Opinion piece on American Hospital Association’s Medicare appeals reform recommendations misses the mark

The American Hospital Association (AHA) takes issue with the July 11 opinion piece by Kristin Walter about the latest brief filed by the AHA in our long-running case against the Department of Health and Human Services (HHS). For over four years, we have sought to ensure that America’s hospitals and health systems receive what the Medicare statute and D.C. Circuit Court of Appeals say is required when a denied Medicare claim is appealed to an administrative law judge: a decision within 90 days.

As of today, hospitals must wait an average of 1,205.8 days – more than 13 times as long as the statute permits – to obtain an administrative law judge decision. Many hospitals wait much longer, going without payment for medically necessary services they actually furnished three, four, five, or even more years earlier. Timely payments help ensure that hospitals can continue delivering the care their patients and communities depend on.

Despite what Ms. Walter says, the major reason for the years’ long delay in administrative law judge decisions is the Recovery Audit Contractors. Before these contractors began to deny huge numbers of Medicare claims, there simply was no backlog in appeals. Only after the contractors began their work did the backlog develop. That is because hospitals appealed tens of thousands of claims that they concluded the Recovery Audit Contractors – who are paid on a contingency basis – had incorrectly denied.

Because the Recovery Audit Contractors caused the problem in the first place, the AHA continues to focus on them as a means to fix the problem.

Ms. Walter is listed as the spokesperson for The Council for Medicare Integrity, which – based on its IRS 990 filing – is run by the Recovery Audit Contractors. The most recent publicly available filing lists two directors (and a secretary and a treasurer) on the council’s board: the council’s president/director was the CEO of HMS, which touts itself as “the highest performing Medicare Recovery Audit Contractor;” the other director was the general counsel for Cotiviti, another Recovery Audit Contractor.

Let’s put it another way: If the president and director of the council is the CEO of a Recovery Audit Contractor, and the second director is the general counsel of a Recovery Audit Contractor, it seems appropriate to say the council is run by the Recovery Audit Contractors.

In her latest defense of these contractors, Ms. Walter says Medicare “already financially penalizes [the contractors] if their appeal overturn rate exceeds 10 percent.” This simply is not the case. Instead, the contractors get a contingency fee increase – a bonus — if the overturn rate at the first level of appeal is lower than 10%.  Not getting a bonus is far different from being penalized.

Ms. Walter also dismisses our suggestion to penalize contractors whose decisions are overturned by an administrative law judge 40 percent or more of the time. She says that Medicare “currently holds back the entire [contractor] payment until claim decisions are upheld up to the second level of appeal.” True, but an administrative law judge is the third level of appeal. And that is the level that provides hospitals the greatest relief. By the time a claim gets to an administrative law judge, Medicare has paid the entire contingency fee to the Recovery Audit Contractors, and the hospital must wait years for the administrative law judge to reverse the incorrectly denied claim.

Requiring Recovery Audit Contractors to get it right a minimum of 60 percent of the time to avoid a penalty is hardly asking too much. It seems like a reasonable and straightforward way to encourage better performance. And better performance would reduce appeals, which would conserve taxpayer funds. 

Finally, Ms. Walter says “Over the past three years, Medicare providers have enjoyed an audit holiday due to significant restrictions placed on Medicare billing oversight. During this time, only 5 percent of Medicare fee-for-service claims have been reviewed for billing accuracy.” While the AHA does not agree that hospitals have had “an audit holiday,” it is true that delays in renewing contracts for Recovery Audit Contractors and certain other HHS actions prevented the review of large numbers of provider claims. However, many other HHS contractors as well as the HHS Office of Inspector General continued to audit hospitals. Now that the Recovery Audit Contractors are getting back up to speed, they will begin reviewing large numbers of fee-for-service claims once again. The claim denials that result will only add to the already lengthy appeals backlog.

Putting in place checks on the Recovery Audit Contractors is a good way to prevent the inappropriate denial of more hospital claims, the appeals that naturally ensue, and a further ballooning of the appeals backlog.

Melinda Hatton is General Counsel for the American Hospital Association.