Health care regulatory burdens costs $39B per year, AHA says

To quantify the level and impact of the regulatory burden on America’s health care system, the American Hospital Association (AHA) in conjunction with Manatt Health conducted a comprehensive study of federal law and regulations in nine regulatory domains from four federal agencies. Among the findings of the study were that health systems, hospitals and post-acute care (PAC) providers must comply with 629 discrete regulatory requirements across nine domains, that the average size hospital dedicates 59 full time employees (FTEs) to regulatory compliance, the cost to providers for regulatory compliance is nearly $39 billion, and, perhaps most significant: some of the rules do not improve patient care but all of them raise costs.

Background

Every day, health systems, hospitals and post-acute care (PAC) providers—such as long-term care hospitals, inpatient rehabilitation facilities, skilled nursing facilities and home health agencies—confront the daunting task of complying with a growing number of federal regulations. Federal regulation is largely intended to ensure that health care patients receive safe, high-quality care. In recent years, however, clinical staff, including doctors, nurses and caregivers, find themselves devoting more time to regulatory compliance, thereby taking them away from patient care. Some of these rules do not improve care, and all of them raise costs. Patients are adversely affected through less time with their caregivers, unnecessary hurdles to receiving care, and a growing regulatory morass that fuels higher health care costs.

Why the AHA conducted the review

The AHA conducted a comprehensive review of federal law and regulations in nine regulatory domains from four federal agencies in order to quantify the level and impact of regulatory burden. Their report seeks to inform policymakers, lawmakers, and the public about the administrative impact federal regulatory requirements have on the ability of health systems, hospitals, and PAC providers to furnish high quality patient care, and to offer a starting point for discussions on implementing meaningful regulatory reform. Reducing regulatory requirements that do not contribute to improved patient care will enable providers to focus on patients, not paperwork, and reinvest resources in improving care, improving health, and reducing costs.

How the AHA conducted the study

The study included interviews with 33 executives at four health systems, and a survey of 190 hospitals that included systems and hospitals with PAC facilities. The researchers examined the Federal Register and the U.S. Code of Federal Regulations for regulations impacting hospitals and PAC providers across the nine domains. They then reviewed each section of the regulations and identified discrete regulatory requirements that generate one or more administrative activities, such as:

  • creating, revising or expanding administrative policies and work flows;
  • documenting and monitoring compliance with policies and work flows;
  • hiring staff, consultants and vendors to support administrative compliance activities, such as extracting and reporting data;
  • developing and conducting trainings on administrative requirements for clinical and nonclinical staff;
  • issuing or revising and disseminating new patient notices; and
  • interpreting and identifying the compliance risks associated with new regulations; and, purchasing or upgrading health IT.

Significant findings

Among the major findings of the study were the following:

1. Health systems, hospitals and PAC providers must comply with 629 discrete regulatory requirements across nine domains, including 341 hospital-related requirements and 288 PAC-related requirements.
2. Health systems, hospitals and PAC providers spend nearly $39 billion a year solely on the administrative activities related to regulatory compliance in these nine domains. An average-sized community hospital (161 beds) spends nearly $7.6 million annually on administrative activities to support compliance with the reviewed federal regulations.
3. An average size hospital dedicates 59 FTEs to regulatory compliance, over one quarter of which are doctors and nurses.
4. The timing and pace of regulatory change make compliance challenging, while the frequency and pace with which regulations change often results in the duplication of efforts and substantial amounts of clinician time away from patient care.

Review recommendations

The AHA study identified specific activities which Congress and the Administration should take immediately to reduce regulatory burden and enhance care coordination, without negatively impacting patient care. These include:

  • Suspend the faulty hospital star ratings from the Hospital Comparewebsite.
  • Cancel Stage 3 of meaningful use of electronic medical records.
  • Suspend all regulatory requirements that mandate submission of electronic clinical quality measures.
  • Rescind the long-term care hospital 25 percent rule and instead rely on the site-neutral payment policy to bring transformative change to the field.
  • Restore compliant codes that count to the inpatient rehabilitation facility 60 percent rule.
  • Eliminate the “96-hour rule” as a condition of payment for critical access hospitals.
  • Modify Medicare conditions of participation to allow hospitals to recommend post-acute care providers.
  • Create a new exception that protects any arrangement that meets the terms of an Anti-Kickback Statute safe harbor for clinical integration arrangements.

The AHA’s recommendations were more fully described in letters sent to President Trump, CMS, and Congress.

