Hobby Lobby & Conestoga Decision Anticipated; History of Litigation

On Monday, June 30, the U.S. Supreme Court is expected to deliver its decision in Sebelius v. Hobby Lobby (No. 13-354). The Affordable Care Act’s provision requiring group health plans (whether offered by an employer or through the health insurance Marketplace) and individual health plans to include specific preventive health services, including contraception coverage at no extra cost to the insured, has generated more litigation than any other part of the law.

Since November 2012, Wolters Kluwer Law & Business has published over a dozen articles on the two cases at the heart of the litigation involving Hobby Lobby and Conestoga Wood Specialties Corp. These articles have appeared in Health Law Daily and Health Reform WK-EDGE. The decisions themselves, as well as related decisions on the contraception coverage controversy involving for-profit and not-for-profit institutions, appear in Wolters Kluwer’s Health Reform KnowlEDGE™ Center.

In this Special Briefing, we have gathered together all of Wolters Kluwer’s reporting on these two cases. When the Supreme Court releases its decision, our analysis of the decision will be available within hours of the release for our Health Law Daily and Health Reform WK-EDGE subscribers. For our blog readers, please expect news of the decision on Monday, with more in-depth analysis later in the week.

See the Special Briefing here.


SCOTUS Won’t Review Abortion Providers’ Admitting Privileges Requirement Law

On June 23, 2014, the Supreme Court denied the petition of Wisconsin officials for review of the Seventh Circuit Court of Appeals decision affirming the preliminary injunction against implementation of the state’s law requiring physicians who perform abortions to have admitting privileges at a hospital within 30 miles of the site of the abortion. The denial of certiorari in Van Hollen v Planned Parenthood of Wisconsin is not a ruling on the merits of the case and is not precedential.

The Statute

 As we have reported, on Friday, July 5, 2013, the Wisconsin legislature enacted Wis. Stat. sec. 253.095. The statute became effective Monday, July 8, 2013, so that on the next business day after enactment, any physician who performed abortions in Wisconsin without having admitting privileges was breaking the law. Planned Parenthood of Wisconsin and Affiliated Medical Services, both of which operate clinics where abortions are performed, immediately sued in federal court to enjoin enforcement of the law. The district court first entered a temporary restraining order preserving the status quo.

The Trial Court

Within a few weeks, the court held a hearing and entered a preliminary injunction pending a trial on the merits of the case. The clinics presented testimony that two clinics would be forced to close and a third would need to limit its abortions to half of the number it usually performed. Hospitals may choose whether to grant privileges regardless of the physician’s qualifications. The court found that the law placed undue burdens on women seeking abortions, especially for women in remote parts of the state, who would travel another hundred miles if the Appleton clinic closed. In addition, the absence of any similar requirement for physicians who perform more dangerous procedures in outpatient clinics suggested that the real purpose of the law was to restrict access to safe, legal abortion.

The Appeal

State officials appealed to the Seventh Circuit, which upheld the injunction in December 2013. The appeals court noted that state argued that the purpose of the law was to protect the health of pregnant women, but the legislature did not consider any evidence of the medical necessity of the requirement; in fact, most of the discussion concerned a requirement that the patient undergo an ultrasound before the abortion. The court also observed that the penalty for violating the law, i.e., an award of civil damages to the father or grandparent of the “aborted unborn child,” did not depend on any injury to the woman. It also considered the absence of similar regulations of physicians performing other surgical procedures with higher rates of complication and more serious risks.

Both the district court and the appeals court rejected the state’s argument that the providers of abortion services lacked standing to challenge the law. The appeals court noted that the interests of the patients and the providers were the same, and that the physicians are subject to penalties for violating the statute.

The issue is likely to come before the Supreme Court in the future, as two other circuits have decided similar cases in favor of the state.

Supreme Court Denied Review to Medicare Contractor Claims Challenge

The Supreme Court denied a petition for certiorari which challenged a Medicare contractor’s handling of over 15,000 individual medical claims submitted for inpatient rehabilitation services by one provider. This denial was announced without comment after the rehabilitation provider challenged 6,200 adverse decisions and another 8,900 claims that had not proceeded beyond the first level of administrative review for the past 11 years. The provider challenged the lower courts’ decision to foreclose the provider’s opportunity to pursue judicial review of those claims in conjunction with constitutional, federal, and state law claims against the Medicare contractor. The provider also presented the issue of an alleged procedural gap in the Medicare appeals process that resulted in the 11-year delay of the review of his claims.

Factual Background

Dr. James P. Little provides care at the HEALTHSOUTH Rehabilitation Hospital, which is classified as an inpatient rehabilitation facility (IRF) (collectively Southern Rehab.) pursuant to the Medicare program. According to the petition, CIGNA Government Services, LLC began to improperly deny Southern Rehab’s claims for Medicare reimbursement in 2001. Between 2001 and 2006, CIGNA continued to wrongly deny claims. While 6,200 of these claims were carried through to the Medicare Appeals Council and were ultimately denied, Southern Rehab asserted that 8,900 claims “remain stuck at the first level of administrative review,” due to a procedural gap.

