ADVANCED WORKSHOP ON MEDICARE CLAIMS APPEALS. by JAMES P. KELLY GREG ETZEL and ANDREW B. WACHLER. Moderator: THOMAS E. HERRMANN TABLE OF CONTENTS

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1 ADVANCED WORKSHOP ON MEDICARE CLAIMS APPEALS by JAMES P. KELLY GREG ETZEL and ANDREW B. WACHLER Moderator: THOMAS E. HERRMANN TABLE OF CONTENTS I. INTRODUCTION... 1 A. Purpose B. Other References... 1 C. Five Level Appeal Process General Initial Determination First Level: Redetermination Second Level: Reconsideration Third Level: ALJ Hearings Fourth Level: Medicare Appeals Council Fifth Level: Federal Court II. SPECIAL PROBLEMS A. Challenge to Manuals, Instructions and Methods Limited Authority of the Medicare Internet Only Manual (IOM) and Other Medicare Manuals Contemporaneous Records B. Judicial Challenges C. Consent Settlement Demands and Agreements D. Repetitive Denials After Non-Precedential Determinations E. Exhaustion of Administrative Remedies Not Required for Government Overpayment Recovery Efforts F. Asking CMS and DHHS for Help G. Sampling and Extrapolation Claims H. Stay of Recoupment I. Service of Documents to Beneficiaries J. Parallel Proceedings K. Burden of Proof L. Obtaining Records M. RAC-Initiated Audits Recent Developments in the RAC Program N. Special Defenses; Untimely Reopening; Provider/Supplier Without Fault; Waiver of Liability Untimely Reopening Provider/Supplier Without Fault Waiver of Liability Medical Necessity i

2 I. INTRODUCTION A. Purpose. ADVANCED WORKSHOP ON MEDICARE CLAIMS APPEALS By JAMES P. KELLY GREG ETZEL ANDREW B. WACHLER Moderator: THOMAS E. HERRMANN The authors collectively have many decades of experience in bringing Medicare claims appeals on behalf of providers, suppliers, and physicians. The purpose of this paper is to share the authors experience and solutions in handling certain selected complications and difficulties which arise, from time to time, in protecting entitlement to Medicare reimbursement. B. Other References An excellent guide and reference collection to the full range of Medicare administrative appeals is Cody & Scully-Hayes, A Practical Guide to Medicare Appeals, (American Bar Association, 2007). More advanced, comprehensive coverage is available in Perling, Medicare Claims Appeals Process Handbook (Aspen 2008). Another helpful source of guidance is the more than 80 selected recent decisions of the Medicare Appeals Council at macdecisions/mac_decisions.html. Of course, one should also become familiar with the Internet Only Manual, publication Medicare Claims Processing Manual, Chapter 29 Appeals of Claims Decisions effective August 3, 2009 which relates to claims appeals. C. Five Level Appeal Process In the December 9, 2009 Federal Register (74 Fed. Reg ), CMS issued final regulations for Part A and Part B claims appeals. To fully understand these final regulations, one should read the preambles to these final rules and their predecessor preambles in the March 8, 2005 Federal Register (70 Fed. Reg ), which contained the interim final rules, and the November 15, 2002 Federal Register in which the rules were originally proposed for comment. 1. General. The Medicare claims appeals rules establish a unified five step appeal process for Part A and Part B claims. The rules became effective for new Part A redeterminations on May 1, 1

3 2005. They became effective for new Part B redeterminations on January 1, The principal features of these rules: a. (i) By statute govern appeals of initial determinations made on or after October 1, 2002 and (ii) as a matter of practicality in light of the dismantling of the prior appeals process, may, at least in part, likely govern appeals of initial determinations made before October 1, b. Impose time deadlines for issuing decisions. c. Consolidate Part A and Part B into a uniform appeal process. d. Calls an initial appeal a redetermination and replaces Part A s reconsideration and Part B s review processes. e. For Part B claims, the new appeals process abolishes the carrier fair hearing and replaces it with the reconsideration level handled by a Qualified Independent Contractor ( QIC ). Current QICs are: Integriguard, LLC, Q 2 Administrators, Island Peer Review Organization, Rivertrust Solutions, Inc., Maximus, LLC, and C2C Solutions, Inc., CMS has assigned responsibilities among the QICs as follows: i. Administrative QIC ( AdQIC ) Q 2 Administrators. (The AdQIC is to function as a file clearinghouse among the contractors, QICs, and ALJs. The AdQIC is also to develop procedures, training, and data analysis for the QICs and CMS. ii. Part A QICs Maximus (East and West Jurisdictions) iii. Part B QIC - Q 2 Administrators (South Jurisdiction) C2C Solutions (North Jurisdiction) iv. Part B DME - C2C Solutions v. Part C - Maximus vi. Part D QIC - Maximus f. QICs are to be independent of carriers and intermediaries. 2. Initial Determination. An initial determination must exist to start the Medicare claims appeal process. To obtain an initial determination, one must present a claim for reimbursement, except in cases of expedited prior approval appeals for Parts A, C and D. The contractor s decision on that claim is 2

