Inspector General Recommends Charging Fee to Reduce Medicare Denial Appeals

The Office of Inspector General thinks some healthcare providers are appealing Medicare claim denials too often, and has recommended that the Office of Medicare Hearings and Appeals (OMHA) begin charging a fee for each appeal.

The Administrative Law Judge system within the OMHA is rife with inconsistencies and inefficiences, an Office of Inspector General (OIG) report found, and it has issued 10 recommendations that it believes will help make the appeals system “efficient, effective, and fair.”

The investigation found that a small number of providers were filing the bulk of the appeals. The OIG also found that the administrative law judges were fully restoring Medicare reimbursements to 56 percent of providers, insurers, and beneficiaries who filed appeals of Medicare benefit denials. That percentages varied widely (15 to 80 percent) by judge. The inspector general office issued a report this morning recommending uncreased regulation, increased education, electronic file processing, and a quality assurance program to make judging more consistent.

According to the executive summary of the report:

Why We Did This Study

Administrative law judges (ALJ) within the Office of Medicare Hearings and Appeals (OMHA) decide appeals at the third level of the Medicare appeals system. In 2005, among other changes, ALJs were required to follow new regulations addressing how to apply Medicare policy, when to accept new evidence, and how the Centers for Medicare & Medicaid Services (CMS) participates in appeals. Medicare providers and beneficiaries may appeal certain decisions related to claims for health care services and items.

How We Did This Study

We based this study on an analysis of all ALJ appeals decided in fiscal year (FY) 2010; structured interviews with ALJs and other staff; structured interviews with Qualified Independent Contractors (QIC), which administer the second level of appeal, and CMS staff; policies, procedures, and other documents; and data on CMS participation in ALJ appeals.

What We Found

Providers filed the vast majority of ALJ appeals in FY 2010, with a small number accounting for nearly one-third of all appeals. For 56 percent of appeals, ALJs reversed QIC decisions and decided in favor of appellants; this rate varied substantially across Medicare program areas. Differences between ALJ and QIC decisions were due to different interpretations of Medicare policies and other factors. In addition, the favorable rate varied widely by ALJ. When CMS participated in appeals, ALJ decisions were less likely to be favorable to appellants. Staff raised concerns about the acceptance of new evidence and the organization of case files. Finally, ALJ staff handled suspicions of fraud inconsistently.

What We Recommend

We recommend that OMHA and CMS:

Develop and provide coordinated training on Medicare policies to ALJs and QICs,

Identify and clarify Medicare policies that are unclear and interpreted differently,

Standardize case files and make them electronic,

Revise regulations to provide more guidance to ALJs regarding the acceptance of new evidence, and

Improve the handling of appeals from appellants who are also under fraud investigation and seek statutory authority to postpone these appeals when necessary.

Further, we recommend that OMHA:

Seek statutory authority to establish a filing fee,

Implement a quality assurance process to review ALJ decisions,

Determine whether specialization among ALJs would improve consistency and efficiency,

Develop policies to handle suspicions of fraud appropriately and consistently and train staff accordingly.

Finally, we recommend that CMS continue to increase CMS participation in ALJ appeals.

OMHA and CMS concurred fully or in part with all 10 of our recommendations.