Questions and Issues Presented

While Southern Rehab admitted in its petition that this action arises out of “a single provider’s claims for reimbursement,” it also asserted that “the case involves questions of exceptional public importance,” as it has the potential to impact “virtually every Medicare provider and beneficiary, now and hereafter, who traverses the administrative review process.” Specifically, in addition to highlighting the issue of the alleged 11-year procedural gap in the review process, Southern Rehab also presented questions to the Court in the following areas: (1) whether the Medicare statute allows providers to raise “inextricably intertwined” constitutional, federal, and state law violations against Medicare contractors; (2) whether non-Medicare reimbursement claims need to be presented to a government agency; and (3) whether the Medicare statute waives immunity for Medicare contractors in suits by providers claiming constitutional, federal, and state violations.

Kusserow’s Corner: American Hospital Association Files Lawsuit Over Delay in ALJ Hearings

Going back to October of last year, I have posted six blogs on the emerging problem of the growing backlog of cases before the HHS Administrative Law Judges (ALJs). The ALJ represents level 3 of the five-step Medicare claims appeals process. On May 22, the American Hospital Association (AHA) weighed in heavily on the issue by filing a lawsuit against HHS to ensure that its ALJs meet the statutory 90-day timeline requirement for deciding Medicare claim appeals. The lawsuit seeks a “declaratory judgment that HHS’ delay in adjudication of Medicare appeals violates federal law” and asks the court to compel HHS’ compliance with providing timely ALJ reviews within the statutory limit.

The crisis was brought to a head last February when Nancy Griswold, Chief ALJ, announced that “due to the rapid and overwhelming increase in claims appeals, effective July 15, 2013, OMHA temporarily suspended the assignment of most new requests for an Administrative Law Judge hearing.” This suspension is anticipated to remain in effect for at least two years, in order to allow OMHA to catch up on almost 375,000 claims already backlogged in its docketing system. OMHA then followed this up by hosting a Forum on Medicare Appeals with stated objectives to provide an update on OMHA operations, explain initiatives to mitigate the growing backlog of cases, provide information on how providers can assist in making the process more efficient, and provide answers to appellant questions. OMHA reported that its workload has been skyrocketing over the last several years, growing now at a rate of 40 percent per year. It now stands at 437,000 cases. They have been steadily, and at an increasing rate, falling behind in the adjudication process to 2013, when they received about 350,000 cases and the approximately 65 ALJs were able to adjudicate only 79,000. This is in addition to the carryover from prior periods. This led to the decision to have a moratorium on assigning new cases until the backlog could be addressed. It should be noted that the average ALJ appeal processing time continues to grow and, as of April 2014, increased to 418.7 days. There are a variety of appeals handled by OMHA included in the backlog:

  • Medicare eligibility and entitlement
  • Part B and D income-related premiums
  • Part A and B pre- and post-payment claims (MACs, RACs, PSC/ZPICs)
  • Continuation of care (QIOs)
  • Part C managed care coverage (Medicare Advantage programs)
  • Part D prescription drug coverage (Prescription Drug Plans)

In order to clear up this mess, more resources are being requested to add ALJs and assist in building new systems. Also, what is needed is a more effective case management system to:

  • Provide electronic messaging to appellants on regarding case status and proceedings
  • Identify and flag potentially duplicate appeals
  • Acknowledge receipt of appeals
  • Give accessibility to appeals via electronic filing
  • Allow electronic submission of evidence to support appeals, including the viewing of documents already in an appeals file
  • Ensure integration of claims data with MACs and QICs to support files necessary for appeals
  • Respond to questions
  • Support transmission of information electronically during the closing process

This problem has drawn Congressional attention following the actions of OMHA. A bipartisan group of 111 House members signed a letter to the HHS Secretary calling for a fix of the Medicare fee-for-service RAC, including strengthening oversight and reducing the RAC appeals backlog. They cited the OIG report of November 2012 that noted 72 percent of hospital Part A appeals that reach the ALJ are ruled in favor of the provider and against the RACs. They took particular note of the OMHA backlog and suspension of assignment of new cases to ALJs while they try to catch up. The lawmakers called for reforms that included more oversight by CMS of the RAC program because of the heavy administrative burdens for hospitals to defend legitimate claims denied by the RACs. They also stated that this resulted in higher costs for Medicare beneficiaries whose inpatient stays are improperly denied by RACs. The steps they said was needed to ensure the RAC process is fair includes:

  1. CMS to dedicate more resources to help resolve the backlog issue.
  2. Considering an alternative payment arrangement with RACs to remove improper incentives.
  3. CMS’ adoption of the commonsense reports supported by 184 bipartisan Members of Congress included in the Medicare Audit Improvement Act of 2013.

On the Senate side, the Appropriations Committee has expressed concerns about both the growing backlog of cases at OMHA and the high rate of claims overturned by the Office and urged CMS to work with providers at the early stages of the audit process so that only a small number of cases are ultimately appealed and the loss of provider time, energy, and resources due to incorrect audit results are limited. They recommended additional funding for OMHA to hire more administrative law judge teams and increase its capacity to process its rising caseload.

This definitely is an issue area that won’t go away for some time.

Richard P. Kusserow served as DHHS Inspector General for 11 years. He currently is CEO of Strategic Management Services, LLC (SM), a firm that has assisted more than 3,000 organizations and entities with compliance related matters. The SM sister company, CRC, provides a wide range of compliance tools including sanction-screening.

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Copyright © 2014 Strategic Management Services, LLC. Published with permission.