Medicare Fee-For-Service:

Opportunities Remain to Improve Appeals Process

GAO-16-366: Published: May 10, 2016. Publicly Released: Jun 9, 2016.

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What GAO Found

The appeals process for Medicare fee-for-service (FFS) claims consists of four administrative levels of review within the Department of Health and Human Services (HHS), and a fifth level in which appeals are reviewed by federal courts. Appeals are generally reviewed by each level sequentially, as appellants may appeal a decision to the next level depending on the prior outcome. Under the administrative process, separate appeals bodies review appeals and issue decisions under time limits established by law, which can vary by level. From fiscal years 2010 and 2014, the total number of filed appeals at Levels 1 through 4 of Medicare's FFS appeals process increased significantly but varied by level. Level 3 experienced the largest rate of increase in appeals—from 41,733 to 432,534 appeals (936 percent)—during this period. A significant portion of the increase was driven by appeals of hospital and other inpatient stays, which increased from 12,938 to 275,791 appeals (over 2,000 percent) at Level 3. HHS attributed the growth in appeals to its increased program integrity efforts and a greater propensity of providers to appeal claims, among other things. GAO also found that the number of appeal decisions issued after statutory time frames generally increased during this time, with the largest increase in and largest proportion of late decisions occurring at appeal Levels 3 and 4. For example, in fiscal year 2014, 96 percent of Level 3 decisions were issued after the general 90-day statutory time frame for Level 3.

The Centers for Medicare & Medicaid Services (CMS) and two other components within HHS that are part of the Medicare appeals process use data collected in three appeal data systems—such as the date when the appeal was filed, the type of service or claim appealed, and the length of time taken to issue appeal decisions—to monitor the Medicare appeals process. However, these systems do not collect other data that HHS agencies could use to monitor important appeal trends, such as information related to the reasons for Level 3 decisions and the actual amount of Medicare reimbursement at issue. GAO also found variation in how appeals bodies record decisions across the three systems, including the use of different categories to track the type of Medicare service at issue in the appeal. Absent more complete and consistent appeals data, HHS's ability to monitor emerging trends in appeals is limited and is inconsistent with federal internal control standards that require agencies to run and control agency operations using relevant, reliable, and timely information.

HHS agencies have taken several actions aimed at reducing the total number of Medicare appeals filed and the current appeals backlog. For example, in 2014, CMS agreed to pay a portion of the payable amount for certain denied hospital claims on the condition that pending appeals associated with those claims were withdrawn and rights to future appeals of them waived. However, despite this and other actions taken by HHS agencies, the Medicare appeals backlog continues to grow at a rate that outpaces the adjudication process and will likely persist. Further, HHS efforts do not address inefficiencies regarding the way appeals of certain repetitious claims—such as claims for monthly oxygen equipment rentals—are adjudicated, which is inconsistent with federal internal control standards. Under the current process, if the initial claim is reversed in favor of the appellant, the decision generally cannot be applied to the other related claims. As a result, more appeals must go through the appeals process.

Why GAO Did This Study

In fiscal year 2014, Medicare processed 1.2 billion FFS claims submitted by providers on behalf of beneficiaries. When Medicare denies or reduces payment for a claim or a portion of a claim, providers, beneficiaries, and others may appeal these decisions through Medicare's appeals process.

In recent years there have been increases in the number of filed and backlogged appeals (i.e., pending appeals that remain undecided after statutory time frames). GAO was asked to examine Levels 1 through 4 of Medicare's appeals process. This report examines (1) trends in appeals for fiscal years 2010 through 2014, (2) data HHS uses to monitor the appeals process, and (3) HHS efforts to reduce the number of appeals filed and backlogged. GAO analyzed data from the three data systems used to monitor appeals, reviewed relevant HHS agency documentation and policies, federal internal control standards, and interviewed HHS agency officials and others.

What GAO Recommends

GAO recommends that HHS take four actions, including improving the completeness and consistency of the data used by HHS to monitor appeals and implementing a more efficient method of handling appeals associated with repetitious claims. HHS generally agreed with four of GAO's recommendations, and disagreed with a fifth recommendation, citing potential unintended consequences. GAO agrees and has dropped that recommendation.

For more information, contact Kathleen King at (202) 512-7114 or kingk@gao.gov.

