processing RAC appeals wasn't unreasonable enough to elicit an order from the court and that HHS and Congress should work together to resolve the issue.
But a three-judge panel of the U.S. Court of Appeals for the District of Columbia Circuit reversed that decision Tuesday (PDF) and sent the case back to the lower court for reconsideration.
The American Hospital Association and several hospitals argued in a lawsuit against the Obama administration that the appeals process for claims identified by RACs as improper is too slow and leaves Medicare payments in limbo, in some cases for years.
HHS has argued that it doesn't have the funding to keep up with the increase in appeals. The agency now has a backlog of 800,000 appeals, which is about 10 times as many as it can adjudicate annually at its current funding levels, according to HHS.
“Although the audit program has recovered billions of dollars in fraudulently or otherwise improperly paid funds, it has also contributed significantly to a volume of appeals that makes compliance with the statutory time frames impossible,” appellate Judge David Tatel wrote in the ruling. For that reason and others, the district court should reconsider “the problem as it now stands—worse, not better,” he wrote.
The American Hospital Association said the decision moves hospitals “closer to getting relief.”
“The appeals court today affirms that hospitals simply cannot afford to have billions of dollars that are needed for patient care tied up indefinitely in the appeals process,” Melinda Hatton, AHA general counsel, said in a statement.
She said the AHA expects the lower court to rule in favor of the hospitals unless HHS and Congress can make meaningful progress toward a solution.
The CMS did not immediately respond to a request for comment Tuesday afternoon.
But the Council for Medicare Integrity, a RAC lobbying group, criticized the decision.
“The court's decision reminds us that all parties believe the appeals process is in dire need of improvement, but it is disappointing to see any validity given to provider claims regarding overturn rates and audit accuracy,” said spokeswoman Kelly Davis in a statement, noting that the rate of improper payments is “approaching an all-time high.”
Davis also noted that evidence suggests a handful of providers are filing many of the appeals, meaning “a few 'frequent flier' hospitals are appealing every claim in an effort to game the system.”
Jessica Gustafson, a partner with Health Law Partners who works with hospitals and suppliers on RAC appeals, called the decision a “positive development for hospitals” but also said she would be surprised if the district court ordered HHS to move faster on the appeals. She noted that legislation was introduced in Congress last year that would make significant changes to the Medicare appeals process, including ones that could reduce the backlog. That bill is called the Audit and Appeals Fairness, Integrity, and Reforms in Medicare Act of 2015.
“I think the court might be hesitant to mandate that HHS take these steps to mandate a resolution when there are legislative efforts in the works that would lead to resolution as well,” Gustafson said.
It's possible the ruling Tuesday could help push Congress toward passing that bill in order to address the issue, said Andrew Wachler, managing partner at Wachler & Associates, which also works with providers and suppliers on audits.
Tatel wrote in the opinion that a court order will likely be necessary “if the political branches have failed to make meaningful progress within a reasonable period of time—say, the close of the next full appropriations cycle.”
“To me, this case emphasizes the importance of taking some action,” Wachler said.
If the lower court does issue an order forcing HHS to comply with the timelines set in statute, that could leave HHS searching for a way to either reduce audits, increase the number of judges or come up with a different strategy, said David Glaser, a shareholder with Fredrikson & Byron who also works on RAC appeals for providers.
HHS could try a strategy similar to one it introduced in 2014 when it offered to pay hospitals 68% of the value of inpatient claims making their way through the appeals process, Glaser said. The CMS had paid more than 1,900 hospitals $1.3 billion, resolving 300,000 claims, as of last summer as part of that deal.
It's also possible the district court could take actions other than issuing an order for HHS to comply with the timelines set out in statute for dealing with appeals. The court, for example, could hold off on making a decision, instead requiring status reports from HHS on efforts to improve the backlog, Glaser said. Or, if the court feels the situation is improving, it could decide not to issue an order at all.