AHA’s motion calls for end of appeals backlog litigation

The American Hospital Association filed on October 14, 2016, a motion for summary judgment formally requesting mandamus relief instructing the Secretary of HHS to comply with mandatory statutory deadlines and clear the backlog of pending Medicare claims appeals. In the motion, the AHA agrees that the backlog cannot be cured overnight, but that “the Secretary has treated difficulty as an excuse for inaction.”

Motion for summary judgment

The AHA requests that that court order the Secretary to implement three sets of solutions for the backlog: (1) offer reasonable settlements to broad groups of Medicare providers and suppliers; (2) delay repayment of at least some subset of disputed Medicare claims and toll the accrual of interest on those claims for waiting times beyond the statutory maximums; and (3) impose financial penalties on recovery audit contractors (RACs) for poor outcomes at the administrative law judge (ALJ) level. The AHA claims that the Secretary has the authority to implement each reform to target the existing backlog of appeals and reduce the number of future appeals. The motion also gives the option for the Secretary to offer and implement proposals of her own that would have at least a significant effect on reducing the backlog and minimizing its impact in the interim.

Procedural history

The AHA, Baxter Regional Medical Center, Covenant Health, and Rutland Regional Medical Center (Medicare providers) asked the court to issue a writ of mandamus to compel HHS to process their long-pending Medicare claim-reimbursement appeals in accordance with statutory timelines. In December 2014, the D.C. district court declined to intervene to resolve the backlog of Medicare reimbursement appeals, stating that “the waiting game must go on.” Although the court agreed that HHS had violated its statutory obligations and reasoned that Recovery Audit Contractors (RAC) audits may have been worsening the problem, the court determined that it was not in a position to address the massive and growing administrative backlog because the problem required cooperation between Congress and HHS.

In February 2016, however, the D.C Court of Appeals revived the case and sent it back to the district court because the backlog of delays had gotten worse. At that time, the Court of Appeals instructed the district court that “in all likelihood,” it should order HHS to comply with the appeals deadlines if HHS or Congress failed to make meaningful progress toward solving the problem within a reasonable period of time. The court pointed to the close of the next appropriations cycle (September 30, 2016) as the deadline for resolution. In response, the Secretary asked the district court to stay the proceedings until September 30, 2017, to allow HHS to move forward on various efforts designed to tackle the backlog of reimbursement appeals. The D.C. district court denied HHS’ request to delay further proceedings in the case, holding that the Secretary’s proposals to reduce the claims review backlog and comply with statutory review deadlines would not result in meaningful progress.

AHA not buying into OMHA’s backlog reduction plan

The American Hospital Association (AHA) submitted comments on August 26, 2016, on the HHS Proposed rule (81 FR 44456, July 7, 2016) intended to reduce the Medicare appeals backlog in the Office of Medicare Hearings and Appeals (OMHA), arguing that the proposal barely scratches the surface of the issue and “that merely tweaking the appeals system will not adequately address the problem.” At best, the AHA stated, the proposals would take five years to eliminate the backlog. The association cautioned that attorneys should only be permitted to adjudicate cases after thorough training and expressed concern with the lack of detail in the OMHA’s suggestion that certain decisions be designated as precedential.  It also rejected the OMHA’s proposals to eliminate the requirement that administrative law judges (ALJs) issue a decision within 90 calendar days of receiving a request for hearing and limit adjudicators’ ability to issue decisions without hearings when CMS or its contractor becomes a party to an appeal.

Proposed rule

The Medicare appeals backlog is a source of great concern for providers.  As of April 30, 2016, over 750,000 appeals were pending, while the OMHA only had the capacity to adjudicate 77,000 per year (with an additional capacity of 15,000 by the end of fiscal (FY) year 2016). The AHA noted that the most recent data reflect an increase in average processing time of 140 days—to 935.4 days, or two and a half years—since the beginning of FY 2016. In an effort to address this backlog, CMS issued a Proposed rule that would allow attorneys, in lieu of ALJs, to adjudicate certain decisions that would not go to hearing, and permit the Chair of the Departmental Appeals Board (DAB) to designate certain final Medicare Administrative Council decisions as precedential. However, it would also limit adjudicators’ ability to issue decisions without hearings when CMS or one of  its contractors becomes a party to a case and would eliminate the mandatory 90-day time period that adjudicators have to issue decisions.

AHA comments

Although the AHA conceded that the use of attorney adjudicators could address matters that do not require ALJ attention, including those decisions that can be issued without a hearing, those cases in which an appellant withdraws a request for hearing, and those appeals which must be remanded for information that can only be provided by CMS or a contractor,  it cautioned that attorneys must be properly trained to ensure they have “significant knowledge of and experience in applying Medicare regulations.”

