Medicare Appeals of Overpayment Determinations: Is the Process Equitable?

In 2005, CMS adopted a uniform Medicare claims appeals process designed to make the appeals process more efficient and accurate, eliminate differences between Part A and Part B appeals, and expanded provider, physician, and supplier (providers) appeal rights making it easier for providers and suppliers to appeal adverse decisions. But does the Medicare claims appeals process “lack certain protections that are essential to an adequate appeals process making it an inequitable and costly endeavor for physicians, suppliers, and providers who may be victims of a poorly performed postpayment review?” Adam Robison, a senior associate of the health care practice group of King & Spaulding addresses that question in an article in the September 2012 issue of Dennis Barry’s Reimbursement Advisor.

Postpayment reviews. Under its Center for Program Integrity, CMS targets the range of causes of improper payments from mistakes such as incorrect coding (errors), inefficiencies including medically unnecessary services (waste), bending the rules through improper billing practices (abuse), to intentional deception by billing for services that were never provided (fraud). One of the program integrity activities includes postpayment reviews of claims conducted by Medicare administrative contractors (MACs), Comprehensive Error Rate Testing (CERT) contractors, recovery auditors, program safeguard contractors (PSCs), and zoned program integrity contractors (ZPICs). 

Issues with the process. If the provider decides to appeal an overpayment determination, the Medicare claims appeals process consists of five levels of appeals beginning with a redetermination by a MAC, followed by a reconsideration by a qualified independent contractor (QIC), then an administrative law judge (ALJ) hearing, followed by a Medicare Appeals Council review, and then federal court review. In his experience representing physicians, suppliers, and providers in the Medicare claims appeals process, Robison has found that the statutes, regulations and policies governing Medicare claims appeals seem to impede providers from appealing postpayment reviews in an equitable and cost-efficient way. He identified eight potential flaws in the process.

  • Qualifications of reviewers. Robison stated that there is no statutory or regulatory requirement that MAC employees or Medicare contractors that perform a redetermination be qualified to make determinations on issues such as medical necessity. Note, however, Chapter 3 of the Medicare Program Integrity Manual (Pub. 100-08, Ch. 3, §3.3.1.1) spells out requirements for reviewers for complex reviews, which requires clinical review of medical documentation submitted by the provider. Robison also said that QIC reconsiderations are made by a panel of physicians or a physician and other health care professionals but there is no requirement that the panel have training in the particular specialty or subspecialty at issue. ALJs and members of the Medicare Appeals Council are not required to be health care practitioners, but may refer to witness testimony and other evidence he added.
  • Impartiality issues. According to Robison, for an appeals process to be equitable, it must involve impartial decision-makers, however, in the case of the decision-makers within the Medicare claims appeals process, the employer and the source of funding for these decision makers is CMS or HHS, so impartiality at each level of the process could be questioned.
  • Statistical sampling and extrapolation issues. Medicare contractors select a small random sample from a universe of claims submitted by a provider to determine whether there are overpayments within that sample. Then they extrapolate the sample overpayment determination to the universe to determine the total amount of the overpayment. Although courts have found that statistical sampling is a permissible technique of assessing overpayments, Congress enacted legislation establishing that Medicare contractors may only use extrapolation to determine overpayments if documented education intervention has failed to correct the payment error, or there is a sustained or high level of payment error (see 42 USC §1395ddd(f)(2)). Robison pointed out, however, that the Social Security Act, federal regulations, and CMS manual provisions state that the threshold determination made pursuant to the legislation is not subject to administrative or judicial review. Therefore, providers have no way to challenge whether a Medicare contractor’s use of extrapolation was warranted, Robison said.
  • Lack of discovery process. Robison states that federal regulations do not afford providers any discovery rights during the redetermination or reconsideration process and only a limited right of discovery at the ALJ and Medicare Appeals Council levels. For the ALJ hearing, Robison said discovery is permitted only if CMS participates as a party. In addition, providers can obtain documents and testimony in limited circumstances through a subpoena by the ALJ or Medicare Appeals Council. Because of the limitations on discovery, providers must resort to the Freedom of Information Act (FOIA) to obtain documentation supporting a Medicare contractor’s overpayment determination and statistical sampling, Robison explained adding that providers have very little recourse against a Medicare contractor that fails to comply timely to a FOIA request.
  • No cross-examination. Under the Medicare claims appeals regulations, providers only have an opportunity to cross-examine witnesses during ALJ hearings if CMS participates as a party to the hearing. If Medicare contractors appear at an ALJ hearing as nonparty participants, they can not be cross-examined, Robison reported.
  • Lack of an in-person hearing. Robison contends that in-person hearings would afford providers a method to be seen by and present their case directly to an ALJ thereby personifying and devilifying the individual whose claims are being denied. Federal regulations provide, however, that in-person hearings before the ALJ should only be conducted if video conferencing technology is not available or in special extraordinary circumstances.
  • Timing issues to avoid recoupment. Although under Medicare law providers have 120 days to file a request for redetermination from the time in which they receive an overpayment demand and 180 days to file a request for reconsideration following a negative redetermination decision, CMS may begin recoupment if a provider does not file its request for redetermination within 41 days of the demand letter or file its request for reconsideration within 60 days of the redetemination decision, Robison said. Therefore, to prevent recoupment from being initiated, providers must file a request for redetermination or reconsideration within abbreviated deadlines of 41 days and 60 days, respectively, Robison noted.
  • No recourse for frivolous overpayment determinations. Another issue Robison addressed was that there is no viable action that can be brought against a Medicare contractor by a provider that has been subject to a vexatious or frivolous postpayment review and overpayment demand. Under the Equal Access to Justice Act (EAJA)(5 USC §504(a)(1)), certain parties who prevail against the government either in an administrative proceeding or a civil action may collect their fees and other expenses from the government if the proceeding was an adversary adjudication, which means that the position of the United States is represented by counsel (§504(b)(1)(C)).  In a case in which an ALJ overturned an overpayment determination, the Third Circuit concluded that the ALJ hearing did not constitute an “adversary adjudication” because CMS did not appear or present evidence, Robison explained.

 Appealing an overpayment determination may be a long and costly process for providers but when millions of dollars are involved  appealing the determination is the likely course of action. Given the current process for claims appeals, what can providers do to address the issues confronting them?