The federal government has a backlog of more than 800,000 appeals from healthcare providers challenging denied Medicare claims, most of them generated by the program's recovery audit contractors, or RACs.
That's about 10 times as many as the program can adjudicate in a year at its current funding levels, according to the CMS office that's buried by the workload.
Now a federal appeals court has given new life to a lawsuit brought by hospitals seeking to force the government to churn through those appeals more quickly.
The ruling sends the case back to the district court that dismissed it last year for reconsideration. But it also might nudge Congress toward passing legislation that seeks to address the massive backlog, some say.
RACs are promised a share of the money they recover for Medicare by identifying erroneous payments.
The American Hospital Association and several hospitals argued in the lawsuit that the process for appealing those findings is too slow, violating parameters set by law, and leaving large sums of revenue in limbo, in some cases for years.
The AHA said last week's decision moves hospitals “closer to getting relief.” AHA Senior Vice President Melinda Hatton said in a statement that the AHA expects the lower court to rule in favor of the hospitals, unless HHS and Congress can make meaningful progress toward a solution.
A lower court had dismissed the hospitals' lawsuit in December 2014, saying that the delay in processing RAC appeals wasn't unreasonable enough to merit an order from the court, and that HHS and Congress should figure out how 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 last week and sent the recovery audit matter back to the lower court for further consideration.
“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. The district court, he wrote, should consider “the problem as it now stands—worse, not better.”
The CMS did not respond to a request for comment about the ruling.
The Council for Medicare Integrity, a RAC lobbying group, said in a statement that the decision is a reminder that “all parties believe the appeals process is in dire need of improvement.” The group's response, however, also stated it was “disappointing to see any validity given to provider claims regarding overturn rates and audit accuracy.”
While hospitals blame the backlog on overzealous audit contractors driven by the bounty paid for recovering government dollars, the Council for Medicare Integrity argues that a small number of hospitals account for a disproportionate number of appeals, suggesting “a few 'frequent flier' hospitals are appealing every claim in an effort to game the system.”
Although the appeals court's ruling was seen as a positive development for healthcare organizations, experts were not confident it would lead to a clear legal victory for them.
If the lower court forces HHS to comply with the timelines set in statute, HHS could be left searching for a way to 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.
One option would be to try once more to pay hospitals to walk away. In 2014, HHS offered hospitals 68% of the value of inpatient claims under appeal.
As of last summer, it had paid more than 1,900 hospitals $1.3 billion, resolving 300,000 claims.
But the court might also simply order HHS to provide status reports on its progress toward reducing the backlog—or do nothing at all.
“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,” said Jessica Gustafson, a partner with The Health Law Partners, who works with hospitals and suppliers on RAC appeals.
Legislation introduced last year in Congress could make significant changes to the appeals process, which could reduce the backlog.
“To me, this case emphasizes the importance of taking some action,” said Andrew Wachler, managing partner at Wachler & Associates, which also works with providers and suppliers on audits.
Tatel wrote in the D.C. Circuit opinion that a court order will probably 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.”
