O&P and Other Subject to RAC Audits Greatly Interested by U.S. District Court Decision to Reject an HHS Request for Delay of Court Action in Hospital Suit Challenging ALJ Delays in Excess of Statutory 90 Day


In 2014, the American Hospital Association filed suit in the federal District Court seeking relief because HHS and the Office of Medicare Hearings and Appeals (OMHA) have for many years egregiously exceeded the statutory provision which assures a provider who must return money to Medicare as a result of an audit a final ALJ decision within 90 days after filing a request for ALJ appeal.  Originally, the District Court dismissed the case, but early this year the D.C. Circuit Court of Appeals reversed that decision and ordered that the case should go forward in the District Court.

HHS/OMHA asked for a delay of over a year (until September 30, 2017) citing proposed regs (to which both AOPA and the O&P Alliance responded) intended to reduce the backlog–which are somewhat problematic in their own right.  The Court ruled not to approve HHS’ request for such a delay, but rather that case will go forward with a hearing in two weeks.

Court Sees Likelihood that the Backlog and Delay in ALJ Decisions Will Grow, Despite Various Efforts by HHS/OMHA Proposed Rule

In his ruling rejecting the HHS request for delay, District Court Judge Boasberg said that even with the administrative changes proposed by HHS/OMHA, it would not reverse the backlog, but rather that the ALJ backlog/delay would nonetheless probably get worse, not better over several years.  The increased claim settlement efforts, and appointing attorneys to undertake adjudication of appeals in the proposed regs, would, the Court said, at best reduce the growth of the backlog. The specifics of the delay are daunting.  Without any remedial actions by either HHS/OMHA or Congress the projected number of appeal cases awaiting ALJ hearing would reach nearly 1.1 million.  HHS reports average delay in 2016 is 850 days, but OMHA says in the third quarter of this year it took 935 days for appeals to get through the first three levels of appeal, not getting to a final ALJ decision. Reports from O&P patient care appellants seems to run closer to 4 years waiting time to get to an ALJ decision!  HHS proposed changes to the RAC program, but these would impact just 7 percent of RAC cases.  Finally, the judge underscored that several Congressional initiatives, e.g., the AFIRM bill had not moved much closer to enactment in the 7+ months since the Circuit Court of Appeals decision, nor did it appear likely that significant budget increases to hire substantially more ALJs would be enacted anytime soon.

The Appeals of RAC Decisions, and the Related Interest Due if Provider Wins May Be Making the Program Much Less Financially Beneficial to the Federal Government Than Many Think

As a report from Dobson-DaVanzo last year demonstrated, with the long ALJ delays, coupled with the 11% annual interest payable by the government on the amount the government recouped if the provider prevails, the actual yield to the government from the audits is greatly reduced, and perhaps close to being fully consumed by its costs.  For example, RAC auditors receive something in range of a 13% bounty on whatever they claw back.  If the case is reversed after the ALJ decision 4 years later, CMS would pay the 11%, which when compounded amounts to a 51.8% interest over the 4 years.  In this scenario CMS may be able to secure the return of the RAC auditor commissions.  Dobson-DaVanzo’s work identified at least 58% of O&P RAC appeals are won at the ALJ level (this is the highest success rate among all provider subgroups, and could perhaps be higher,  as only verified ALJ wins could be affirmatively identified)-this coupled with the above large interest due, would appear to largely obliterate any net long-term CMS gains from all the RAC efforts in O&P.

One concluding note is that two bills supported by AOPA would help alleviate some of the adverse impact of RAC audits on O&P professionals.  S.829/H.R. 1530 would assure that CMS must recognize the orthotist/prosthetist notes of patient visits as a legitimate part of the medical record for purposes of determining medical necessity. H.R. 1526 would help reduce the cash flow devastation of audits and extended wait for appeals by establishing the maximum amount of recoupment that CMS could claw back before a final ALJ appeal decision to 50% of the contested amount until such time as HHS/CMS/OMHA are operating within the clear terms of the statute and assuring delivery of final ALJ decisions within the stated 90 days.

Contact Joseph McTernan with any questions at 571/431-0811 or jmcternan@aopanet.org.