On February 9, 2016, the D.C. Circuit, in American Hospital Association v. Burwell, No. 1:14-cv-00851 , held that a district court has jurisdiction to compel the Department of Health & Human Services (“HHS”) to address the substantial backlog of disputed Medicare claims and to make decisions within the statutory deadlines in the face of complaints by the American Hospital Association (“AHA”) and several hospitals. Not only did the D.C. Circuit find that the suit met the threshold requirements for mandamus jurisdiction, it also opined that the circumstances of the case and the clarity of HHS’ duty to meet statutory deadlines will “likely require” issuance of the writ if HHS has not made meaningful progress in addressing the backlog by the close of the next full appropriations cycle.
After a Medicare claim is denied, the Medicare Act provides a four-level administrative appeal process, followed by judicial review. The statute includes specific time frames for each step of the process. At the first level, the provider presents its claim to the Medicare Administrative Contractor for “redetermination,” to take place within 60 days. The second level involves “reconsideration” by a Qualified Independent Contractor, also to be completed within 60 days. The third level constitutes de novo review by an administrative law judge (“ALJ”) within 90 days. The fourth and final administrative stage involves de novo review by the Medicare Appeals Council within 90 days. Appeals should work their way through the administrative process within about a year if all of the respective time frames are met.
The D.C. Circuit explained that at the heart of the case is the HHS’ concurrent administration of the Medicare claims appeals process and the Medicare Recovery Audit Program, aimed at detecting waste, fraud, and abuse and recouping overpayments through recovery audit contractors (“RACs”). Although the audit program has recovered billions of dollars in fraudulently or improperly paid funds, it is also largely to blame for the HHS’ failure to comply with statutory appeals deadlines. Because RAC denials are appealable through the same administrative process as initial claims denials, the implementation of the RAC program caused a dramatic increase in the number of appeals. Here are the numbers:
- 46% of pending appeals originated from the RAC program.
- The number of appeals filed skyrocketed from 59,600 in fiscal year 2011 to over 384,000 in fiscal year 2013.
- Every 2 months or less, HHS receives as many appeals as it can process in a full year.
- As of February 2015, the ALJs’ decisions coming down had been pending for an average of 572 days.
The court fully acknowledged the role the RAC program plays in the backlog, but emphasized that, although Congress directed the Secretary of HHS to establish the RAC program, the Secretary still has substantial discretion to implement it and determine its scope. On the contrary, the administrative process for initial claims denials is subject to statutory deadlines. The court proclaimed that “these deadlines dictate that the Secretary will have to curtail the RAC program or find some other way to meet them,” emphasizing that congressionally imposed mandates trump discretionary decisions.
In its nod to the AHA’s arguments, the D.C. Circuit even set out the factors of the mandamus analysis that it ordered the district court to undertake on remand, highlighting the real impact the delays have on human health and welfare. The three hospital plaintiffs alleged that they have been unable to fund a number of essential activities, such as purchasing ICU beds and replacing an outdated catheterization lab, because of the significant amount of funds they have tied up in the Medicare appeals process. One factor driving the court’s decision is that many of the delayed appeals appear to have merit. Hospitals responding to a survey conducted by the AHA reported that they had appealed about half of RAC denials and that 66% of these completed appeals were successful. The court noted that even government counsel conceded at oral argument that 43% of ALJ appeals succeed. The court found inaction impossible in the face of such a high reversal rate.