Medicare Fee-For-Service: Opportunities Remain to Improve Appeals Process

GAO-16-366 Published: May 10, 2016. Publicly Released: Jun 09, 2016.
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Highlights

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.

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Recommendations

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.

Recommendations for Executive Action

Agency Affected Recommendation Status
Department of Health and Human Services 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.
Closed – Implemented
HHS agreed with our recommendation and, subsequently, OMHA-the agency responsible for appeals at Level 3--added a "Reason for Disposition" data field in its Electronic Case Adjudication and Processing Environment (ECAPE) system. ECAPE was implemented agency-wide, as of December 2019. In addition, DAB-the agency responsible for appeals at Level 4-modified its case management system to capture the procedural issues related to Level 3 appeal dismissals. According to DAB officials, DAB has also taken steps to increase its case management system's interoperability with the other Medicare appeals systems. These actions will increase HHS's ability to monitor appeals trends and make improvements to the appeals process.
Department of Health and Human Services 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).
Closed – Implemented
HHS generally agreed with our recommendation, and OMHA and DAB took some actions to collect this information. In June 2016, OMHA proposed a change in the basis for determining the amount in controversy, which would have resulted in the reporting of the allowed amount for certain denied claims at Level 3 of the appeals process. However, this provision was removed after HHS conducted further analysis and determined that the costs of the proposal outweighed the benefits. Further, HHS officials stated in August 2019 that developing a methodology to estimate the amount that CMS would have paid providers is complex. As of September 2021, DAB officials stated that MODACTS had been modified to capture the amount in controversy if this information was available in the appeal claim file. However, if prior appeals levels had not included this information in the claims file, DAB would be unable to capture the amount in controversy in MODACTS. We appreciate HHS's efforts to evaluate this proposed change, and are closing this recommendation as implemented based on HHS's actions to meet the intent of the recommendation.
Department of Health and Human Services 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.
Open
HHS agreed with our recommendation, and as of September 2021, HHS continues 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 MAS to standardize appeal categories between Levels 1 through 3. HHS also reported that, as of May 2021, all Part A MACs were successfully processing Part A Level 1 appeals in MAS, and Part B and DME MACs were in the process of transitioning to MAS. In addition, HHS reported that ECAPE, which interacts with MAS for reporting purposes, was implemented agency-wide at OMHA, as of December 2019. In September 2021, DAB officials reported that CMS, OMHA, and DAB had established interoperability between appeals systems that did not exist when we issued our report in 2016. Information shared includes the procedural issues that led to Level 3 appeal dismissals. However, until Part B and DME MACs are fully transitioned to MAS, HHS will be unable to collect and share standardized appeals information across appeal levels. We will continue to monitor progress on the implementation of this recommendation.
Department of Health and Human Services 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.
Closed – Implemented
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.

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