As addressed in the prior installments of this three-part series (Understanding the Audit Contractors and Responding to Audits and Potential Consequences from Negative Audits), healthcare providers face potential audits from an increasing number of Medicare and Medicaid contractors, often with significant financial and other consequences. This content – the final in a three-part alert series – explores the appeals process, tips for achieving the best results and challenging adverse audit results.
Medicare Appeals Process
When healthcare providers and suppliers disagree with negative audit findings, they can challenge the results through the Medicare appeals process. The five levels of the Medicare appeals process are:
- Redetermination from the Medicare Administrative Contractor (MAC).
- Reconsideration from a Qualified Independent Contractor (QIC).
- Appeal to an administrative law judge (ALJ).
- Appeal to the Medicare Appeals Council Departmental Appeals Board (DAB).
- Appeal to a federal district court.
The majority of the requirements for the appeals process are set forth in 42 U.S.C. § 1395ff and 42 C.F.R. §§ 405.900-.1140.
Level 1: Redetermination (42 C.F.R. §§ 405.940-405.958)
The first level of appeal is a redetermination, where a provider requests that its MAC review the initial determination. The redetermination request consists of a written request to the MAC seeking a review of the claims determinations and, if applicable, the sampling methodology used to calculate the overpayment demand. In the request, the provider “must explain why it disagrees with the contractor’s determination and should include any evidence that the party believes should be considered by the contractor in making its redetermination.” 42 C.F.R. § 905.946. Thus, at the redetermination phase, a provider can include additional records and other evidence to support its position.
Except in limited circumstances, a redetermination request must be filed within 120 days from the date of the initial determination. For prepayment audits and certain additional documentation request (ADR) audits, the initial determination is included in the remittance advices providing notice of payment. If the audit was a post-payment audit, such as one conducted by a Unified Program Integrity Contractor (UPIC) or a Supplemental Medical Review Contractor (SMRC), the MAC would issue a letter noting that it has made an “initial determination” and demand payment within 30 days of receipt.
If a provider fails to repay the overpayment within 30 days, interest will be assessed on the overpayment amount, and the MAC may initiate recoupment proceedings by offsetting payments owed to the provider until the overpayment is fully recouped. However, if a provider seeks redetermination within 42 days of the initial determination, recoupment is stayed until the redetermination decision is issued. While 42 C.F.R. § 405.379 allows for 42 days before recoupment begins, the MAC’s initial determination letter will state that an appeal must be filed within 30 days to avoid recoupment. This gives the MAC a few days to process the redetermination and implement the recoupment stay. Interest continues to accrue, however, and is payable if an unfavorable decision occurs.
Generally, redetermination decisions are issued within 60 days of the MAC’s receipt of the request.
Level 2: Reconsideration (42 CFR §§ 405.960-405.978)
If the redetermination decision is partially or fully unfavorable, a provider can then request a reconsideration. In contrast to redetermination, the reconsideration phase is conducted by a QIC and consists of “an independent, on-the-record review of an initial determination, including the redetermination and all issues related to payment of the claim.” 42 C.F.R. § 405.968(a).
Except in limited circumstances, a reconsideration request must be filed within 180 days of receiving the redetermination decision. To stay recoupment of the overpayment, the reconsideration request must be submitted within 60 days of the redetermination decision. Providers should be aware that interest on the overpayment continues to accrue, even if recoupment is stayed while the reconsideration decision is pending.
Like the redetermination request, the reconsideration request is a written request presenting “evidence and allegations of fact or law related to the issue in dispute,” including any missing documentation identified in the redetermination decision and explaining why the provider disagrees with the initial determination and the redetermination. 42 C.F.R. § 405.966(a). Providers should be aware that, absent demonstrating good cause, any evidence not submitted with the reconsideration request will not be considered at subsequent appeal levels.
Generally, reconsideration decisions are issued within 60 days of the request. After the reconsideration decision is rendered, recoupment is not stayed under any circumstances, even if additional levels of appeal are pursued.
