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AHA Submits Comments to OMHA on ALJ Backlog

In a letter dated December 4, 2014, the American Hospital Association (“AHA”) submitted comments in response to the Office of Medicare Hearings and Appeals (“OMHA”) request for information on current and potential initiatives to resolve the current backlog of appeals at the administrative law judge (“ALJ”) level.

In its letter, the AHA takes the position that “fundamental reform of the recovery audit contractor (“RAC”) process is at the heart of an effective and permanent solution to the appeal backlog problem.” According to the AHA, “excessive and inappropriate” RAC denials have forced hospitals to continuously appeal claims resulting in an influx of appeals reaching the ALJ level. Moreover, the AHA highlighted problems with the RAC contingency fee structure which encourages RACs to find overpayments “with impunity.” The AHA believes that assessing financial penalties on RACs for inappropriate denials would promote more appropriate and accurate assessments.

Accordingly, the AHA provided additional administrative changes that would enhance audit accuracy and reduce burden on hospitals and the appeals system, including:

• Codifying in regulation CMS’s assertion in the preamble of fiscal year 2014 inpatient prospective payment system final rule that the RACs are limited to determining whether an inpatient is medically necessary based on the medical documentation available at the time the admission decision was made.

• Eliminating the application of the one-year filing limit to rebilled Part B claims. The AHA believes that hospitals should be able to submit a subsequent Part B claim for the services provided so long as the Part B claim is submitted within 180 days of a final determination. This would allow hospitals to pursue their appeal rights and receive a final determination on the Part A claim before rebilling under Part B.

• Limiting RAC approval for auditing approved issues (such as inpatient short stays) to a particular defined time period, instead of approving them indefinitely. Additionally, a senior CMS official should be designated to be accountable for the approval of audit issues. After the issue’s audit time period has run, RACs must stop auditing the issue. CMS would then analyze the audit results and provide education to its provides in that jurisdiction, if warranted. A RAC would need to seek new approval from CMS to audit for the same issue, but must wait a certain defined time period to allow providers to incorporate education before requesting new approval.

Additionally, the AHA asserted that the lack of critical operational information discourages hospitals from participating in the OMHA established pilot program. Accordingly, the AHA listed the following questions and concerns surrounding the operation of the Statistical Sampling Pilot, including:

• Use of Extrapolation: The OMHA states that a “Medicare contractor” will extrapolate the ALJ’s decision on the sample set of claims to the larger universe of claims for which the sample was drawn; however it is not clear which Medicare contractor would perform extrapolation. The AHA strongly opposes CMS’s use of RACs to extrapolate the ALJ’s decisions, given the significant financial incentives the RACs have to increase hospital claim denials. In addition, the AHA believes that the OMHA does not provide details on how the extrapolation would be conducted and it is unclear whether or how hospitals would be able to challenge the validity of the extrapolation.

• Part B Rebilling: The OMHA states that the ALJ cannot extrapolate the amount that a hospital would receive if it submits denied Part A admissions for rebilling under Part B. Although OMHA does not directly address whether hospitals would have the right to rebill denied Part A admissions that were part of a universe of claims, it seems impossible from a practical perspective that hospitals would be able to do so. Therefore, the AHA believes that the use of statistical sampling for denials of Part A admissions may result in hospitals forgoing their ability to receive any payment for those claims
• Effect of Withdrawing Consent: Hospitals will be able to withdraw consent for participation in a statistical sampling until the ALJ has issued a pre-hearing conference order. However, the AHA believes that once a hospital withdraws consent, it is not clear whether appeals that would have been subject to statistical sampling will remain in queue for a hearing by an ALJ or if they will go to the back of the line.

The AHA notes that although improvements to the Statistical Sampling Pilot program may make the settlement more attractive to hospitals, it nonetheless remains an “inadequate substitute” for a timely ALJ hearing. The AHA believes that it is at the ALJ stage of the Medicare appeals process where hospitals are entitled to “independent and objective” review of their claims and historically, have had the greatest rate of success in overturning inappropriate RAC denials. Accordingly, the AHA emphasized that the focus should remain on ensuring that RAC denials truly represent improper payments which requires “fundamental reform” of the RAC process.

For more information, or for questions regarding RAC audits and appeals, please contact Abby Pendleton, Esq. or Jessica Gustafson, Esq. at (248) 996 – 8510 or via email at or

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