OIG Concludes Improvements Needed at ALJ Level of Review

by King & Spalding

The OIG issued a report on November 15, 2012 (OEI-02-10-00340) in which it concluded that the administrative law judge (ALJ) level of appeal requires improvements in a number of areas due to (i) apparent substantive inconsistencies between the interpretation of Medicare policy applied by ALJs and qualified independent contractors (QICs) and (ii) the existence of process inefficiencies at the ALJ level.  The OIG made various recommendations to CMS and the Office of Medicare Hearings & Appeals (OMHA) for achieving improvements in both areas. 

The asserted need for improvements appears largely based on the OIG’s findings that there were a high percentage of full reversals at the ALJ level (56%) and that the ALJs’ bases for such reversals reflected less strict interpretations of Medicare policies than employed by QICs.  Fully-favorable reversals at the ALJ level, however, were less likely when CMS participated in the appeal.  The report reflected a concern that appellants have an incentive to appeal because the cost of doing so is minimal and the chances of a favorable outcome are high; this is particularly the case among “frequent flyers,” or appellants that filed at least 50 appeals or more in fiscal year 2010. OIG’s implicit assumption is that the relatively high number of ALJ decisions in favor of appealing providers reflects a problem with the ALJ process and not a problem with the QIC process.

In addition to inconsistencies in substantive review between ALJs and QICs, the OIG found various process inefficiencies at the ALJ level of appeal.  While admission of new evidence at the ALJ level is prohibited absent a showing of good cause, many ALJs employed a wide interpretation of good cause to accept new evidence from appellants.  Inefficiencies also arise, according to the OIG’s findings, because the ALJ continues to employ paper files, whereas the QICs have moved to electronic files.  In addition, the OIG found that ALJ staff handle suspicions of fraud inconsistently. 

Based on these findings, the OIG made three sets of recommendations.  It issued joint recommendations to CMS and OMHA to:

  • develop and provide coordinated training on Medicare policies to ALJs and QICs;
  • identify and clarify Medicare policies that are unclear and interpreted differently between ALJs and QICs;
  • standardize case files and make them electronic at the ALJ level;
  • revise regulations to provide more guidance to ALJs regarding the acceptance of new evidence; and
  • improve the handling of appeals from appellants who are also under fraud investigation and seek statutory authority to postpone these appeals when necessary.

To OMHA, the OIG recommended:

  • seek statutory authority to establish a filing fee;
  • implement a quality assurance process to review ALJ decisions;
  • determine whether specialization among ALJs would improve efficiency; and
  • develop policies to handle suspicion of fraud appropriately and consistently and train staff accordingly.

The OIG recommended that CMS:

  • continue to increase CMS participation in ALJ appeals.

Aside from raising due process concerns regarding the postponement of cases under fraud investigations, CMS and OMHA largely either concurred with the OIG’s recommendations or promised to engage in further evaluation of recommendations. Among the recommendations identified for further evaluation by CMS and/or OMHA were those concerning (i) changes to regulations governing admission of new evidence; (ii) establishing a filing fee; (iii) ALJ specialization; and (iv) increased participation by CMS in ALJ appeals.

Click here to obtain a copy of the OIG report.

Reporter, Tracy Weir, Washington, D.C., +1 202 626 2923, tweir@kslaw.com.

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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