A win for efficiency: The AHA suit may force shorter adjudication times for Medicare administrative appeals. In 2014, the American Hospital Association (AHA), along with three hospital systems, filed suit against the U.S. Department of Health and Human services, alleging that the lengthy adjudication time for administrative appeals of Medicare claim denials caused severe economic harm.  See,American Hospital Association, et al. v. Kathleen Sebelius, Secretary of Health and Human Service,Civil Action No. 14-851 (D.D.C. December 18, 2014). Although sympathetic to AHA’s complaint of delay, the District Court in Washington D.C. dismissed the complaint and granted no relief. 

However, in a recent ruling, the United States Court of Appeals for the District of Columbia Circuit inAmerican Hospital Association, et al. v. Burwell, No. 15-5015 (D.C. Cir., February 9, 2016) seismically breathed new life back into the lawsuit. In doing so, the Court reversed the dismissal and sent the case back to the District Court with directions to see whether or not HHS should be compelled by court order to cure the appellate deficiencies (i.e., delay) and comply with all statutory deadlines Congress imposed for the processing of these cases.

In this case, the Court of Appeals found that the ultimate slowdown in the Medicare appeals system stemmed directly from the lack adequate resources given to one component of HHS, the Office of Medicare Hearings and Appeals (OMHA), to handle all of the additional work coming through its doors as the result of the successful activity of another component of HHS, one that audits program payments.

In its four step appeals process, Congress required HHS to adjudicate Medicare appeals within certain time frames so that these cases move expeditiously to final decision (Step One/60 days for redetermination; Step Two/60 days for reconsideration; Step Three/90 days for a de novoadministrative law judge hearing; and Step Four/90 days for Medicare Appeals Council review).

On the other hand, Congress also tasked HHS in 2010, through the Medicare Recovery Audit Program, with combing through Medicare payments in order to identify both underpayments and overpayments and to take aggressive steps to recoup overpayments. The Court of Appeals noted that through utilization of “recovery audit contractors” (RACs) who receive compensation based upon the amount of monies recovered, the government has now recovered billions of dollars in improperly paid program money.

Unfortunately, as the Court of Appeals observed, these two missions crossed paths with relatively severe consequences, at least with regard to OMHA efficiency. The Court of Appeals noted that while the parties differ in the percentage of increase ascribed to the RAC program, there have been significantly increased filings because of RAC activity.  For example, while 59,200 appeals were filed in 2011, OMHA saw 384,000 appeals filed in 2013.  Given OMHA’s budgeted capacity to process approximately just 72,000 cases per year, OMHA has been swamped — and by July 2014 — the Court of Appeals observed that OMHA had a pending case backlog of over 800,000 pending appeals. With this backdrop, there is little surprise that the Court of Appeals now describes HHS Medicare claims reimbursement appeals as being in a state of “systemic failure” that virtually causes all appeals to be decided well after the statutory deadlines imposed by Congress.

This case now goes back to the District Court for a determination of whether “‘compelling equitable grounds'” exist to issue a writ of mandamus. We expect the District Court to move expeditiously in consideration of the appellate court’s guidance. Given today’s charged presidential election-year political atmosphere and the vacancy that now exists on the Supreme Court, it appears that that the Court of Appeals remains more than ready, able, and willing to remain active in this case in order to provide certainty in an uncertain environment, should the need remain for it to do so.