4 the initial determination. 1 A common form of initial determination is the Medicare Summary Notice ( MSN ) (formerly called Explanation of Medical Benefits) or Remittance Advice forms sent by the contractor to the beneficiary, supplier or provider in response to a claim presented for reimbursement. It is important to ascertain whether the provider/supplier has received an appealable determination. Sometimes, providers/suppliers receive a consent settlement demand, which superficially looks like a denial of payment, but which is not an appealable determination. Additionally, contractors also deny claims based on technical deficiencies in the paperwork accompanying the reimbursement claim, i.e., missing paperwork, incorrect signatures, etc. Some contractors may deem these technical denials as non-appealable on the basis that they represent a fatally defective presentation of a claim. 2 An initial determination which is revised in a reopening by the contractor is binding unless reversed in a redetermination appeal. 3 This rule indicates that appeals of claims reopened by post-payment audits would have to start at the first level (redetermination) of the appeal process. 3. First Level: Redetermination. a. Request for redetermination must be made within 120 days of the initial determination. Use CMS Form to file the request. This form is available at downloads/cms20027.pdf. b. Redeterminations must be decided by the contractor within 60 days of the filing of the appeal request, unless additional evidence is submitted after the filing of the appeal request. The decision deadline is extended fourteen (14) days for each such submission. 4 c. No right to escalate to next level if contractor does not issue decision within 60-day (as extended) time frame. 5 d. Stricter rules for content of appeal notice. 6 e. Contractor has more latitude to dismiss appeals for technical or procedural defects. 7 f. No hearing, but desk review must be conducted by a different individual than the one who made the initial determination C.F.R C.F.R (n). 42 C.F.R C.F.R (b)(3). Compare 42 C.F.R with 42 C.F.R (d), (e). 42 C.F.R C.F.R C.F.R

5 4. Second Level: Reconsideration. a. Request for a reconsideration before a QIC must be made within 180 days of receipt of the redetermination. Use CMS Form to file the request. The form is available at b. QICs should complete the appeal decision within 60 days (unless period extended by submission of new evidence) or appellant can, upon request, escalate to ALJ level. 9 Risk to appellant of escalation is that the record may not be sufficiently developed. If escalation is requested, the QIC has 5 additional days to complete the reconsideration. If the reconsideration cannot be completed in that timeframe, then the QIC must forward the case file to the ALJ. However, if appellant does not request an escalation after the 60 days, then QIC is only required to issue the appeal decision as soon as possible. c. Submit all necessary evidence required at QIC level. New evidence cannot be considered at subsequent levels of appeal, unless good cause is shown. Evidence may be presented to the QIC at any time before its decision. Generally, each such submission automatically extends the QIC s decision making period by fourteen (14) days. 10 There is, however, a catch. QICs are not required to wait to the end of the 60 day, or otherwise extended, pre-escalation-rights period to make their reconsideration decisions. In fact, sometimes without notice to appellants, QICs issue a decision earlier. An early QIC decision may put the appellant in the position of not having submitted all evidence which the appellant wished (a) the QIC to consider and (b) to be in the record for review by the ALJ. To reduce this risk, appellants should overcome probable QIC resistance and establish regular communication with the QIC adjudicator. If the appellant is planning to submit further evidence to the QIC, the appellant should notify the QIC in writing of this intent, ask the QIC not to issue a decision until the appellant has submitted the evidence, and keep track of where the QIC is in the QIC s decision process. Even if the appellant does this, the QIC may still issue an early decision without receiving the additional evidence. Once the QIC issues its decision, then the limitation on recoupment ends, and the appellant can expect recoupments to start around forty-one (41) days later. If the QIC issues such an early decision, then one option for the appellant is to request that the QIC reopen its reconsideration decision. Reopening is purely discretionary with the QIC, and during the pendency of the request for reopening the 60 day period to appeal to the ALJ continues to run. If the situation is egregious, such as where the QIC knew that the appellant would be submitting additional C.F.R C.F.R (a)(2). 4

6 significant evidence, an appellant may consider contacting the CMS Division of Appeal Operations and the CMS Office of Financial Management (which oversees recoupment procedures) to encourage the QIC to exercise its discretion to reopen the decision with retroactive effect by declaring its prior decision of no effect. If the decision is reopened in this manner, then recoupment is to stop and recouped amounts should be refunded. If the QIC will not reopen its decision, then the appellant should consider submitting its additional evidence for the QIC to include in its post-decision records. Arguably, if such evidence is in the QIC s files prior to the ALJ receiving the record from the QIC, then such evidence should not be considered inadmissible new evidence by the ALJ. Alternatively, one can argue to the ALJ that the QIC s early decision without all the evidence is good cause for the ALJ to admit the new evidence which would have been submitted to the QIC during the pre-escalation-rights period, but which was not considered by the QIC. d. On questions of medical necessity, the QIC must use panels of physicians or other appropriate health care professionals. 11 e. QIC may obtain evidence on its own. 12 f. QICs are not bound by LCDs, LMRPs or CMS program guidance, such as program memoranda or manual instructions, but [must] give substantial deference to these. 13 g. No hearing at the QIC level; only on-the-record ( OTR ) review. 14 h. A dismissal by the MAC can be reviewed by the QIC, but not at a higher level. i. Maximus, LLC ( is the QIC for both the Part A East and West jurisdictions C.F.R (a). 42 C.F.R (a). 42 C.F.R (b). 42 C.F.R (a). 15 Maximus Federal Services QIC Part A East 1040 First Ave., Ste. 400 King of Prussia, PA Colorado, New Mexico, Texas, Oklahoma, Arkansas, Louisiana, Mississippi, Alabama, Georgia, Florida, Tennessee, South Carolina, North Carolina, Virginia, West Virginia, Puerto Rico, Virgin Islands, Maine, Vermont, New Hampshire, Massachusetts, Rhode Island, Connecticut, New Jersey, New York, Delaware, Maryland, Pennsylvania, and Washington DC. 5

