Health Law Alert: December 2014 Monthly RAC Report: Current OMHA Initiatives and RAC Appeal Issues

December 03, 2014

While the settlement process is in full swing for some hospitals, others have continued to pursue their appeals with the goal of a higher than 68% overturn rate. As discussed in a previous update, CMS recently offered hospitals 68 cents on the dollar for inpatient denials in exchange for the hospital withdrawing all of its eligible inpatient appeals. CMS gave hospitals until October 31, 2014, to decide whether to settle. For those hospitals that submitted the initial settlement request by October 31 or within the timeframe granted by an extension, the Medicare Administrative Contractor (MAC) should send the hospital an email containing a list of all validated claims within 31 days of the initial request. After the hospital receives this email it will have 14 days to inform CMS of whether it will abandon or proceed with settlement. But hospitals should remember: The 14-day time period to abandon or proceed marks the last point in which the hospital may abandon the settlement process.

Earlier this year, in yet another move by the Office of Medicare Hearings and Appeals (“OMHA”) to reduce its backlog of appeals at the Administrative Law Judge (ALJ) level, OMHA initiated a pilot program in which hospitals may participate in “statistical sampling” for a certain number of their pending appeals. Under this program, an ALJ issues a decision on a sample of units; the decision is then sent to a CMS contractor, which will extrapolate the ALJ’s decision on the sample units and apply the resulting success rate to the “universe” of eligible claims; and the MAC then finalizes the decision and applies payment based on the extrapolated decision amount. However, before the ALJ will make its decision, the hospital must submit a valid request of eligible claims.

To be eligible for statistical sampling, the hospital must submit a request that meets numerous requirements, including, among other things, that the hospital currently has at least 250 claims sitting at the ALJ level of appeal falling into one denial category: pre-payment claim denials, post-payment non-RAC claim denials, or post-payment RAC claim denials from a single RAC. Additionally, these appeals must be assigned to one or more ALJs or must otherwise have been filed between April 1, 2013, and June 30, 2013. Once an eligible “universe” of claims is identified, those claims are assigned to one ALJ - and this single ALJ will determine the success rate of all of the appeals in the universe of claims.

Even with these two initiatives, however, OMHA still will have a considerable backlog of appeals at the ALJ level. Because the success rate is much higher than 68% for some providers and because of the loss of accrued interest upon settlement, many providers declined the 68% settlement offer. And because few providers have more than the necessary 250 claims that are either assigned to an ALJ or otherwise appealed within the established timeframe, most providers will not participate in the statistical-sampling pilot program.

OMHA, to be sure, understands that these initiatives will not by themselves clear the ALJs’ dockets. On November 5, 2014, OMHA published in the Federal Register a Request for Information, asking providers to make suggestions for certain actions that OMHA could undertake to address the backlog of appeals at the ALJ level. The following topics are up for discussion: (1) initiatives currently undertaken by OMHA; (2) possible new initiatives that could be undertaken by OMHA; and (3) current regulations that could be amended to streamline the adjudication process at the ALJ level of appeal. To submit a suggestion or comment, providers should visit and select “Are you new to this site?” and then “How do I submit a comment?” Providers must submit their suggestions and comments by Friday, December 5, 2014.

Additional documents and information related to the ALJ appeal initiatives described above can be accessed at the following web links:

For additional information related to the ALJ appeals and settlement process, please contact Jeff Moore at