The association was not accepting, however, of CMS’s proposal to allow the DAB Chair to designate select decisions that address repetitive legal and policy questions as precedential, and to designate factual decisions as precedential where relevant facts are the same and the underlying factual circumstances have not changed since the decision was issued. The AHA expressed “strong concerns” regarding the lack of specifics included in the proposal, noting, “it is difficult to evaluate the merits of the proposal, but easy to speculate how it could harm appellants if the process favors decisions that are beneficial to CMS.” Instead, it suggested gathering stakeholder feedback and engaging in future notice-and-comment rulemaking.

The AHA specifically opposed the proposal to amend 42 C.F.R. sec. 405.1016, which states that, after a qualified independent contractor (QIO) has issued a reconsideration, “the ALJ must issue a decision, dismissal order, or remand . . . no later than the end of the 90 calendar day period beginning on the date the request for hearing is received,” (emphasis added) by removing the word “must.” According to the AHA, the OMHA indicated that the requirement is not absolute, since appellants are statutorily permitted to escalate claims when the timeframe is not met.  The AHA referred to the reasoning as “too clever by half,” noting that amending the regulation would do nothing to eliminate the statutory mandate.

The association also rejected proposed changes to 42 C.F.R. sec. 405.1038(a), which currently states that ALJs may issue a decision without notice or hearing where the evidence on record “supports a finding in favor of appellant(s) on every issue.” According to the AHA, the proposed changes, which would prevent an adjudicator from issuing such a decision where CMS or its contractor chooses to become a party to the appeal, could allow contractors to force a hearing to justify inappropriate denials.

Ongoing issues

The AHA argued that HHS has refused to acknowledge that the backlog results predominately from “excessive inappropriate denials of claims by Medicare contractors, and specifically the Recovery Audit Contractors (RACs),” which have financial incentives for denying claims. While recognizing that the OMHA cannot control the RAC process, the AHA encouraged the agency to provide information about the process to Congress.  It also continued to urge the OMHA to:

  • delay recoupment of payments until an appeal is decided and prevent interest from accruing prior to a decision;
  • eliminate the one-year filing limit to rebilled Part B claims and allow hospitals to submit Part B claims within 180 days of a final Part A claim denial determination;
  • create a defined time period during which RACs may audit providers on a particular issue, after which RACs must petition CMS to perform additional audits on the issue, but only after a defined time period has passed, during which providers have been educated; and
  • codify, in regulation, a statement made in the FY 2014 inpatient prospective payment system Final rule that Medicare contractors may only evaluate the medical necessity of an inpatient stay based on “the information available to the admitting practitioner at the time of the admission” (78 F.R. 50495, August 19, 2013).

AHA urges Fourth Circuit to strike down false claims extrapolation

The American Hospital Association (AHA), in conjunction with the Catholic Health Association of the United States (CHA), urged the U.S. Court of Appeals for the Fourth Circuit to affirm a lower court’s ruling that qui tam relators are not permitted to use statistical sampling and extrapolation to determine the number of false claims submitted for reimbursement. The associations, via an amici curiae brief, emphasized the False Claims Act’s (FCA) (31 U.S.C. §3729) requirement of proof that a physician’s treatment decision was unreasonable to the point of fraud.

No proof, no settlement

Last year, the South Carolina district court ruled that the federal government can veto a qui tam settlement, even when it chooses not to intervene. In U.S. ex rel. Michaels v. Agape Senior Community, Inc., this veto was based upon the settlement’s reliance on statistical extrapolation to determine how many claims were fraudulent (see Between a rock and a hard place: U.S. won’t help with trial but blocks settlement, Health Law Daily, June 29, 2015). The relators brought the case against 24 affiliated skilled nursing facilities on the grounds that hospice claims and claims for general inpatient care services were filed without regard to medical necessity. The suit involved tens of thousands of claims, and review of each claim would cost between $16.2 and $36.5 million. In lieu of review, the relators proposed extrapolating the number of false claims from a sample of patient files. The relators and companies agreed to settle the case for $2.25 million, which the government rejected due to a belief that the case was worth $25 million.

Amici curae

The AHA and CHA find the notion of FCA liability based on extrapolation “extremely alarming,” as their members provide many services reimbursed by the government. The associations believe that the risks of allowing FCA extrapolation on health care providers would be enormous due to treble damages, per-claim penalties, and fee shifting for attorneys fees. The brief argues that extensive penalties should not be levied without requiring a relator to prove that claims are actually false, in accordance with prior Fourth Circuit rulings as well as the FCA itself.