7 j. Q 2 Administrators 17 ( is the QIC for the Part B South jurisdiction and C2C ( handles the reconsideration appeals for both the Part B North jurisdiction and DME. 18 k. A QIC s geographic jurisdiction should be specified in the notice of redetermination, 19 but generally will be determined by the state where the medical equipment, supply or service was supplied or provided. In the case of chain providers, the jurisdiction is with the QIC with responsibility for the state within which the provider s intermediary (for the claim in question) is located. The exception to the chain provider rule is that, for claims redetermined by Mutual of Omaha, jurisdiction resides in the QIC which covers the state where the good or service was rendered. l. The Administrative QIC ( AdQIC ) is responsible for developing operational procedures and protocols for the QICs, data analysis for CMS and the QICs, training of QIC personnel, and serving as a liaison in case file distribution between the Office of Medicare Hearings and Appeals (OMHA), and the Medicare Appeals Council. For additional information on the AdQIC, please visit m. Use CMS Form for filing appeals to QICs as published at 16 MAXIMUS Federal Services, Inc. QIC Part A West P.O. Box King of Prussia, PA Washington, Idaho, Montana, North Dakota, South Dakota, Iowa, Missouri, Kansas, Nebraska, Wyoming, Utah, Arizona, Nevada, California, Alaska, Hawaii, Oregon, Kentucky, Ohio, Indiana, Illinois, Minnesota, Michigan, Wisconsin, Guam, Northern Mariana Islands, and American Samoa. 17 Q 2 Administrators Part B QIC South Operations P.O. Box Columbus, Ohio Attn: Administration Manager Colorado, New Mexico, Texas, Oklahoma, Arkansas, Louisianan, Mississippi, Tennessee, Alabama, Georgia, Florida, North Carolina, South Carolina, Virginia, West Virginia, Puerto Rico, Vigin Islands. 18 (All DME) C2C Solutions, Inc. DME Reconsiderations P.O. Box Jacksonville, FL C.F.R (a). 6

8 n. The office with general oversight responsibility over QICs is: CMS Centers for Medicare Medicare Enrollment and Appeals Group Division of Appeals Operations ATTN: Maria Ramirez 7500 Security Blvd. Mail Stop C Baltimore, MD To resolve problems with QICs on procedural issues, direct inquiries to the QIC project officer in the CMS Division of Appeals Operations, who is: Maria Ramirez (fax) o. The office with oversight of overpayment recoupment is the Financial Services Group, Division of Medicare Debt Management. Debbie Miller This is the office to contact if a contractor has prematurely commenced recoupment in violation of a stay of recoupment. 5. Third Level: ALJ Hearings. a. Amount in controversy (for 2012) must be at least $130, adjusted annually by the medical care component of the consumer price index for all urban consumers. The amount in controversy requirement can be met by aggregation of (i) individual claims each under $130 (for 2012) if the claims involved the delivery of similar or related services to the same individual or involved common issues of law and fact arising from services furnished to two or more individuals, (ii) two or more suppliers involving common issues of law or fact arising from services provided to multiple beneficiaries, 20 and (iii) shoe box claims in which a single supplier can include adverse determinations of all types for multiple beneficiaries. 21 Disputed amounts previously paid 20 40, Moore v. Sullivan, 785 F. Supp. 44 (S.D.N.Y. 1992), Medicare and Medicaid Guide (CCH) See 42 C.F.R (e). 7

9 under limitations of liability can be included in calculating the amount in controversy. 22 As a practical matter, the techniques of aggregating claims are less important for the purposes of meeting the $100 amount in controversy requirement than they are for the purpose of assembling cases of sufficient size to warrant the considerable expense of bringing such appeals. Aggregation of claims differs from consolidation of claims. Consolidation of claims is a matter within the ALJ s discretion. b. When: within sixty (60) days of receipt of the QIC determination. c. Specify exactly which determinations you are appealing. Avoid general appeal statements, such as, I appeal the QIC s decision. Often, the QIC will decide some determinations in your favor, and some against you. You do not want to appeal the favorable determinations. If an ALJ indicates that he or she wants to re-open determinations which the QIC decided in your favor, remind the ALJ that (i) Medicare policy is that It is not intended that the appeals procedure be used as a vehicle to audit favorable initial determinations to the detriment of the party that is appealing the denied portion of the claim 23 and (ii) the regulations specify that it is the appellant who designates the specific claims to be aggregated for an appeal. 24 However, if evidence is presented to the ALJ before or during the hearing which causes the ALJ to question a fully favorable determination, he or she may re-open and re-decide the fully favorable determination. 25 A dismissal by a QIC may be appealed to an ALJ, but to no higher level. d. How: by a writing clearly evidencing a request for an ALJ hearing on forms or with all information required on the prescribed DHHS forms. The prescribed form to request an ALJ appeal is Form CMS 20034A/B which may be found at The request must be filed with the entity specified in the QIC s reconsideration determination. 26 e. ALJs must decide the case within 90 days, or appellant may escalate to Medicare Appeals Council. The 90 days starts when the appeal request is received at OMHA; not when the record is received from the QIC C.F.R (d)(2). IOM 100-4, Medicare Claims Processing Manual, Ch C.F.R C.F.R (d). 42 C.F.R (b). 8

