In Contravention of Federal Law, CMS Delays Assignment of New Requests for Administrative Law Judge Hearings

In a memorandum to Office of Medicare Hearings and Appeals (“OMHA”) applicants, the Centers for Medicare and Medicaid Services (“CMS”) announced that it will temporarily suspend the assignment of new requests for Administrative Law Judge (“ALJ”) hearings for two years. CMS stated in the memo that the reason for the temporary suspension is the increasing backlog of ALJ hearing requests.

According to CMS, OMHA’s claims and entitlement workload grew by 184% from 2010 to 2013, while adjudicative resources stayed relatively constant. As a result, the OMHA backlog of claims for services and entitlement appeals that are currently assigned has grown to over 357,000. Meanwhile, new requests for ALJ hearings average over 15,000 per week.

The average wait time for an ALJ hearing is already 16 months, according to CMS. It estimates that general assignment will not resume for 24 months as OMHA works through the current backlog, and even after that, post-assignment wait times will continue to exceed six months. Hospitals thus face the prospect of waiting at least 30 months to recoup disputed funds.

To the great detriment of providers/appellants, CMS’ latest action is directly in contravention of federal law and regulations requiring DHHS ALJs to issue decisions within 90 days of receipt of the hearing request. Hospitals around the country are outraged at the back-log and particularly outraged at this new CMS announcement. Notably, the American Hospital Association (“AHA”) has written a letter to CMS Administrator Marilyn Tavenner, contending that CMS’ delay violates the law. The AHA states that the 30-month delay directly violates the Medicare statute, which requires ALJs to issue a decision within 90 days of receipt of a request for hearing.

The AHA correctly points out that excessive and inappropriate denials of Medicare services by Recovery Audit Contractors (“RACs”) directly contributes to the ALJ hearing request backlog. The AHA states that, in more than 70 percent of inpatient denials by RACs, ALJs rule in favor of the hospital. This suggests that the majority of inpatient claims denied by RACs are actually appropriate, necessary claims that are supported by clinical guidelines.

Instead of suspending assignment of current appeals, the AHA urges Tavenner to suspend all RAC audits until the backlog has been processed. The AHA also requests that CMS only recover funds from RAC denials after an ALJ decides the case, rather than after the second (QIC) level of appeal. This would allow hospitals to retain payment for disputed claims while the backlog of ALJ hearings is addressed. The AHA also urges that the 90-day statutory timeframe be enforced by CMS through entries of default in favor of the provider in cases that exceed the time period.

For more information on this topic, you can reach Abby Pendleton, Esq. at apendleton@thehlp.com or Jessica Gustafson, Esq. at jgustafson@thehlp.com. Pendleton and Gustafson lead the firm’s Medicare Audit and Appeals Department.