Level 3: ALJ Review (42 CFR §§ 405.1000-405.1058)
If the reconsideration decision remains unfavorable, providers can request a hearing before an ALJ within 60 days of receiving the QIC’s reconsideration decision. In contrast to the earlier levels of review, to be entitled to an ALJ hearing, providers must establish an amount in controversy of at least $180. This threshold amount is adjusted annually. For appeals filed on or after January 1, 2023, the threshold appeal amounts are listed here.
The request for an ALJ hearing must be made in writing and include the reasons the provider disagrees with the QIC decision. If the use of statistical sampling and extrapolation is being challenged, the request must include specific information for each sample claim being appealed and assert the reasons the provider disagrees with the statistical sampling and extrapolation methodology.
The ALJ conducts a de novo review and issues a decision based on a review of the record from both the lower appeal levels and the ALJ. Again, unless a provider can establish good cause for failing to submit evidence at the redetermination and reconsideration phases at the ALJ level, no new evidence may be submitted. ALJ hearings typically occur by telephone, but they can also be held in person or by video-telephone conference. The Centers for Medicare & Medicaid Services (CMS) and its contractors typically participate in the hearing but do not join as a party. This prohibits the provider from calling CMS or its contractors as witnesses.
Providers tend to have the most success at the ALJ level as this is the first phase in the Medicare appeals process where a provider can present oral testimony and other arguments to support its position. Statistics regarding the outcomes of appeals can be found here. The ALJ level and the DAB review level are also where providers are likely to experience significant delays in receiving a decision. While statutes and regulations contemplate a decision within 90 days of requesting an ALJ hearing, in 2022, the average processing time for ALJ decisions was 725 days (approximately two years). Because of a court-mandated reduction of the appeals backlog, the Department of Health & Human Services (HHS) has implemented various strategies in the last several years to expedite the review process, and the turnaround time has improved significantly.
Level 4: DAB Review (42 CFR §§ 405.1100-405.1140)
Following an unfavorable ALJ decision, a provider may seek review by the DAB. A DAB review request must be submitted within 60 days of the ALJ decision and must identify the portions of the ALJ decision the provider disagrees with and support the provider’s position. In addition to provider-directed DAB review, the DAB, on its own motion or based upon a referral from CMS or its contractors, may determine to review the ALJ decision.
The DAB conducts a de novo review and issues a final decision within 90 days of the request for review. Though, as discussed above, the adjudication timeframe often extends beyond 90 days because of the backlog in pending DAB appeals. While review at the DAB level is typically on the record, oral argument is granted under limited circumstances, and the parties can request an opportunity to file briefs or other written statements.
Level 5: Federal District Court (42 CFR §§ 405.990, 405.1130-405.1138)
If a provider remains dissatisfied with the DAB’s decision, the provider’s last option for appeal is judicial review in federal court. Providers can file an action in federal court within 60 days of receiving the DAB decision if the amount in controversy remains at least $1,850. There is no statutory time limit within which a court must reach a decision. Because of significant deference to the agency decision, judicial review is limited.
Medicaid Appeals Process
The timing and requirements related to the appeal of Medicaid audits are governed by state law. Given the variation in Medicaid requirements across states, multistate providers must meet the challenging task of navigating different Medicaid reimbursement requirements and appeal rights. It is essential for Medicaid providers to understand the structure of Medicaid audit processes and appeal formats for their respective states.
Preparing an Appeal
Appeals of adverse audit results allow providers to receive payment for previously denied claims and, if extrapolation is used, the potential to significantly lower damages amounts. Successful appeals also reduce the audit error rate, which is critical as a provider’s past audit results often drive the government’s future audit targets. After receipt of a negative audit finding, providers should closely review all correspondence, including the audit results and demand letter, to understand the appropriate next steps for the appeal. Because the appeal timeline turns on the date of the demand letter, it is critical that providers and their counsel accurately document the date of the demand letter and map the applicable timelines based on the first demand letter.