10 f. Appellant may waive 90 day deadline, and it may be wise to waive escalation in order to receive favorable consideration of good cause requests for new evidence, such as statistical expert witness testimony. g. QICs may participate in ALJ hearings as required by the Secretary. h. Four regional centers for OMHA ALJs. OMHA is part of DHHS, but not part of CMS. OMHA administratively houses the ALJ function. 1. In a recent change, OMHA requires appellants to file appeals for ALJ review with its new Centralized Docketing office. Its address is: HHS OMHA Centralized Docketing 200 Public Square, Suite 1260 Cleveland, OH Depending on caseload balance among the four OMHA Filed Offices, the Centralized Docketing Office may assign an appeal to any of the Field Offices, rather than appeals always being sent to the Field Office previously serving the appellant s HHS Region. 2. Please direct inquiries to any one of the following tollfree numbers: a) Mid-Atlantic Field Office 27 (866) b) Southern Field Office 28 (866) c) Mid-West Field Office 29 (866) d) Western Field Office 30 (866) i. Videoconference hearings. - In-person appearance of right only for appellant, if approved by presiding ALJ C.F.R (a) 42 C.F.R (a) 42 C.F.R (a) 42 C.F.R (a) 9

11 - To increase odds of receiving an inperson hearing, consider offering to present the case in person before the ALJ at his or her regional center. Such an offer should remove DHHS s hesitancy to have inperson ALJ hearings because of government travel costs. - OMHA may offer to pay for at least one OMHAapproved remote VTC studio access for an appellant. j. New evidence admitted only for good cause. - Exceptions: oral testimony at the hearing; CMS; or unrepresented beneficiaries. k. Discovery available, if CMS enters as a party. 31 l. Tip: Seek inperson hearing (be prepared to travel to ALJ regional hearing center). m. Tip: Specify if there is a dire need for earlier scheduling of the hearing. n. Tip: Examine, and if possible obtain a copy of, the ALJ s copy of the Record. 32 o. Tip: Request a prehearing conference. 33 There is not a right to a prehearing conference, but ALJs can be expected to grant them because they are usually very helpful to the ALJ in managing the adjudication of the appeal. A prehearing conference may present an opportunity to meet the ALJ s attorney advisor and support staff, who can be very helpful in the smooth handling of problems which may arise. The topics which can be covered include, but are not limited to: 1. Witnesses 2. Parties a) Will ALJ have his/her own witness(es) b) Expert witnesses. c) Remote testimony of witnesses. d) Use of affidavits in lieu of live testimony. e) What role will QIC play? a) Is CMS (or a MAC or QIC) intervening as a party or participating as a participant? C.F.R (a). 42 C.F.R C.F.R

12 b) Will CMS be filing briefs or offering evidence as an participating non-party? c) Will participants be subject to crossexamination by the appellant? 3. Documents. a) Review the record. b) Arrange copying of the record. c) Identify defects in the record. d) Ascertain how OMHA has organized and marked the exhibits in the record. Ascertain if there is a master file in addition to files for claims for individual beneficiaries. 4. Stipulations/Issues/Discovery Needs. a) Discuss possible stipulations. b) Offer to prepare prehearing briefs on critical issues and pertinent law. c) Discuss discovery needs, subpoenas, etc. d) Determine what will help the ALJ handle the case. 5. Determination of place and time of the hearing. 6. Hearing Planning. a) Estimate length of hearing. b) Order of presentation. c) Discuss types of exhibits (especially if other than paper exhibits). d) Discuss any complications in a big box appeal (namely, an appeal with voluminous records). 7. Obtain permission to use a court reporter (as unofficial recorder). The transcript will be helpful for post-hearing briefs and proposed findings of fact, if such are allowed by the ALJ. To hedge against OMHA s or other s loss of the OMHA digital recording of the hearing (which is the official record of the hearing), obtain a duplicate of the digital recording at the conclusion of the ALJ hearing. The digital recording will be a necessary part of the record, if further appeal is necessary. 8. Videoconferencing arrangements. a) Coordinating and obtaining approval of location, equipment and VTC technicians. 11

13 b) Coordination of document numbering and indexing for coordinated remote referencing of documents. c) Coordination of exhibit marking system. d) Determine system for handling non-paper exhibits, PowerPoint presentations, physical evidence, videos, etc. e) Obtain firewall access authorizations and pretest of electronic measures. p. There are only approximately 80 OMHA ALJs, so their individual workloads will be very heavy. Do everything you can to make it easy for the ALJ to decide your case. For example, specify in the appeal request or in a prehearing brief the issues involved, an explanation of the relevant law, and a summary of the evidence. q. ALJs may remand a case to the QIC for certain reasons, including where the written record is missing information that is essential to resolving the issues on appeal and that information can only be provided by CMS or its contractors. 34 r. ALJs have subpoena power. 35 s. Tip: Be proactive on transfer of appeal records. Don t assume that they will be transferred in complete or accurate form or timely. t. If unresolved administrative problems arise in dealing with an OMHA ALJ regional office, consider seeking assistance or intervention from the OMHA or an attorney from the DHHS Office of General Counsel. If there is an unresolved problem in the QIC s assembly or transmittal of the appeal record to the ALJ, consider contacting the CMS Division of Appeal Operations (see page 7 supra.). 6. Fourth Level: Medicare Appeals Council. a. When: within sixty (60) days of receipt of notice of ALJ decision. 36 b. How: by a writing clearly evidencing desire for a Medicare Appeals Council review and otherwise complying with 42 C.F.R or by Form DAB 520. Time sensitive appeals may be faxed. On urgent matters call the Operations Director to arrange expedited handling of the appeal after it is filed. Forms are available at In the appeal petition, C.F.R C.F.R C.F.R

