American Hospital Association v. Sebelius

209 F. Supp. 3d 221, 2016 U.S. Dist. LEXIS 126840
District Court, District of Columbia·Decided September 19, 2016·No. Civil Action No. 2014-0851·Published·Cited by 3 cases

Opinion

MEMORANDUM OPINION

JAMES E. BOASBERG, United States District Judge

The best medicine can sometimes be hard to swallow. More than two years ago, a set of Medicare service providers asked the Court to issue a writ of mandamus to compel the Secretary of Health and Human Services to process their long-pending claim-reimbursement appeals in accordance with statutory timelines. The Court declined to do so, believing the matter best left to the political process. The Court of Appeals disagreed, holding that this Court has jurisdiction to grant mandamus relief and remanding the case here for a determination on the merits. In response, the Secretary now moves to stay the proceedings until September 30, 2017, to allow HHS to move forward on various administrative and legislative efforts designed to tackle the backlog of reimbursement appeals. As was true two years ago, the Court is reluctant to intervene. But the backlog and delays have only worsened since Plaintiffs first sought the Court’s help, and the Secretary’s proposed solutions are unlikely to turn the tide. The Court accordingly will deny the Secretary’s Motion for Stay.

I. Background

The Court offered a primer on Medicare reimbursement in its first Opinion in this case. See Am. Hosp. Ass’n v. Burwell (AHA I), 76 F.Supp.3d 43, 46-48 (D.D.C. 2014), rev’d, Am. Hosp. Ass’n v. Burwell (AHA II), 812 F.3d 183 (D.C.Cir.2016). It now briefly reviews the aspects of the administrative-appeals process relevant to the instant Motion.

*223 Health-care providers and suppliers submit an extraordinary number of Medicare fee-for-service claims on behalf of the program’s beneficiaries—1.2 billion in fiscal year 2014. See Gov’t Accountability Office, Medicare Fee-for-Service: Opportunities Remain to Improve Appeals Process 1 (May 2016), http://www.gao.gov/assets/680/ 677034.pdf (GAO Report). A Medicare Administrative Contractor (MAC) processes each claim for reimbursement and decides whether to pay it or deny it as invalid or improper. See 42 U.S.C. § 1395kk-l(a). If the claim is denied, the provider may appeal.

The Medicare Act sets out a sequential four-step administrative-appeal process, each of which must be completed within a statutorily provided deadline: (1) redeter-mination by the MAC, which must be completed within 60 days, id § 1395ff(a)(3)(A), (a)(3)(C)(ii); (2) on-the-record reconsideration by a Qualified Independent Contractor (QIC), which must be completed within 60 days, id. § 1395ff(c)(3)(C)(i); (3) review, including a hearing, by an administrative law judge in HHS’s Office of Medicare Hearings and Appeals (OMHA), which, absent a waiver, must be completed within 90 days, id. § 1395ff(d)(l)(A); and (4) review by the Medicare Appeals Council within the Departmental Appeals Board (DAB), which must render a decision or remand to the ALJ within 90 days. Id § 1395ff(d)(2)(A). If the provider’s claim is worth at least $1,500, the DAB’s decision is subject to judicial review. Id. § 1395ff(b)(l)(E)(i), (b)(l)(E)(iii); 42 C.F.R. § 405.1006(c); 80 Fed. Reg. 57,827 (Sept. 25, 2015). When a statutory deadline lapses before a decision has been made, moreover, a provider may leapfrog its appeal to the next stage through a process referred to as “escalation.” See 42 U.S.C. § 1395ff(c)(3)(C)(ii), (d)(3)(A), (d)(3)(B); 42 C.F.R. §§ 405.1104, 405.1108(d), 405.1132(b).

Taking the statutory deadlines together, a Medicare-reimbursement claim should proceed through all four steps of the administrative-appeal process within one year—“and for years they did.” AHA I, 76 F.Supp.3d at 46. Recently, however, a massive accumulation of backlogged cases has triggered significant delays, particularly at step three—ALJ review. Between fiscal years 2010 and 2014, the number of appeals filed at step three grew 936%— from 41,733 to 432,534. See GAO Report at 11. By the end of FY2014, 767,422 appeals were pending at step three, see Mot., Exh. 1 (Projections Chart) at 26, and 96% of ALJ decisions were issued well after the 90-day statutory deadline. See GAO Report at 18. In FY2014, it took OMHA an average of 415 days to process a step three appeal; it now takes 935 days. See HHS, Office of Medicare Hearings and Appeals (OMHA): Current Workload—Decision Statistics (July 25, 2016), http://www.hhs. gov/omha/Data/Current% 20Workload/ index.html.

Plaintiffs point to the Recovery Audit Program, which was “fully implemented” in 2010, AHA II, 812 F.3d at 186, as the “primary culprit in creating and sustaining” the backlog. See Opp. at 5. Congress required the Secretary to set up the Program to identify under- and overpayments and recoup the latter. See 42 U.S.C. § 1395ddd(h)(l). To do so, the Secretary contracts with Recovery Audit Contractors (RACs), who are private entities that “audit provider-favorable MAC decisions in ‘post-payment’ review.” AHA I, 76 F.Supp.3d at 47 (citing 42 U.SC. § 1395ddd(f)(7)(A)). RACs are paid on a contingent basis—they “receive a cut of any improper payments they recover”— “and can challenge claims going back as far as three years.” Id. (citing 42 U.S.C. § 1395ddd(h)(l); Statement of Work for the Medicare Fee-for-Service Recovery Audit Program 9-10, https://www.cms.gov/ *224 Research-Statistics-Data-and-Systems/ Monitoring-Programs/recovery-audit-program/downloads/090111racfinsow.pdf). Because a RAC’s decision to deny payment of a reimbursement claim is “appealable through the same administrative process as initial denials, the RAC program has contributed to a drastic increase in the number of administrative appeals.” AHA II, 812 F.3d at 187.

The Secretary agrees that the RAC Program is a contributor to the backlog, but also points to other sources: an increase in Medicare beneficiaries; a growing practice among some providers to appeal virtually every claim denial through ALJ review; and a significant rise in the number of appeals filed by Medicaid state agencies. See Mot., Exh. A (Declaration of Ellen Murray), ¶¶ 10-13.

Frustrated by the long delays, Plaintiffs—the American Hospital Association, Baxter Regional Medical Center, Covenant Health, and Rutland Regional Medical Center—filed suit in May 2014. They asked the Court to grant mandamus relief to compel the Secretary to adjudicate their pending administrative appeals in compliance with the statutory deadlines, as well as to comply with the statutory deadlines in administering the appeals process for all hospitals. See ECF No. 1 (Complaint) at 21-22. Plaintiffs then filed a motion for summary judgment, see ECF No. 8, and the Secretary moved to dismiss for lack of jurisdiction. See ECF No. 12.

The Court concluded that the jurisdictional and merits inquiries at issue merged and thus resolved the parties’ motions together. AHA I, 76 F.Supp.3d at 50.

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American Hospital Association v. Sebelius, 209 F. Supp. 3d 221, 2016 U.S. Dist. LEXIS 126840 (D.D.C. 2016).

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