Medicare Billing Appeal Backlog Persists Despite $1.5B Settlement

A three-pronged strategy to reduce the appeals backlog notwithstanding, the backlog of Medicare billing disputes is expected to exceed 1 million contested claims by 2020.

Medicare's recent $1.5 billion hospital-claims settlement deal is not a big deal in the grand scheme of the program's claims appeal backlog, federal records show.

Last week, in response to a Freedom of Information Act request from Kaiser Health News, the Centers for Medicare & Medicaid Services released a list identifying the 2,022 hospitals that received billing-dispute settlement payments last year.

The settlement deal gave hospitals 68 cents on the dollar for disputed Medicare billing claims for patients admitted on or before Oct. 1, 2013. Kaiser Health News reported 35 hospitals got more than $5 million in the deal, with the median payment pegged at $307,642.

Appeals of Denied Medicare Claims Mean High Costs for Hospitals, Low Risk for RACs

Long Island Jewish Medical Center, a 900-bed acute care hospital in New Hyde Park, New York, that is among nearly two dozen hospitals operated by Northwell Health, was among the facilities that received the largest settlement payments—$10.8 million for 1,230 disputed claims.

Participating in the settlement was preferable to waiting out the appeals process, Robert Shapiro, executive vice president of finance and CFO of the Great Neck, New York-based health system, said last week in an email to HealthLeaders Media.

"We settled with CMS in 2015 to take advantage of the 'time value' of money. At that time, we were concerned that CMS would change the rules down the road."

The ultimate venue of appeal for Medicare billing disputes is U.S. District Court. But before billing disputes reach that court, they can be challenged at four levels:

1. Redetermination by a Medicare Administrative Contractor (MAC)
2. Reconsideration by a Qualified Independent Contractor (QIO)
3. Adjudication hearings before an Office of Medicare Hearings and Appeals administrative law judge (ALJ)
4. Medicare Appeals Council hearings

Despite settling 260,000 claims in the 2015 fiscal year, the backlog of Medicare billing-dispute appeals at the ALJ and Medicare Appeals Council levels shows no sign of easing, according to the Office of Medicare Hearings and Appeals (OMHA).

A division of the U.S. Department of Health and Human Services, OMHA administers Medicare billing-dispute appeals independently of CMS. For the federal fiscal year ending September 2015, more than 884,000 Medicare claims were awaiting adjudication before administrative law judges. Another 14,800 disputed claims were awaiting hearings before the Medicare Appeals Council, which reviews appeals of ALJ decisions.

A Three-Pronged Strategy

Clearly, the capacity to conduct ALJ and Medicare Appeals Council hearings is inadequate, and OMHA acknowledges that there is a problem.

It says says federal officials have launched a "three-pronged strategy" to reduce the appeals backlog, including "administrative actions to reduce the number of pending appeals and encourage resolution of cases earlier in the process."

OMHA's forecast is grim however: "Based on the projected impacts for all CMS and OMHA administrative actions currently being implemented, the backlog is expected to be approximately 1 million appeals by the end of FY 2020. However, this is nearly 50% less than what would have been pending if these administrative actions were not taken."

Lawrence Hughes, assistant general counsel at the American Hospital Association, says the Medicare billing-dispute appeals process needs mending. "Hospitals continue to have millions of dollars tied up in the appeals process; leaving hospitals to make do with insufficient resources, and their employees and patients to pay the price," he said Friday.