14 reference both the ALJ docket number and the individual Medicare health insurance numbers of the beneficiaries whose claims are being appealed. Also reference the date of the ALJ decision, the original carrier, intermediary, or Medicare administrative contractor and type of claim/service being appealed. With the request for appeal, you should submit all documents or other supporting evidence which you wish to be considered (assuming, of course, that such evidence has been admitted by the ALJ). At a minimum, include the ALJ decision and its attachments, if any. In voluminous filings, point out or highlight pertinent points and information to assist the Medicare Appeals Council personnel in organizing the case for consideration by the judges. The AdQIC (see page 7 supra) is formally in charge of transmitting the record of the ALJ hearing to the Medicare Appeals Council. It may be wise to confer with the AdQIC to insure that it has acquired and is transmitting all parts of the ALJ s record. This is particularly important with respect to easily misplaced or overlooked items such as the digital recording of the hearing, passcodes to encrypted electronic data, and lack of corruption in electronic data and evidence files. If there is an unresolved problem with the AdQIC in the transmittal of the appeal record to the Medicare Appeals Council, consider contacting the CMS Division of Appeals Operations (see page 7 supra). c. If the ALJ has ruled favorably for you on a substantial number of determinations under appeal, think carefully about whether you want to risk reversal of those favorable determinations by appealing to the Appeals Council. The reason for this risk is that the Appeals Council is authorized to review de novo all elements of the ALJ s decision. 37 While the Appeals Council can review all determinations, the practice of the Appeals Council is not to open all issues but is to focus on the issues specified by the appellant. d. The Medicare Appeals Council was formerly a part of the Social Security Appeals Council, but is now consolidated with the DHHS Departmental Appeals Board ( DAB ). The contact information for the Medicare Appeals Council is: Department of Health and Human Services Departmental Appeals Board Medicare Appeals Council, M.S Cohen Building Room G Independence Ave., S.W. Washington, D.C Phone: (202) Fax: (202) C.F.R (a). 13

15 e. The Medicare Appeals Council rules of procedure are set forth at 42 C.F.R , et seq. f. Upon proper request, the Medicare Appeals Council will allow you to file briefs and other written statements. 38 g. The Medicare Appeals Council may initiate a review of an ALJ decision on its own motion within sixty (60) days of the date of the ALJ decision. CMS or its contractors can refer a case to the Medicare Appeals Council for consideration of own motion review, particularly if CMS or its contractor participated in the ALJ hearing. 39 h. The Medicare Appeals Council must implement its own motion review within the sixty (60) days -- this time period cannot be extended. The Medicare Appeals Council must file the notice of acceptance of the own motion review on or before the sixtieth (60 th ) day. i. If the sixty (60) days ends on a holiday or weekend, then the last working day before the sixtieth day becomes the final day to accept review. j. The Medicare Appeals Council usually limits its Own Motion Review of the record to (i) error material to the decision, (ii) abuse of discretion, (iii) conclusions not supported by the preponderance of the evidence, and (iv) issues of broad public policy. 40 Review is usually on the record, although in certain circumstances, new material evidence may be submitted. 41 A party to the appeal can file briefs. 42 Usually, the Medicare Appeals Council does not grant a hearing, but it has the discretion to grant a hearing. 43 k. The Medicare Appeals Council may remand a case to the ALJ for further consideration or action. One common cause for remand is the absence from the record of the official audiotape (or videotape, CD or DVD) of the ALJ hearing. Follow-up promptly with the ALJ s office to make sure the audiotape (or videotape, CD or DVD) does not become lost and is included in the record when the ALJ s office sends the record to the Medicare Appeals Council. Also, if a federal court has remanded a case to the Medicare Appeals Council for further C.F.R C.F.R C.F.R (c). 42 C.F.R C.F.R C.F.R

16 evidence, the Medicare Appeals Council will likely further remand such a case to the ALJ. l. Even if the Medicare Appeals Council does not accept a case for own motion review, it has (i) 180 days to re-open the case for good cause, and (ii) no time limit to re-open the case for fraud. 44 m. CMS claims it can also ask the Medicare Appeals Council to reopen a decision after the sixty (60) days has expired. The Medicare Appeals Council s reopening of ALJ decisions in response to a CMS request has been attacked in court with differing results. One court has held that only claimant s requests for reopening can be honored. 45 Another court has allowed reopenings contrary to claimant s desires. 46 n. See and divisions/medicareoperations/macdecisions/mac_decisions.html for selected decisions of the Medicare Appeals Council. o. Medicare Appeals Council must decide within 90 days, unless the appeal has been escalated from the ALJ level. p. If the Medicare Appeal Council fails to decide within 90 days (or as appropriately extended), then appellant can escalate to federal court review. q. Appellants may waive the 90 day deadline. r. Oral argument may be allowed in special cases. s. Standard of review is de novo Fifth Level: Federal Court. a. When: within sixty (60) days of Medicare Appeals Council s decision. 48 b. $1,000 minimum amount in controversy ( AIC ) (adjusted annually for inflation, beginning in 2005). The 2011 AIC is $1,350 (74 Fed. Reg. at 48977, Sept. 25, 2009). c. Where: file complaint in district where supplier/provider is located or in Washington, D.C. d. Defendant: the Secretary of HHS C.F.R (d)(3). See, e.g., McCuin v. Bowen, 817 F.2d 161 (1 st Cir. 1987). See, e.g., Fox v. Bowen, 835 F.2d 1159 (6 th Cir. 1987). 42 C.F.R (a). 42 U.S.C. 405(g). 15

