Federal court receives AHA's ideas on fixing Medicare backlog

A federal court has received the American Hospital Association's ideas on reducing the huge backlog of denied Medicare claims. A federal judge may mandate HHS to follow some or all of the ideas in order to curb the ever-growing number of appeals.

The idea expected to make the most impact includes new contract standards for Medicare recovery audit contractors once the current agreements end. RACs with more than 40% denials overturned in a given quarter should lose 25% of their contingency fees, the AHA suggested.

"A financial penalty on RACs with high (administrative law judge) overturn rates counteracts RACs' incentive to deny debatable claims," AHA wrote in the filing.

Another idea is to have claims reviewed by quality improvement organizations (QIOs) instead of RACs. QIOs include health quality experts, clinicians and consumers. Physicians are often the first to review claims in these organizations and because they're practitioners, are more likely to understand clinical decisions that may have led to the denied claim.

The AHA thought inpatient rehabilitation facilities had been particularly hard hit by denied claims and asked that denials awaiting review should be settled within 90 days. Rehab hospitals have tried for months to settle appeals out of court, but HHS rejected their offer, Marotta said.

Once HHS determines an overpayment has been made, providers are required to repay it within 30 days or else interest shall accrue. Interest on unrefunded alleged overpayments now stand at a whopping 10.25%. The AHA suggested that HHS reduce this interest.

Otherwise providers are in a bind, the AHA argues. On the one hand, a provider can give the purported overpayment to HHS and get repaid if it prevails. But having that cash being tied up during the appeals process can hurt struggling hospitals, the trade group said.

Since appeals take as long as three years to resolve, a hospital risks repaying the entire claim plus interest.

"That is no real choice at all; any rational hospital—even one confident in its chances—will repay pending appeal," AHA said.

An HHS spokesperson did not respond to a request for comment. The agency will have until July 6 to respond to the proposals, according to Boasberg's timeline.