Recommendations for Executive Action

  1. Status: Open

    Comments: According to HHS as of August 2016, OMHA and DAB were considering the cost and technical feasibility of collecting this information within their appeals data systems. As of August 2018, OMHA has begun to take action on this recommendation. Specifically, in the July 2017 interim release of the Electronic Case Adjudication and Processing Environment (ECAPE) system, OMHA added a "Reason for Disposition" data field. However, the "Reason for Disposition" data field is currently limited in the number of reasons that can be selected, and ECAPE has not yet been rolled out to all OMHA offices. We will update the status of this recommendation when we receive additional information regarding comprehensive reporting of this data field.

    Recommendation: To reduce the number of Medicare appeals and to strengthen oversight of the Medicare FFS appeals process, the Secretary of Health and Human Services should direct CMS, Office of Medicare Hearings and Appeals (OMHA), or Departmental Appeals Board (DAB) to modify the various Medicare appeals data systems to collect information on the reasons for appeal decisions at Level 3.

    Agency Affected: Department of Health and Human Services

  2. Status: Open

    Comments: According to HHS as of August 2016, this information was not captured in any CMS system, including MAS. HHS reported that if MAS is modified to capture the amount of Medicare allowed charges at stake, OMHA will consider modifying its Electronic Case Adjudication and Processing Environment (ECAPE) to include this information as well, and DAB can capture it in a new case management system currently being developed by the agency. As of August 2018, CMS is developing a methodology to estimate the amount that CMS would have paid providers, however, the methodology is complex and HHS does not think that it would be appropriate for use in determining whether the appeal meets the amount in controversy requirements for a Level 3 appeal. The basis for our recommendation was also so that HHS could better monitor important appeal trends. Additionally, without this information, HHS does not know the actual amount of Medicare reimbursement at issue in the appeals process. We will update the status of this recommendation when we receive additional information regarding HHS's efforts to implement it.

    Recommendation: To reduce the number of Medicare appeals and to strengthen oversight of the Medicare FFS appeals process, the Secretary of Health and Human Services should direct CMS, OMHA, or DAB to modify the various Medicare appeals data systems to capture the amount, or an estimate, of Medicare allowed charges at stake in appeals in Medicare Appeals System (MAS) and Medicare Operations Division Automated Case Tracking System (MODACTS).

    Agency Affected: Department of Health and Human Services

  3. Status: Open

    Comments: According to HHS as of August 2016, HHS reported taking several initial steps to standardize data across Medicare appeals systems. As of August 2018, HHS was continuing to take steps to implement GAO's recommendation to standardize data collection on appeals across its multiple data systems. Specifically, HHS stated that, in November 2016, CMS and OMHA modified the MAS system to standardize appeal categories between Levels 1 through 3, which will help to facilitate more accurate trending analyses across appeal levels. Further, as of April 2017, all Part A Medicare Administrative Contractors (MAC), who are responsible for Part A Level 1 appeals, were successfully processing appeals in MAS, according to HHS. However, Part B and DME MACs, which are responsible for Part B and DME Level 1 appeals, have not been fully transitioned to MAS. Therefore, appeals categories are still inconsistent for these claims. According to HHS, CMS has not received funding to transition the remaining Level 1 appeals contractors to MAS. Additionally, OMHA's ECAPE system, which will interact with MAS for reporting purposes, has not been implemented at all OMHA offices. Therefore, we will continue to monitor progress on the implementation of this recommendation.

    Recommendation: To reduce the number of Medicare appeals and to strengthen oversight of the Medicare FFS appeals process, the Secretary of Health and Human Services should direct CMS, OMHA, or DAB to modify the various Medicare appeals data systems to collect consistent data across systems, including appeal categories and appeal decisions across MAS and MODACTS.

    Agency Affected: Department of Health and Human Services

  4. Status: Closed - Implemented

    Comments: In April 2017, CMS took actions which implement our recommendation. Specifically, CMS informed Medicare FFS suppliers that the agency had directed the Medicare Administrative Contractors (MAC) that process claims for durable medical equipment and supplies to streamline the way in which they adjudicate appeals of certain serial claims. For example, MACs must now identify and take into consideration appeal decisions when adjudicating other denied claims in the same series. In addition, CMS instructed the MACs to conduct data analysis to identify other pending appeals in the series that could be resolved in a similar manner. CMS has implemented our recommendation by taking steps to resolve appeals of repetitive claims more efficiently, which will help to reduce the number of pending appeals contributing to the appeals backlog.

    Recommendation: To reduce the number of Medicare appeals and to strengthen oversight of the Medicare FFS appeals process, the Secretary of Health and Human Services should implement a more efficient way to adjudicate certain repetitive claims, such as by permitting appeals bodies to reopen and resolve appeals.

    Agency Affected: Department of Health and Human Services

 

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