17 - adversarial process e. The standards of review for Medicare claims on appeal to federal court are substantial evidence as to findings of fact; 49 arbitrary, capricious or an abuse of discretion as to procedural matters, 50 and de novo as to matters of law. f. Government motions for remand are likely under 42 U.S.C. 405(g), which provides two (2) remand procedures: a Sentence 4 remand and a Sentence 6 remand. These colloquial terms refer, respectively, to the fourth and sixth sentences of 42 U.S.C. 405(g). Under Sentence 4, the court retains jurisdiction and essentially decides the case, although the formal outcome may be a remand for implementation of the court s decision. In contrast, under a Sentence 6 remand, the court relinquishes jurisdiction so that the merits of the case (most likely based on additional evidence) are decided on remand by the Medicare Appeals Council or, most likely, by the ALJ to whom the Medicare Appeals Council will likely further remand the case when it returns from federal court. g. Expect inadequately developed cases to be remanded. II. SPECIAL PROBLEMS. A. Challenge to Manuals, Instructions and Methods. 1. Limited Authority of the Medicare Internet Only Manual (IOM) and Other Medicare Manuals. Contractors often will rely on provisions from the IOM or other Medicare Manuals as legal authority for their actions in connection with the post-payment audits. These Manuals are not binding per se on suppliers or providers, but they do state CMS s interpretation of regulations and law and are not to be ignored. The appeals system will give a substantial, but not total, deference to these Manuals. In addition, the Manuals may be important evidence of what the suppliers or providers knew or should have known about a particular Medicare coverage instruction or other policy. Such knowledge may determine whether a supplier or provider can avail itself of the limitation of liability or without fault defenses. Because the Manuals are binding on the contractors in their relations with CMS, contractors take the position that the Manuals bind suppliers and providers. While the Manuals may be persuasive, at least two courts have held that suppliers cannot be held accountable under Carriers Manual provisions. 51 Also, U.S.C. 405(g) 50 5 U.S.C. 706(2)(A). 51 Physicians and Surgeons Laboratories, Inc. d/b/a Physicians Reference Laboratory v. Bowen, No. C87-112A (N.D. Ga., February 12, 1987), Medicare and Medicaid Guide (CCH) 36,680; Glick v. Secretary of HHS, 714 F. Supp. 39 (D. Mass. 1989). 16

18 ALJ s are not bound by the Manuals, 52 deference. 53 although ALJs must give the Manuals substantial 2. Contemporaneous Records. Contractors have in some cases attempted to impose a requirement that suppliers rebut contractor medical necessity determinations only through the use of records created contemporaneously with the furnishing of the services or goods to the beneficiary. There is no statutory basis for requiring this standard. Often records of claims involved in post-payment audits were prepared years ago before physicians, providers or suppliers could have known of current contractor expectations of explanatory documentation. While records should never be altered, additional narrative explanation from the physician s, provider s or supplier s personal knowledge and memory should be admissible evidence. The QIC and ALJ can assess its credibility. B. Judicial Challenges As a general rule, direct challenges in federal court for matters arising under the Medicare program lack subject matter jurisdiction. 54 In Illinois Council, the Supreme Court took a broad view of the exclusivity of the judicial review method set forth in Section 405(g) & (h) of the Social Security Act (incorporated into the Medicare Act by virtue of 42 U.S.C. 1395ii), which provides that no action against the United States, the [Secretary], or any officer or employee thereof shall be brought under section 1331 or 1346 of title 28 to recover on any claim arising under this subchapter. 55 The bar of jurisdiction under 405(h) reaches beyond ordinary administrative law principles of ripeness and exhaustion of administrative remedies and effectively requires the channeling of virtually all controversies through administrative appeals processes established by the agency. 56 Illinois Council, substantially narrowed the exception to the jurisdictional bar understood by courts from the Supreme Court s prior decision in Bowen v. Michigan Academy of Family Physicians. 57 This decision, had been interpreted to permit limited direct judicial review of issues relating to the method under which payment and payment amounts are determined under Medicare Part B, but did not extend judicial review to the amount of reimbursement payable to Part B suppliers. Illinois Council clarified that the Michigan Academy exception applies only when the application of the jurisdictional bar in section 405(h) would not simply channel review through the agency, but would mean no review at all. 58 From a practical standpoint, this means that the appeals processes established under (for example) 42 C.F.R et seq. and et seq. must (with certain limited exceptions discussed below) be utilized for challenges to agency policy, even when such challenges may be based on statutory or Constitutional grounds. This does not mean that all such futile challenges 52 See, Schweiker v. Hansen, 450 U.S. 785, 789 (1981) (Social Security Claims Manual is not a regulation and is not binding as a matter of law); Shalala v. Gurnsey Memorial Hospital, 514 U.S. 87, 99 (1995) (HHS Manuals are not accorded like force and effect of law in adjudicatory proceedings); In Home Health, Inc. v. Shalala, 188 F.3d 1043, 1046 (8 th Cir. 1999); Christensen v. Harris County, 529 U.S. 576, 587 (agency opinion letter interpreting Fair Labor Standards Act was not binding law, nor are agency policy statements, enforcement guidelines or manuals) C.F.R See. Illinois Council on Long Term Care, Inc v. Shalala, 529 U.S. 1 (2000). 55 Id. at Id U.S. 667, 106 S. Ct (1986). 58 Illinois Council, 529 U.S. at

