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RAC Lawsuit Dismissed by Federal Judge

On December 18, 2014, a U.S. District Court judge dismissed a lawsuit the American Hospital Association (“AHA”) filed against the Department of Health and Human Services (“HHS”) seeking HHS to process their administrative appeals in accordance with statutory timelines.

In its order, the Court acknowledged that the Office of Medicare Hearings and Appeals (“OMHA”) is “saddled with a workload it cannot possibly manage.” In fact, between 2012 and 2013, the backlog of administrative law judge (“ALJ”) level appeals quintupled. For example, in 2013, OMHA received 350, 629 appeals and decided only 79, 303 of them.

Despite this fact, Judge Boasberg, ruled: “While the Court sympathizes with Plaintiffs’ plight, for the time being the waiting game must go on. HHS’s delay in processing their administrative appeals, while far from ideal, is not so egregious to warrant intervention.”

In its motion for summary judgment, the AHA argued that over-auditing in the Recovery Audit Contractor (“RAC”) program has caused the back up in the appeals process. In response, the Court noted that the agency does not deny that RACs have played a part in increased appeals, but it also attributes the spike to “more Medicare beneficiaries, increased use of covered services, and additional appeals from Medicaid State agencies.”

In rendering its decision, the Court discussed the escalation process, which allows that in the event any level of the appeals process gets too far behind, claimants may leapfrog it and move to the next stage. According to the AMA (and as many hospitals would agree), escalation is not a perfect solution to the backlog of appeals. This is because if an appeal is escalated, the ALJ level of review is essentially bypassed. This is extremely problematic according to the AHA who believes “ALJ review is an invaluable step in the appeals process.” This is largely due to the fact that it is at the ALJ level where hospitals can provide oral testimony in support of their cases and claimants are able to engage with ALJs and respond to questions in real time. Available data shows that appellants experience the highest rates of success at the ALJ level of appeal.

In the end, the Court noted: “Congress is well aware of the problem, and Congress and the Secretary are the proper agents to solve it. In such situations–where an agency is underfunded and where it is processing Plaintiffs’ appeals on a first-come, first-served basis–the Court will not intervene.”

The Court’s full text version of the order is available here.

For more information regarding the appeals backlog please click here, or for any other questions regarding RAC audits and appeals, please contact Abby Pendleton, Esq. or Jessica Gustafson, Esq. at (248) 996-8510 or via e-mail at apendleton@thehlp.com or jgustafson@thehlp.com.

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