HHS target of class action in Medicare appeals backlog fiasco

The ever-growing backlog of appeals at the Office of Medicare Hearings and Appeals for inpatient status claims has prompted the Center for Medicare Advocacy to file a nationwide class action lawsuit against the U.S. Secretary of Health and Human Services.

The complaint, filed Aug. 26 U.S. District Court for the District of Connecticut, alleges that, as implemented, the Medicare administrative review process violates Medicare statutory obligations and the Fifth Amendment’s Due Process Clause. It asks the court for a declaratory judgment that the HHS Secretary is in violation of the 90-day deadline.

By law, the Medicare program’s system of administrative review has four levels of appeal. The first two levels generally result in a “rubber stamp†of the initial denial, the lawsuit claims.

The third level – before an administrative law judge – requires an oral hearing and allows for a meaningful review of an appeal. That hearing is to take place before the ALJ no more than 90 days from the date that the request for a hearing is received. However, as of July, the average length of time has grown to nearly 488 days – or five times the statutory limit.

ALJ wait times have dramatically increased since 2009, in part, because of increasing rates of denial at the lower levels of appeal.  The lawsuit points out that “over the last five years, the rates at which redetermination and reconsideration decisions have reversed denials of coverage have been falling dramatically and are now usually at 5 percent or less.â€

However, once the claim reaches the ALJ level, denial of coverage is generally reversed in at least half of the cases.

On August 29, 2014, the Centers for Medicare and Medicaid Services (“CMS”) announced a new settlement process to assist in reducing the appeals backlog. In exchange for accepting timely partial payment, hospitals with pending inpatient status claims must agree to enter into an administrative agreement to withdraw their previous claims.