HHS Reduced Medicare Appeals Backlog by 19% Since Fall 2018

July 25, 2019 - HHS has made significant progress with reducing the Medicare appeals backlog, decreasing the number of appeals pending at the Office of Medicare Hearings and Appeals (OMHA) by about 19 percent as of July 1, according to new court documents.

In the court documents released by the American Hospital Association (AHA), which sued HHS over the growing Medicare appeals backlog in 2014, HHS reported a net reduction of 82,936 appeals pending at OMHA from November 1, 2018, to the end of the second quarter of FY 2019, bringing the total number of pending appeals to 343,658 by the end of the period.

The Medicare appeals backlog update puts HHS ahead of schedule with reducing the number of pending appeals at the OMHA level according to a federal court order from last year. Last year’s order required HHS to decrease the Medicare appeals back by at least 19 percent by the end of FY 2019 based on the department’s projected FY 2018 backlog of 426,694 appeals.

The order also requires HHS to achieve the following reductions:

• 49 percent reduction by end of FY 2020
• 75 percent reduction by end of FY 2021
• Elimination of Medicare appeals backlog of end of FY 2022

Failure to eliminate the backlog by the FY 2022 deadline may result in a default judgment in favor of providers and other stakeholders appealing the Medicare claim.*

READ MORE: Medicare Appeals Backlog Delays Decision Process By 4.5 Years

HHS has argued that the final stipulation of the court order violates Medicare regulations. By law, the federal department cannot “make payment on Medicare claims regardless of the merit of those claims.”

The argument won HHS a reprieve from the court-ordered reduction timeline in 2018. However, a federal court reinstated the deadlines shortly after in light of new funding from Congress. HHS received $182.3 million in 2018 to fund efforts to reduce the Medicare appeals backlog, including increasing administrative law judge staffing, which HHS projected would double the appeal court’s disposition capacity.

“As this time around the Government agrees that recent funding has made compliance possible within four years, the Court will impose such a deadline,” Judge James E. Boasberg of the US District Court for the District of Columbia wrote in the 2018 court order.

HHS must submit status updates to the court detailing the department’s progress with reducing the Medicare appeals backlog. This is the first status update report from HHS since the federal court revived the reduction deadlines.

Since 2018, the federal department has implemented several new initiatives and rules to help reduce the Medicare appeals backlog, including settlement options.

READ MORE: Can Changes to Medicare Reimbursement Appeals Reduce Backlog?

In February 2018, CMS announced that providers with less than 500 Medicare appeals stuck in the backlog at the OMHA and Medicare Appeals Council levels could apply for a settlement. They received a partial payment of 62 percent of the net approved amount of the appealed claim in exchange for withdrawing all eligible claims from the appeals process.

The agency offered two rounds of the settlement option during the year.

HHS also expedited Settlement Conference Facilitation (SCF) process in May 2018 to aid efforts to reduce the Medicare appeals backlog. Under the express process, the department offered providers a settlement based on preliminary data. Providers had to accept the offer within seven days or move forward with the formal SCF process.

Through the use of settlements, HHS aims to quickly rid the appeals process of thousands of pending claims. But the method does not target the root cause of the backlog, industry stakeholders have argued.

Prior to last year’s order, the AHA urged the federal court to require HHS to implement Recovery Audit Contractor (RAC) program reforms. RACs identify and recover improper Medicare payments paid to providers. The entities receive a contingency fee based on every payment recovery and claim denial they pursue.

READ MORE: How to Maximize Revenue with Improved Claims Denials Management

But the RAC financing structure incents the entities to deny or recover more payments, which results in more appeals, AHA and others have argued. HHS needs to reform the RAC program to meaningfully and sustainably reduce the Medicare appeals backlog, the hospital association told the federal court.

Specifically, the AHA advised HHS to impose financial penalties on RACs with high overturn rates. The penalties would remove the incentive to unnecessarily deny claims, reducing the backlog and preventing it from forming again.

CMS recently announced new RAC rules earlier this year. The agency has started to require RACs to maintain a 95 percent accuracy score when it comes to identifying improper Medicare payments. The number of claims RACs can review declines if the entity does not meet the requirement.

CMS also started to hold back contingency fees paid to RACs until after the second level of the appeals process is completed.

CORRECTED: Previous version of this article stated, "Failure to eliminate the backlog by the FY 2022 deadline will result in HHS granting default judgment in favor of providers and other stakeholders appealing the Medicare claim." The sentence has been updated for clarification.