D.C. District Court Orders DHHS to Reduce Medicare Appeal Backlog Affecting Hundreds of Thousands of Appeals

D.C. District Court Orders DHHS to Reduce Medicare Appeal Backlog Affecting Hundreds of Thousands of Appeals

Health care providers received a big win on December 5, 2016, when the U.S. District Court for the District of Columbia issued a decision granting summary judgment to the American Hospital Association ("AHA") and ordered the Department of Health and Human Services ("DHHS") to resolve the years-long backlog of Medicare appeals by December 31, 2020. American Hospital Association v. Burwell, 1:14-cv-00851 (D.D.C. Dec. 5, 2016). In 2014, the AHA sued DHHS over DHHS's failure to reduce the considerable backlog of Medicare appeals pending from health care providers seeking reimbursement on denied Medicare claims. The D.C. Circuit imposed upon DHHS "numeric reduction targets" over the next four years while leaving it to DHHS's discretion on how to achieve those targets. Id. at *4. In rendering its decision, the D.C. Circuit noted it was making a concerted effort to avoid directly intervening in the appeals process but was unable to ignore DHHS's flagrant violations of its statutory deadlines to resolve these appeals. See id.

The backlog arose as a result of Medicare's implementation of the RAC and ZPIC programs, which has resulted in an exponential rise in the number of health care providers who have sought relief through Medicare's appeal process against often onerous multimillion dollar recoupment actions.[1] As of March 31, 2016, there were 761,318 appeals pending before an Office of Medicare Hearing Appeals administrative law judge, with an additional 19,302 appeals pending before the Medicare Appeals Council. See Decl. of Ellen Murray, Assistant Sec'y for Fin. Res. and Chief Fin. Officer of the Dept. of Health and Human Servs. at 4, (May 25, 2016) [Doc. 30-1]. To put this number into context, DHHS has reported that the average processing time for a Medicare appeal was 877.2 days (or approximately 2½ years). See HHS, Office of Medicare Hearings and Appeals, Average Processing Time by Fiscal Year (Nov. 18, 2016).

Notably, Medicare's right to recoup the funds at issue in the provider's appeal begins after the completion of the second level of appeal, which has historically been completed more timely than at the administrative law judge level. In other words, throughout much of the 877 days in which an appeal is currently pending, providers could potentially have already incurred heavy financial losses while waiting years for a final decision to be issued on the validity of their Medicare appeal.

After consideration of briefing from both parties, and heavy objections from DHHS, the D.C. District Court reiterated that equitable grounds for mandamus relief existed due to the "unacceptably high" backlog of appeals. Id. at *6. Further, the court determined that the target-based methodology offered by the AHA was the best solution to meet the dual interests of not interfering in the agency's decision-making while requiring DHHS to meet its statutorily mandated deadlines. See id. at *7.

Under the court's target-based methodology, the Secretary must achieve a 30 percent reduction from the current backlog by December 31, 2017; 60 percent by December 31, 2018; 90 percent by December 31, 2019; and 100 percent by December 31, 2020. See id. at *4. The D.C. Circuit declined to enter an order granting default judgments for all qualifying appeals on January 1, 2021, the day following the court's imposed timeline. However, the court held that plaintiffs may move for default judgment or otherwise enforce the writ of mandamus if the Secretary fails to meet the prescribed timelines. See id. at *4-5. Finally, the court ordered that the Secretary provide quarterly status reports that should include updated figures for the current and projected backlog, as well as administrative and legislative actions implemented and designed to reduce the backlog. Id. at *5.

The court does not address whether those providers whose appeals have been pending the longest could seek redress after the December 31, 2017, deadline but before the January 1, 2021, deadline. In light of the court's use of the word "timelines," this will be a development to watch.

Lawyer Contacts

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Rebekah N. Plowman

Kristen P. McDonald

Lindsey Lonergan

Laura K. Gura

Andrea Bilbija, an associate in the Atlanta Office, assisted in the preparation of this Alert.

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[1] In an effort to maintain the integrity of the Medicare program, the Medicare Act establishes a five-level Medicare appeals process: (i) redetermination by a Medicare administrative contractor; (ii) reconsideration by a qualified independent contractor; (iii) hearings before an administrative law judge in the Office of Medicare Hearings and Appeals; (iv) review by the Medicare Appeals Council; and (v) judicial review in the United States District Court.