In a March 19, 2015 report commissioned by the American Orthotic & Prosthetic Association (AOPA), a health care consulting firm found that the Center for Medicare & Medicaid Services (CMS) could save $12 million over 10 years by not requiring providers to repay disputed Part B claims to Medicare until after the Administrative Law Judge hearing and determination. This change in policy also could make a tremendous difference to provider operations since it would allow them to have access to certain funds during the very lengthy period while they wait for the ALJ determination.

The Office of Medicare Hearings and Appeals (OMHA) oversees a four-level appeal process for Medicare claims issues. Currently, providers must reimburse CMS for payments in dispute prior to requesting a third-level appeal with an Administrative Law Judge (ALJ). Due to a significant increase in the number of Recovery Audit Contractor (RAC) audits being appealed to ALJs, hearings are not even being assigned for up to 28 months (with an additional six-month delay post-assignment for the determination). This means that providers, especially smaller providers, are struggling to stay in business while substantial amounts of capital are not available for their operations for up to three years. Although some claims denials are upheld, a very large number typically are overturned. While the money is returned to the provider (plus interest), if they prevail at the ALJ level, the irony is that more than 100 health care providers reportedly have had to close thus far because they could not continue operations during the lengthy period while their money was tied up on appeal.

The study found that requiring providers to repay disputed claims before the ALJ determination also has an adverse impact on the government, as the lengthy delays (and the large number of claims denials that are overturned on appeal) mean that CMS has to pay a substantial amount of interest to the providers whose claims denials were overturned. Specifically, over 10 years, CMS likely will have to pay out $12.37 million in interest payments, just for the Part B services under appeal. As a result, the study identifies what might be a win-win solution for providers and the government (i.e., AOPA proposes that CMS delay recouping payments for disputed claims from providers until after the ALJ determination).

The study, by Dobson DaVanzo & Associates, LLC, “Estimated Impact of Deferring Provider Payment for RAC Appeals Until After Administrative Law Judge (ALJ) (Level 3) Determinations,” focused on two types of appeals: those related to orthotic and prosthetic (O&P) services, and those related to Medicare Part B. The study also noted that claims related to Medicare Part A services represent two-thirds of all claims appealed to an ALJ, and further investigation was required to estimate the cost savings of applying this proposal to Medicare Part A claims.