To successfully appeal negative audit findings, providers should take immediate steps to analyze every denied claim to determine if there are procedural and substantive grounds to appeal. These steps should include the following:
- Calendaring the appeal deadlines to ensure they are met. Missing a deadline can waive the right to appeal. For Medicare appeals, these timelines vary at each level, so it is important to know the deadline at the outset of each appeal. Providers should consider developing an appeal tracking system to monitor all appeal deadlines and the information submitted for appeals.
- Reviewing the authority cited by the auditors to determine if the auditors relied upon the correct authority in effect at the time of the audit. If the auditors relied upon the wrong standards or misapplied these standards, providers have a strong argument to overturn the decisions. Billing requirements for Medicare, Medicaid, and commercial payors change periodically, so it is important for providers to know which standards govern the audit at issue.
- Analyzing the denial reasons asserted in the audit findings to directly address these issues. This may require additional medical record review and compilation and alternative forms of evidence, such as attestations, to address technical deficiencies, like missing signatures. If additional records are identified, providers should ensure they are submitted no later than with their reconsideration request for Medicare appeals, as new evidence submitted at subsequent levels requires a showing of good cause for why it should be admitted. Providers must also address denials based on lack of medical necessity, meaning that the audit contractor found that the patients did not actually need the services provided. As with the technical billing denials, providers should review the available records to determine if they can support the denied claims’ medical necessity.
- Engaging subject matter experts, such as coding consultants and medical reviewers, to analyze the medical records and develop arguments for why the medical records support the claims. These subject matter experts can often be very helpful in identifying potential documentation and arguments that can be used to refute audit findings. Providers may find they have these subject matter experts within the organization and can rely on these internal resources to prepare the appeal. If the providers do not have the needed internal resources, they can retain outside experts in developing these arguments.
- Developing detailed position papers supporting each claim. Providers should work with their subject matter experts to highlight how a patient’s medical records or other supporting documentation negates the auditor’s unfavorable findings. These position papers should be updated at each appeal level to address the appeal findings.
- Adequately preparing for the ALJ hearing. If the appeal advances to the ALJ, providers can present oral testimony. Prior to the hearing, providers and their counsel should identify witnesses who will participate and carefully prepare each witness for the hearing process. Both experts and counsel should be very familiar with the case, the procedural history and the facts that demonstrate compliance with applicable Medicare requirements. Providers should be prepared to address specific questions from both the ALJ and CMS, even if CMS is not participating as a party.
Appealing Statistical Sampling and Extrapolation
If a provider is subject to an extrapolated overpayment demand, it is imperative that providers (1) prepare to appeal the denial of each individual claim and (2) evaluate early in the appeal process whether there are grounds for challenging the sampling methodology and extrapolation calculations.
While a Medicare contractor’s decision to use extrapolation is not appealable, a provider can seek to have extrapolation overturned by challenging the sampling methodology and extrapolation calculations. While each claim amount may be relatively small, when extrapolated, the dollar amount is significant. Thus, having individual claims overturned during the appeal process can significantly reduce overpayment liability if extrapolation is upheld.
To determine potential appeal grounds, providers should assess the validity of the statistical sample, evaluate whether the contractor followed applicable guidelines, and employ applicable defenses against the extrapolation. For Medicare audits using extrapolation, providers may not invalidate the results by arguing that more precise methods were available or the contractor failed to follow one or more Medicare Benefit Integrity Manual requirements. Rather, providers may challenge the validity of the sampling methodology by arguing that the use of the sample violates due process because the sample was not representative or statistically significant based on the actual statistical validity of the sample as drawn and conducted. This analysis will likely involve the engagement of a statistician. Providers should obtain all documentation related to the sampling calculations to allow a statistician to conduct a full review and prepare a written report and oral testimony at a hearing.
Conclusion
The significant financial implications of negative Medicare and Medicaid audit findings combined with the time-intensive appeals process underscore the importance of preparing a thorough appeal to challenge unfavorable audit results.
If you have any questions about appealing adverse audit results, please contact the authors. If you would like more information on the audit process, Bass, Berry & Sims will host a webinar on March 8 titled, “Medicare and Medicaid Audits: Current Audit Landscape and Best Practices for Response and Appeal of Adverse Results.” For additional details about the webinar and registration information, click here.