A recent report by the Office of Inspector General for the Department of Health and Human Services (OIG) concluded that in Fiscal Year 2010, 61% of Medicare providers that appealed CMS payment decisions were fully successful in their respective appeal.  In other words, these providers persuaded the Administrative Law Judge (ALJ) handling the appeal to completely overturn previous adverse payment decisions made by CMS and its contractors.  Notably, of the 61% of providers that were successful, those appealing Part A and B claims had the most success, 67% and 59% respectively.

The Medicare overpayment appeal process consists of four levels.  At the first level of appeal, which is available after an initial overpayment determination, the individual or entity (appellant) appeals the overpayment decision to CMS’s Medicare Administrative Contractor.  If the appellant is unsuccessful, the next appeal is administered by CMS’s Qualified Independent Contractor (QIC).  The third level of appeal is administered by the ALJ, and the fourth level is administered by the Medicare Appeals Council.  OIG’s report contrasted the high success rate at the ALJ level to the low 20% success rate at the QIC level.  While there are many reasons for the difference, OIG’s report found that the main reason is that ALJs tend to view Medicare’s reimbursement and coverage policies less strictly than CMS’s contractors.  OIG also found that CMS participated in only 10% of all ALJ appeals, which resulted in the ALJ overturning CMS’s decision in 60% of these cases.

Our Insight. Your Advantage.  When considering whether to appeal a Medicare payment determination, keep in mind that a negative outcome is likely at the QIC level, but the appeal is more likely to pay off at the ALJ level.  It appears that ALJs tend to be more objective and independent when making decisions – especially when compared to CMS’s contractors.  For example, per OIG’s report, one QIC stated that it approaches the appeals process expecting to uphold the previous decision made by CMS’s contractor and will only reverse the decision when there is a compelling reason to do so. Thus, for this QIC, rather than approaching the appeal in an independent and objective fashion, the QIC is predisposed to rule in favor of CMS. Unfortunately, OIG ignored this issue and, while it recommended that a quality assurance process be implemented to review ALJ decisions, OIG did not recommend a similar quality assurance review of the QIC decision-making process.

Additionally, while this report should be encouraging to most providers, it is worth noting that OIG’s recommendations to CMS based on this data appear to be skewed toward making it more difficult for providers to successfully appeal.  For example, OIG’s report points out that certain providers were “frequent filers” of appeals and that these providers had a very high success rate on appeal.  In response to this data, OIG actually recommended that CMS impose a filing fee to discourage frequent appeals by the same providers.

Notwithstanding OIG’s recommendations, this report highlights the fact that appealing Medicare payment decisions can pay off.  Providers should carefully and systematically review negative determinations and consider an appeal when the provider believes the original claim for payment was justified and can be supported.