Moving the HME Industry Forward


ALJ Delays – AAHomecare Taking a Proactive Approach

February 3, 2014

AMARILLO, TX – Recently, Nancy J. Griswold, Chief Administrative Law Judge, issued a memorandum that took the DME industry’s collective breath away. The memo stated, in part:

“Due to the rapid and overwhelming increase in claim appeals, effective July 15, 2013, OMHA temporarily suspended the assignment of most new requests for an Administrative Law Judge hearing to allow [the Office of Medicare Hearings and Appeals (“OMHA”)] to adjudicate appeals involving almost 357,000 claims for Medicare services and entitlements already assigned to its 65 Administrative Law Judges. This temporary measure was necessitated by a dramatic increase in the number of decisions being appealed to OMHA, the third level of administrative review in the Medicare claim and entitlement appeals process.

“From 2010 to 2013, OMHA’s claims and entitlement workload grew by 184% while the resources to adjudicate the appeals remained relatively constant, and more recently were reduced due to budgetary sequestration. Even with increased productivity from our dedicated Administrative Law Judges and their support staff, we have been unable to keep pace with the exponential growth in requests for hearing. Consequently, a substantial backlog in the number of cases pending an ALJ hearing, as well as cases pending assignment has resulted.

“In just under two years, the OMHA backlog has grown from pending appeals involving 92,000 claims for services and entitlement to appeals involving 460,000 claims for services and entitlement, and the receipt level of new appeals is continuing to rise. In January 2012, the number of weekly receipts in our Central Operations Division averaged around 1,250. This past month, the number of receipts was over 15,000 per week. Due to this rapidly increasing workload, OMHA’s average wait time for a hearing before an Administrative Law Judge has risen to 16 months and is expected to continue to increase as the backlog grows.

“Although assignment of most new requests for hearing will be temporarily suspended, OMHA will continue to assign and process requests filed directly by Medicare beneficiaries, to ensure their health and safety is protected. Assignment of all other new requests for hearing will resume as Administrative Law Judges are able to accommodate additional workload on their dockets. However, with the current backlog we do not expect general assignments to resume for at least 24 months and we expect post-assignment hearing wait times will continue to exceed 6 months.”

A 24- to 30-month delay in obtaining an ALJ decision is wrong on many different levels. AAHomecare, under the leadership of Tom Ryan (President/CEO) and Kim Brummett (Senior Director/Regulatory Affairs), and with assistance from industry stakeholders, sent a six page letter on January 29 to DHHS Secretary Sebelius. The letter, in blunt (but polite) language, points out (i) why the delay in ALJ assignments/adjudications is contrary to the law and (ii) the corrective steps that CMS should take. AAHomecare’s letter states, in part:

• The statutory deadline for the disposition of Medicare appeals is 90 days from the date an appeal is timely filed. The 24 to 30 month delay violates this statutory requirement.
• DME suppliers do not have the financial ability to serve beneficiaries for free while waiting for the appeals process to run its course.
• These delays result from the inordinate increases in the volume of pre-payment reviews that are subject to unsound audit practices by the Medicare contractors.
• The number of DME claims denied for technical reasons (nothing to do with waste, fraud or abuse) has increased by at least 700% over the past four years. Too often, contractors routinely deny claims based on their own, often incorrect, interpretation of Medicare guidelines.
• The ALJ level is the only level of appeal where providers have a right to a hearing before an independent adjudicator.
• An unintended consequence of this lengthy delay may be to shift more of the risk to beneficiaries.
• The 24 to 30 month delay unfairly affects competitive bid contract suppliers. The delay is a major change in Medicare policy after suppliers submitted their competitive bids. This is information that the bidders should have had before deciding whether or not to submit a bid or sign a competitive bid contract.
• The record number of audits performed by contractors, and the unsustainable appeals backlog that has resulted, has increased the financial risk to providers as the amount of their revenue tied up in pending appeals continues to grow.

AAHomecare then offers short term and a long term solutions. For a short term solution, AAHomecare suggests the following;
(i) impose a moratorium on MAC pre-payment and post-payment audits of DMEPOS claims until the appeals backlog is reduced to not more than six months;
(ii) widespread product-specific pre-payment and post-payment audits should be limited;
(iii) providers should be excluded from pre-payment and post-payment audits for one year if they demonstrate a low payment error rate;
(iv) a contractor should be prohibited from repeatedly auditing the same beneficiary’s claims for a product if the product was determined to be medically necessary during a previous audit;
(v) impose product and provider specific limits on the volume of claims that can be audited…..based on the individual provider’s previous results;
(vi) in the 10 states subject to the Power Wheelchair Prior Authorization Demonstration Project, CMS should exclude claims from the audit pool for those PWCs that have been previously authorized by the MAC after the providers supplied extensive documentation to support the medical necessity of the PWC;
(vii) limit the number of claims subject to audit among competitive bid contract suppliers;
(viii) prohibit MACs from issuing written or verbal “clarifications” of existing policies or new policies without giving providers at least 60 days’ written notice of the new policy or clarification;
(ix) shift funds allocated for audits to OMHA to hire more ALJs and attorney advisors;
(x) impose a monetary penalty on contractors that refuse to limit or reduce their audit activity as directed by CMS;
(xi) suspend recoupment of any overpayment appealed to the an ALJ until OMHA can comply with the 90 day deadline for deciding appeals;
(xii) suspend accrual of interest on overpayments appealed to the ALJ level;
(xiii) refund overpayments that have been recouped and repaid if a provider has pending ALJ appeals related to the overpayment;
(xiv) establish a mechanism that would permit providers to resolve audit issues directly with the contractor before the contractor issues a demand letter;
(xv) establish firm deadlines that contractors must meet when reviewing additional documentation submitted by providers in response to an audit; and
(xvi) limit the scope of an audit to the issues and documentation a contractor identifies in the audit request letter.

In terms of a long term solution, AAHomecare recommends that CMS should ensure greater oversight of its Medicare claim audits and appeals activities to monitor the resolution of the current backlog and identify emerging problems in the future.

The Social Security Act requires DHHS to conduct a survey of individuals who use the Medicare appeals process at least once every five years. However, it does not appear that DHHS has conducted such a survey. CMS should undertake this survey and implement procedures to ensure that it occurs every five years. The survey should be expanded to include the assessment of the contractors’ audit practices.

AAHomecare will continue to exert its leadership in resolving this serious problem. Equally as important, individual DME suppliers need to enlist the support of their patients, their referring physicians, and their elected officials (U.S. Representatives and U.S. Senators).

Baird will be presenting at Medtrade Spring 2014 in Las Vegas, where he will share his expertise, advice, and ideas. CLICK HERE to register for Medtrade Spring, held from March 10-12, 2014, at the Mandalay Bay Convention Center.

Jeffrey S. Baird, JD, is chairman of the Health Care Group at Brown & Fortunato PC, a law firm based in Amarillo, Tex. He represents pharmacies, infusion companies, HME companies, and other health care providers throughout the United States. Baird is Board Certified in Health Law by the Texas Board of Legal Specialization and can be reached at (806) 345-6320 or