Federal Administrative Law Judges (ALJs) exercise considerable authority in our national healthcare system. ALJs in the Food and Drug Administration routinely make adjudicatory decisions regarding drugs and medical devices. Those working within the Department of Labor may render decisions impacting a healthcare provider’s workforce or workplace. And the determinations of ALJs within the Drug Enforcement Administration can deny a provider the ability to dispense controlled substances.
Perhaps most important for healthcare providers contracted with Medicare are the ALJs affiliated with the Office of Medicare Hearings and Appeals (OMHA), who oversee appeals associated with coverage and payment for items and services furnished under Medicare Parts A, B, C, and D. As adjudicators in the third level of the five-level Medicare appeals process, OMHA’s ALJs are positioned to make decisions regarding the disposition of millions of Medicare dollars.
Yet, despite the considerable power wielded by OMHA’s ALJs, the source of their authority and the branch of government with which they are affiliated is frequently misunderstood. Here, we briefly survey the history of these ALJs, the process by which they render their decisions, and how the likelihood of a favorable outcome for appellants has shifted in recent years.
Background
ALJs derive their authority from the Administrative Procedure Act of 1946 (APA) (5 U.S.C. Subchapter II) which was passed in response to public concern in the first half of the last century that administrative agencies within the executive branch were growing too numerous and too powerful.
Before the adoption of a uniform code of administrative law, federal agencies frequently enacted and enforced rules without public notice or input. And they sometimes acted with impunity. In the 1930s, when state governors accused the director of the Federal Emergency Relief Administration of “playing politics with relief” moneys, members of Congress could not compel the agency’s director to answer questions regarding how the agency made spending decisions.
The APA established standards for how executive branch agencies promulgate rules. It also specified that agencies should have neutral hearing officers—their designation was changed to “administrative law judges” by legislation passed in 1978—to adjudicate cases associated with these rules.
ALJs may make determinations based on submitted evidence or preside over hearings without juries, in the equivalent of bench trials. They can administer oaths, issue subpoenas, take testimony, and rule on both motions and the admissibility of evidence in the process of deciding a case. Yet, despite the judicial trappings, they are part of the executive branch, with jurisdiction limited to the administrative agencies in which they work.
Appeals process
The first step for a Medicare provider who disagrees with the denial of a Medicare Part A or B claim by a Medicare Administrative Contractor (MAC) is to request a redetermination from the MAC itself. Such requests must be filed within 120 days of notice of the original denial, and MACs are required to make payment redeterminations based on new reviews of the disputed claim(s) within 60 days of request.
If a MAC’s redetermination is not in their favor, providers have 180 days from the date of receipt of notice of the MAC’s decision in which to appeal it to a Qualified Independent Contractor (QIC). The QIC will conduct a new, independent, and on-the-record review of the disputed claims(s) and any supporting evidence within 60 days and either dismiss the case or issue a reconsideration.
Providers who are not satisfied with a QIC’s dismissal or reconsideration of a decision at the second level of appeals may file an appeal with OMHA within 60 days of receipt of notification of the reconsideration, which is presumed to be five days after the date of the notice.
This is the first level in the appeals process at which a monetary value is specified. To be considered by OMHA, cases must meet the minimum threshold for the amount in controversy, which is published annually, and is currently set at $180.
When a case is accepted for appeal, the QIC forwards evidence from the second level of appeals to the ALJ. An appellant wishing to submit evidence which was not shared with the QIC must demonstrate good cause for not introducing it in the earlier process and comply with timelines for submission before the hearing date.
An ALJ may decide a case based upon the documentary evidence in the case file, without a hearing. Such “on the record” decisions may occur when all parties indicate that they do not want to have a hearing or when the evidence supports a finding fully in the favor of an appellant.
Hearings are typically conducted by phone or video conference, and OMHA maintains hundreds of designated video-teleconferencing (VTC) sites for this purpose around the country. Less frequently, a hearing may take place at one of OMHA’s 10 field offices if an appellant can demonstrate good cause for an in-person hearing. Appellants will receive notice of a scheduled hearing at least 20 days in advance. The appeals process may be expedited for Part D cases that warrant it.
While ALJ decisions are subject to appeal, there may be additional levels of review within a given agency before a case is submitted for external judiciary review.
System alternatives
Appellants with a minimum of 250 claims of a single type—all prepayment or all overpayment Medicare Part A or Part B—are eligible to participate in OMHA’s Statistical Sampling Program.
Described by OMHA as offering appellants with a large number of claims a “more efficient means to adjudicate appeals,” this program, while still in its infancy, can be initiated through appellant request or at the invitation of OMHA.
