Appeals Court Win Gives Providers Another Way to Challenge Medicare Appeals Backlog

by Parker Poe Adams & Bernstein LLP

A federal appeals court issued a significant ruling last week in relation to the ongoing backlog of Medicare claims appeals. It potentially gives providers a new way to seek relief when Medicare comes to collect money that an administrative law judge has yet to rule is actually owed.

This is not a theoretical concern: Many providers have gone out of business because they could not afford to pay the government or have their money suspended while their appeal was tied up in the backlog. The backlog has become a critical issue for hospitals, physician practices, home health agencies, hospices, nursing homes, and other providers all across the country.

The Appeals Process and the Backlog

Medicare hires recovery audit contractors (RACs), zone program integrity contractors (ZPICs), and unified program integrity contractors (UPICs) to determine whether providers have received overpayments. The amounts can add up to millions of dollars, and most cases get appealed. The first two steps of the appeals process happen fairly efficiently. But the third level – going before an administrative judge to argue your case – is where the backlog has ballooned.

Under federal statute, the administrative law judge is required to issue a decision within 90 days of the request for a hearing. In reality, it can now take multiple years. As of February 19, 2018, the average processing time for an administrative law judge hearing is 1,216 days – or more than three years. In the meantime, Medicare can start recovering its money by suspending Medicare payments. As the provider awaits a hearing, if money is still owed, interest accumulates.

The Resulting Lawsuits

Over the years, there have been a number of attempts by providers to get into federal court to avoid the recoupment or suspension of funds while awaiting the administrative hearing. Typically, those cases were dismissed for lack of jurisdiction because the provider had not yet exhausted the administrative appeals procedures. There are a few notable exceptions, but they tended to involve unique facts.

More recently, the U.S. District Court for the District of Columbia had ordered the federal Department of Health and Human Services (HHS) to fix the backlog and come into compliance with the 90-day statutory deadline. But as we discussed in a previous blog, the D.C. Circuit Court reversed that decision. The appeals judges concluded that a court could not order the government to do something that was practically impossible or that would force it to do something it was prohibited from doing under the law: paying Medicare claims without first vetting them.

A New Roadmap

In Family Rehabilitation, Inc. v. Azar, a Texas provider that was unlikely to receive an administrative hearing for at least three years asserted that it would soon go bankrupt if recoupment continued. It sought an injunction against HHS to prevent it from suspending Medicare payments, but the district court dismissed the case for lack of jurisdiction, as has been common with these lawsuits.

The Fifth Circuit Court of Appeals reversed the district court’s dismissal for two of the provider’s asserted claims: procedural due process and ultra vires (meaning the government went beyond its powers). There are two keys to those claims. One, they are collateral to Medicare’s administrative process. And two, they do not jump the gun in seeking permanent relief in place of the administrative process. The Fifth Circuit panel ruled unanimously that, under those claims, the federal district court can consider the type of relief the provider deserves while the administrative process plays out.

To be clear, it was a limited win for the provider, as it now needs to make its case for the injunction before the district court. But the ruling provides a roadmap for how a provider could prevent HHS from recouping funds while awaiting an administrative hearing.

The federal government may choose to appeal the ruling to the U.S. Supreme Court. If not, it is likely that other providers in Fifth Circuit states – Texas, Louisiana, and Mississippi – will file similar lawsuits to see if they can obtain injunctive relief. Similar lawsuits may be filed in other circuits as well, including those over the Carolinas (Fourth Circuit) and Georgia (Eleventh Circuit).

We will continue to cover the legal fight over the Medicare appeals backlog on this blog.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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