19 must proceed through each level of the administrative appeals process. For example, a supplier my seek expedited access to judicial review if the controversy involves no disputed material issues of fact and the only factor precluding a decision favorable to the supplier is a statutory provision that is unconstitutional, a provision of a regulation or national coverage decision, or a CMS Ruling. 59 The request for expedited access to judicial review cannot be made prior to receiving a reconsideration determination from a QIC, however, and it must be affirmatively granted by a review entity comprised of ALJ members of the DAB. 60 Thus, not all levels of the administrative review process may be skipped, and the agency must acquiesce to the request. While Illinois Council makes direct challenges to agency regulations, etc. extremely difficult, there are situations in which such challenges can be made. For example, courts have consistently held that the jurisdictional bar in section 405(h) does not apply to section 1361 (mandamus) jurisdiction. 61 While mandamus is an extraordinary form of relief, limited to actions attempting to compel an agency to perform an allegedly non-discretionary duty owed to the supplier, as the example cases noted illustrate, there are instances in the Medicare context where it may arise. In addition, the D.C. Circuit interpreted the Illinois Council exception to recognize that in certain situations the prospect of financial ruin and major penalties could make administrative procedures, for all practical purposes unavailable, including the judicial review that would follow. 62 In such instances, the American Lithotripsy court held that administrative review was effectively not available, and federal court jurisdiction lies. 63 Finally, the D.C. Circuit has held that, while the Illinois Council exception is primarily concerned with whether a particular claim can be heard though the Medicare Act channels, we see nothing in the case law requiring us to disregard factors that speak to a potential proxy s willingness and ability to pursue the plaintiff s claim where the plaintiff has no direct channel to the administrative appeals process. 64 Thus, with limited exceptions, providers and suppliers seeking to challenge a regulation, manual provision, or method, will need to pursue their remedies through administrative channels. It is only in exceptional cases where a supplier or provider can show that it has been precluded from such review that a direct judicial challenge can be made. C. Consent Settlement Demands and Agreements. In some cases of post-payment audits, the carrier or a Medicare administrative contractor ( MAC ) will notify the supplier that it has performed a pilot audit of a sample of the supplier s claims and projected a potential overpayment based on several years of claims. The carrier or C.F.R (d). 42 C.F.R (a) & (b). See e.g., Monmouth Med. Ctr. v. Thompson, 257 F.3d 807, 813 (D.C.Cir. 2001); Cordodoba v. Massanari, 256 F.3d 1044, 1047 (10 th Cir. 2001); Buchanan v. Apfel, 249 F.3d 485, (6 th Cir. 2001). 62 American Lithotripsy Society v. Thompson, 215 F.Supp. 2d 23 (D.C.Cir. 2002) (Challenge to the regulatory interpretation of the Stark law precluding reimbursement for physician referrals to their own lithotripsy centers. In order to challenge the interpretation administratively, the physicians risked statutory penalties of up to $15,000 per claim, potential criminal penalties and exclusion from Medicare.) 63 Id. at See also, Physician Hospitals of America v. Sebelius, 770 F.Supp. 2d 828 (E.D. Tex. 2011) (To challenge Constitutionality of Section 6001 of PPACA the physician-owned hospital would be required to construct or expand a hospital at significant expense, which was an inconceivable gamble for a hospital to take, thus the Illinois Council exception was met). 64 Council for Urological Interests v. Sebelius, 2011 WL (D.C. Cir. 2011) (Association of doctor-owned equipment providers challenged Stark regulation affecting joint ventures, when there was no willingness of hospitals to challenge the interpretation). 18

20 Medicare administrative contractor may offer the provider three options: (1) repay the projected overpayment and execute a consent settlement, (2) provide further information and documentation to rebut the disallowances found in the sample, or (3) proceed to a further statistically valid sample audit and projection of the detected overpayment rate to a supplier s past claims. Under CMS s instructions, the carrier or MAC is to project the detected error rate only to the universe of claims from which the audit sample was drawn. Also, under CMS s instructions, the carriers and MACs are not supposed to be coercive in consent settlement procedures. For example, a carrier or MAC should not threaten the supplier with doing a statistically valid audit of a larger universe (namely, more years of claims) than the consent settlement sample universe, if the supplier does not agree to the consent settlement. The consent settlement procedure set forth in the IOM is designed to deal with suspected overutilization of procedures by physicians. 65 CMS has informally instructed carriers and MACs on how to conduct consent settlement procedures for other suppliers. Because a consent settlement proposition does not involve a determination and because the consent settlement process is not established expressly by regulation, there is no authority for CMS or the carrier or MAC to collect the projected overpayment in a consent settlement procedure, if the supplier does not agree to a settlement. Generally, however, it is best to find a way to settle consent settlement allegations to avoid forcing the carrier to take more aggressive steps under harsher procedures. Although consent settlement demands are not determinations, file an appeal request to preserve appeal rights to guard against attempts to recharacterize the demands as determinations. Extreme care should be taken in reviewing or drafting the final settlement or consent agreement. Regard consent settlement forms sent by the carrier or MAC with great caution. Generally, the first draft from the carrier or MAC will provide little protection to the supplier. Redraft the settlement agreement to indicate that, among other things, settlement is being made of a disputed claim without admission of the validity of the disallowance of the sampling or other methodologies used by the carrier. It is important that no adverse admissions be made, particularly since the matter may be reviewed by CMS or the OIG for other purposes. Section 935 of the Medicare Prescription Drug, Improvement and Modernization Act of 2003 provides a number of reforms to be observed by CMS and its contractors in implementing the consent settlement procedure. D. Repetitive Denials After Non-Precedential Determinations. The concept of administrative regularity may be invoked in situations where a Medicare administrative contractor, carrier, or intermediary continues to deny claims on the same issue in which a provider has repeatedly prevailed in administrative proceedings. In these situations, the contractor typically justifies such repetitive denials on the basis that prior administrative appeal decisions are not binding precedent. Even though such administrative decisions are not precedential like judicial opinions are, an agency may still be required to follow prior decisions made on its behalf by an appeal entity (QIC, ALJ or MAC). To the extent that the appeal entity s decision becomes that of the agency, 65 See MCM