The process entails an independent statistical expert randomly selecting sample units using methodology in accordance with guidelines found in Chapter 8 of the Medicare Integrity Program Manual (MIPM). The sample claims will then be divided between three ALJs if the total number of claims is between 250 and 750, or between four to five ALJs if the total number is 750 or more. After each assigned ALJ conducts a hearing on their portion of the sample units, their decision will be extrapolated to the universe of claims by the OMHA statistical expert.
OMHA also offers appellants the opportunity to pursue an alternative dispute resolution process for Medicare Part A and Part B claims through Settlement Conference Facilitation. In this process, a facilitator employed by OMHA helps the appellant and CMS arrive at a mutually agreeable resolution through mediation. The facilitator does not serve as a fact finder or make determinations on the merits of the claims.
Decisions
Historically, the odds were commonly in the appellant’s favor in ALJ hearings. Decisions in over 60% of appeals heard by ALJs in 2010 were at least partially favorable to appellants.
However, the odds of a favorable outcome for appellants have declined in the last decade. Today, decisions that favor or partially favor appellants are rendered in less than 31% of cases.
But, when they do come, the financial impact of favorable decisions can be significant. In January, OMHA’s chief ALJ decided a case in favor of Sleep Management, LLC dba Vie Med. That decision spared the company from having to return over $29 million in what the Office of the Inspector General of the Department of Health and Human Services (HHS) had identified as overpayments.
Timeliness
The shift in the likelihood of favorable outcomes for appellants has coincided with efforts to resolve an enormous backlog in appeals.
Statute requires OMHA to resolve appeals within 90 days. Yet in Fiscal Year 2014, the average processing time for an OMHA appeal was over 414 days—a figure which, beyond representing a bureaucratic nuisance for individual appellants, had implications for the larger healthcare system.
For providers, delays in the resolution of claims appeals equate to delays in cash flow. When disputed claims languish in the OMHA system, providers do not have access to funds that would otherwise be invested in new equipment or used to maintain facilities, procures supplies, and pay staff. In addition, uncertainty about the timeframe or likelihood of future reimbursement can lead providers to avoid treating certain patients or offering specific procedures.
In 2014, the American Hospital Association (AHA) joined with three regional hospitals and healthcare systems in suing HHS over “extraordinary delays in the (OMHA) appeals process.” They argued that the backlog of appeals, which then stood at 800,000 claims, was fueled by aggressive auditing practices on the part of Medicare contractors. As contractors flagged more claims in pursuit of larger contingency fees, providers had no choice but to appeal in the expectation that impartial ALJs would recognize the merits of their claims.
To support its argument, AHA pointed to the fact that the backlog of pending claims at the ALJ level had quintupled in the two-year period ending in 2013. By 2014, OMHA was receiving five times as many appeals annually as it was deciding.
HHS responded that while it was taking “extraordinary measures” to address the ever-growing backlog, the agency could not be compelled to comply with court-imposed deadlines to resolve the issue. Federal district and circuit courts initially seemed inclined to agree.
The question remained in dispute until 2018 when, after Congress appropriated $182.3 million for OMHA to hire additional staff, HHS declared its own timeline for resolving the backlog. The U.S. District Court for the District of Columbia subsequently concluded that while the courts might not be able to impose their own deadline, they could compel HHS to meet its own. A mandamus order to this extent was issued in November 2018.
The impact was not immediate. The processing time for OMHA appeals peaked at 1,430 days in FY 2020. However, by the second quarter of this year, average processing time had dropped to 143 days. According to a joint status report released in May by HHS and AHA, “there were only 663 appeals that were initiated but have not been adjudicated within 90 days.”
Not the final authorities
As the third level of the five-level Medicare appeals process, OMHA’s ALJs do not have final authority in adjudicating disputed claims. Providers who are not satisfied with an ALJ’s decision may appeal to the Medicare Appeals Council (Council) by making a “request for review.”* Part of the Departmental Appeals Board of the Department of Health and Human Services (HHS), the Council represents the last level of administrative appeal in the appeals process. It is independent of CMS.
In addition, appellants whose request for a hearing has been pending for longer than 90 calendar days may request that their case(s) be escalated.
Conclusion
ALJs within OMHA play an important, if not conclusive, role in resolving disputes over Medicare payments. Beyond financially impacting individual providers, ALJ’s decisions can shape the provision of care to Medicare beneficiaries. Having addressed the challenges presented by a surge in disputed claims earlier in this century, OMHA’s ALJs remain positioned to function as neutral and reasoned arbitrators in the Medicare appeals process.
*HHS notes that “A party does not have the right to seek Council review of an OMHA adjudicator’s remand to a QIC, dismissal of a request for review of a reconsideration dismissal, or affirmation of a QIC’s dismissal of a request for reconsideration.”