Reimbursement Update

Medicare announces alternative dispute resolution pilot programs

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In today's Medicare audit landscape, healthcare providers are experiencing an increased number of claim denials by Medicare audit contractors. Due to the increase in claim denials, Medicare providers have filed more appeals challenging the denials. However, providers often experience limited success at the first two levels of the Medicare appeals process (i.e., redetermination and reconsideration levels).

This has led to hundreds of thousands of administrative law judge (ALJ) appeals backlogged at the Office of Medicare Hearings and Appeals (OMHA). Due to the backlog, in 2013, OMHA announced that providers should expect a 2-3 year delay between the date in which the request for ALJ hearing is submitted and the date the hearing is actually held.

Meanwhile, the Centers for Medicare and Medicaid Services (CMS) are authorized to recoup the entire alleged overpayment amount from the provider upon an unfavorable decision being rendered at the reconsideration level of appeal (i.e., the appeal level directly preceding the ALJ hearing). Thus, providers may be forced to withstand 2-3 years of recoupment of the alleged overpayment before they have an opportunity to present their case to a fair and impartial ALJ.

In light of the delays, OMHA announced the implementation of two pilot programs to provide alternative routes for providers to reach a potentially more expedient final determination for appealed claims pending at the ALJ hearing level: 1) Settlement Conference Facilitation Pilot (SCF) and 2) Statistical Sampling Pilot.

Settlement Conference Facilitation
Under the SCF, appellant providers are given the opportunity to discuss with CMS the potential of coming to a mutually agreeable resolution to the claims appealed to an ALJ hearing.  According to the announcement, the settlement conference facilitator, an employee of OMHA, will use mediation principles to assist the appellant and CMS in reaching a settlement agreement.

If a settlement is reached, the facilitator will draft an agreement that will be signed at the settlement conference by both parties. Once the settlement agreement is executed, it is binding and any pending ALJ hearing requests for the claims covered by the settlement agreement will be dismissed and no further appeal rights will be attached to those claims.

However, if the parties cannot reach a settlement agreement and the facilitator determines further mediation will be unsuccessful, the SCF process will be concluded and the appealed claims will return to the ALJ appeal docket. If that is the case, the claims will be heard in the order the hearing requests were originally received by OMHA.

Initially, the only claims eligible for the SCF pilot program are those appealed by Medicare Part B providers, including clinical laboratory services. To be eligible, appellants must have filed their request(s) for ALJ hearing in 2013 and those claims must not be currently assigned to an ALJ. The SCF request must include all of the provider's pending ALJ appeals requested in 2013 for the same item or service. Additional SCF eligibility requirements include that either at least 20 claims must be at issue or at least $10,000 must be in controversy if there are fewer than 20 claims at issue.

Finally, the amount of each individual claim must be less than $100,000 or, for claims subject to statistical sampling, the extrapolated overpayment amount at issue must be less than $100,000. OMHA stated in its announcement that it will continue to explore expanding the SCF pilot program for larger extrapolated overpayment cases.

Although not all Medicare providers are currently eligible to engage in the SCF pilot program, the program is available for clinical laboratory providers with claims meeting aforementioned eligibility requirements. If eligible, clinical laboratory providers should seriously consider engaging in the SCF pilot program as it offers an alternative route to reaching a final determination for claims without having to wait for more than 2 years before an ALJ hearing decision is rendered. Thus, providers may potentially obtain a resolution sooner than if the provider waited for an ALJ hearing and the opportunity for a positive result from the standard appeals process.

Statistical Sampling
Through the Statistical Sampling Pilot Program, providers may resolve large volumes of claim denials by requesting that a random sample of claims from the universe of the provider's pending ALJ hearing requests be selected for a single hearing, after which, the ALJ's final determination is applied to the remaining universe of claims. 

In order to be eligible for the pilot program, the provider must have a minimum of 250 eligible claims which have either been assigned to an ALJ or filed between April 1, 2013 and June 30, 2013. Claims that are assigned to different ALJs or were requested in different consolidation groups may be incorporated into the request for statistical sampling. The claims must be one of the following: 1) pre-payment claim denials 2) post-payment non-RAC claim denials; 3) post-payment RAC claim denials from one RAC.

A Medicare provider that meets the eligibility requirements for the Statistical Sampling Pilot may request statistical sampling by submitting a "Request for Statistical Sampling" form that is available on OMHA's website. The provider must also submit a spreadsheet that provides detailed information about the claims requested to be included in the statistical extrapolation. Following the request, OMHA will send the Medicare provider a consent template requesting the provider to consent in writing to statistical sampling.

After the written consent is obtained, a pre-hearing conference will be held to confirm the consent, establish the universe of claims from which the sample will be taken, and agree to other matters related to the hearing. Following the pre-hearing conference, the ALJ will issue an order that will become binding if no objections are received within 10 days of the parties' receipt of the order. Once the pre-hearing conference order becomes binding, consent for the statistical sampling may not be withdrawn.

Upon the binding pre-hearing conference order, OMHA will combine the universe of claims agreed to in the pre-hearing conference under a single ALJ appeal number. The appeal will be assigned to the next available ALJ unless all of the appeals had been assigned to an ALJ prior to the statistical sampling request. The random statistical sample will be compiled by a trained and experienced statistical expert. The expert will develop a sampling methodology in accordance with Medicare guidance.

At the ALJ hearing, the ALJ will review only the sample claims and render decisions regarding those claims. Upon the ALJ's decision on the sample claims, the decision will be extrapolated to the universe of claims agreed to in the pre-hearing conference order. CMS or a CMS contractor may, and given the amount at issue, will likely participate in the hearing.

Although the Statistical Sampling Pilot Program is a creative and alternative option to reach a final determination for claims sitting at the ALJ level of appeal, providers should carefully consider the risks of engaging in this program before agreeing to participate. Much like the SCF, providers will likely not know the identity of the ALJ that will review the sample of claims prior to entering into a binding agreement under the Statistical Sampling Pilot. It may be risky for a provider to agree to the application of one ALJ's decision over a large volume of claims. Thus, providers should carefully weigh the risks to this alternative approach before essentially putting "all of their eggs in one basket."

The healthcare community hopes that the pilot programs will reduce the ALJ backlog by providing eligible providers with alternative and efficient options to reach a final resolution of their denied claims. The pilot programs are creative options for providers to consider engaging in to avoid waiting over 2 years for an ALJ hearing. However, providers should carefully consider all of the risks and benefits to the programs before agreeing to participate in them.

Jessica Forster and Kevin Miserez are associate attorneys at Wachler & Associates, P.C. For more information on these pilot programs, please visit the Wachler & Associates, P.C. blog at www.wachlerblog.com. If you would like to contact Ms. Forster or Mr. Miserez please call them at 248-544-0888.

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