21 then there is room to argue, as was recognized in the St. Francis case involving the CMS Administrator, that: The Administrator s departure from his earlier opinions cannot be permitted. It is an elementary tenet of administrative law that the agency must either conform to its own precedent or explain its departure from them. [Citing International Union v. NLRB, 459 F.2d 1329 (D.C. Cir. 1972).] 66 Cases involving estoppel similarly suggest that there should be a limit to the carrier, intermediary, or Medicare administrative contractor repetitively denying claims where the issues at stake have been resolved against the carrier, intermediary, or Medicare administrative contractor in prior administrative adjudications. 67 See also Dewall Enterprises v. Thompson 68, where the court held that the Secretary owed the DME claimant a non-discretionary duty to apply the rulings in earlier administrative appeals to later claims involving the identical claimant, identical device and identical regulation. 69 E. Exhaustion of Administrative Remedies Not Required for Government Overpayment Recovery Efforts. Although providers and suppliers almost always have to exhaust administrative remedies through the administrative appeals process for relief on disputed Medicare claim denials, the First Circuit holds that the exhaustion requirement does not apply to the federal government when it seeks to recover alleged Medicare overpayments. In U.S. v. Lahey Clinic Hospital, Inc. 70, the United States sued in federal district court under 28 U.S.C to assert common law causes of action for recovery. The provider defended on the grounds, among others, that the court lacked jurisdiction because the government had failed to invoke and exhaust administrative remedies, such as claim reopening and denial which would trigger administrative appeal remedies. The First Circuit held that the federal court had jurisdiction because federal statutes did not limit the government s recourses to the Medicare administrative reopening and appeal processes. F. Asking CMS and DHHS for Help Procedural difficulties sometimes arise due to misinterpretations or complexities of the case at issue. Often these practices are unknown to CMS or DHHS. Many times, if the matter cannot be resolved with supervisors at the QIC, relief is for the asking by contacting CMS. The office with general oversight responsibility over QICs is: 66 St. Francis Community Hospital v. Schweiker, [ Transfer Binder] Medicare and Medicaid Guide (CCH) 34,156 at page 10,188 (D.S.C., Civil Case No , March 10, 1983), aff d, No (4th Cir., Jan. 17, 1984). 67 See United States v. Utah Constr. & Mining Co., 384 U.S. 394, 422, 86 S.Ct (1966); Ingalls Shipbuilding v. United States, 21 Cl.Ct. 117 (1990). See also Stern v. Shalala, 14 F.3d 148 (2d Cir. 1994), cert denied, 516 U.S. 821, 116 S.Ct. 82 (1995). ( Petitioner presents a substantial argument that the imposition of penalties based on a finding of scienter is barred by the collateral estoppel effect of the prior administrative determination that there was a legitimate difference of opinion whether Stern s services were reimbursable. ) F.Supp.2d 992 (D. Neb. 2002). See also Gessler v. Dept. of Business and Prof. Reg., 627 So.2d 501, 504 (Fla. 4th DCA, 1993). 399 F.3d 1 (1 st Cir. 2005), cert. denied 126 S.Ct. 339 (2005). 20

22 CMS Centers for Medicare Medicare Enrollment and Appeals Group Division of Appeals Operations ATTN: Maria Ramirez 7500 Security Blvd. Mail Stop C Baltimore, MD To resolve problems with QICs on procedural issues, direct inquiries to the QIC project officer in the CMS Division of Appeals Operations, who is: Maria Ramirez (fax) In our experience, the OMHA ALJs are skilled in the reasonable exercise of discretion to accommodate solutions to procedural and administrative needs or problems in the ALJ appeal level. Intractable administrative or procedural problems with unreasonable ALJ or other personnel in ALJ appeal centers may be brought to the attention of David Cade, Esq., DHHS Office of General Counsel, Washington, D.C. G. Sampling and Extrapolation Claims. Carriers and Medicare administrative contractors conduct post-payment audits by reviewing a sample of patient files from a multi-year period. The rate of overpayment found in the sample will then be projected ( extrapolated ) on all claims submitted during the period in question to estimate an alleged overpayment. Many times, this sampling and extrapolation technique generates recoupment demands against the provider in the hundreds of thousands of dollars. The authority of the carriers and Medicare administrative contractors to use a sampling technique as the basis upon which to extrapolate a universal overpayment has usually been upheld by the courts. 71 Chapter 8 of the Medicare Program Integrity Manual ( MPIM ) sets forth, in occasionally tortured language, general parameters (but not detailed cookbook instructions or standards) to be followed (but not necessarily read literally with plain English meanings) in statistical sampling and extrapolation. A difficulty in understanding the MPIM s parameters is that the MPIM often uses many plain English words with very different coded statistical meanings. It is difficult to determine when the MPIM intends that a word have its plain English meaning or its statspeak meaning. Examples of seemingly plain English words in Chapter 8 of 71 United States v. Lahey Clinic Hosp., 399 F.3d 1 (1st Cir. 2005); Chaves County Home Health Services v. Sullivan, 931 F.2d 914, Medicare and Medicaid Guide (CCH) 39,181, (D.C. Cir. 1991, cert. denied, 502 U.S. 1091, 112 S.Ct. 1160, 117 L.Ed. 408 (1992); Ratanasen v. Calif. Department Health Services, 11 F.3d 1467, Medicare and Medicaid Guide (CCH) 42,040, (9th Cir. 1993); see, e.g. Mile High Therapy Centers, Inc. v. Bowen, 735 F.Supp. 984, Medicare and Medicaid Guide (CCH) 37,180 (D. Colo 1988); Illinois Physicians Union v. Miller, 675 F.2d 151, Medicare and Medicaid Guide (CCH) 37,895, (7th Cir. 1982); Glick v. Secretary of HHS, 714 F.Supp. 39 (D. Mass. 1989). 21