ALJ Appeals Frequently Favorable To Providers; OIG Calls For Reforms

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Explore:  ALJ Appeals CMS Medicare OIG

The OIG recently published a report reviewing the implementation of 2005 regulations regarding the administrative law judge (ALJ) level of appeals, the third level of the Medicare appeals system. The 2005 regulatory changes were intended to address prior concerns voiced by the OIG over the inconsistent application of standards at different levels of appeals and CMS’s limited ability to defend itself.

In the current review, the OIG found ALJs reversed in favor of appellants for 56 percent of appeals. In contrast, qualified independent contractors (QICs), the prior level of appeal, decided fully in favor of appellants in 20 percent of FY 2010 appeals. The OIG found that this difference was due to ALJs differing from QICs in their interpretation of Medicare policies, their degree of specialization and their use of clinical experts. Interviews with QICs and ALJ staff showed that ALJs tended to interpret Medicare policies less strictly than QICs. Additionally, QICs specialize in a Medicare program area (Part A, Part B, or DMEPOS); however ALJs typically decide appeals involving all Medicare program areas due to random assignment. QICs have medical directors and clinicians on staff to review decisions, but ALJs do not, and ALJ staff noted that ALJs have thus tended to rely on testimony and evidence from treating physicians.

The OIG also noted that some ALJs were much more likely than others to make decisions that were fully favorable to appellants. Among the 66 ALJs, the fully favorable rate varied from 18 to 85 percent. The OIG noted that a small number of "frequent filers" account for one-third of all appeals, and that these frequent filers received fully favorable decisions at different rates from different ALJs.

The OIG found that when CMS participates in appeals, ALJ decisions were found to be less favorable to appellants. Overall, CMS participated in 10 percent of the appeals that ALJs decided in FY 2010. When CMS participated, 44 percent of the ALJ decisions were fully favorable to appellants; when CMS did not participate, the fully favorable rate was 60 percent. CMS rarely chose to be a party, which would have allowed it to submit evidence, call or cross examine witnesses. Nearly all CMS staff reported plans to increase participation in ALJ appeals, especially by the contractors that originally denied the claim or recouped the claim payment.

The OIG report also notes concerns that the requirements regarding acceptance of new evidence are open to wide variation among ALJs. In addition, nearly all CMS and ALJ staff identified problems with the case files being organized and formatted differently at different levels of appeals. QIC case files are almost completely electronic whereas ALJs accept only paper case files. The OIG also found that ALJs are inconsistent in how they handle cases where they suspect Medicare fraud and that the agency does not have written policies that address this issue.

The OIG recommended a number of steps for improvement, all of which the Office of Medicare Hearings and Appeals (OMHA) and CMS concurred fully or in part. The OIG recommended that OMHA and CMS:

  1. Develop and provide coordinated training on Medicare policies to ALJs and QICs;
  2. Identify and clarify Medicare policies that are unclear and interpreted differently;
  3. Standardize case files and make them electronic;
  4. Revise regulations to provide more guidance to ALJs regarding the acceptance of new evidence;
  5. Improve the handling of appeals from appellants who also are under fraud investigation and seek statutory authority to postpone these appeals when necessary;
  6. Seek statutory authority to establish a filing fee, and consider options for making the fee effective and fair, such as scaling the fee to the dollar amount at issue;
  7. Implement a quality assurance process to review ALJ decisions, such as sampling and reviewing ALJ decisions and then providing additional training as necessary;
  8. Determine whether specialization among ALJs would improve consistency and efficiency;
  9. Develop policies to handle suspicions of fraud appropriately and consistently and train staff accordingly; and
  10. Continue to increase CMS participation in ALJ appeals.

Scott McBride has extensive experience with ALJ level appeals. For more information, please contact B. Scott McBride at smcbride@bakerlaw.com or 713.646.1390 or Ameena N. Ashfaq at aashfaq@bakerlaw.com or 713.646.1329.