Don’t dis the ALJ when CMS is wrong 50% of the time

Wednesday, April 30, 2003

Capitol Hill’s recent rejection of the Bush administration’s plan to eliminate independent administrative law judges (ALJs) from the Medicare appeals process saved providers and beneficiaries from an expansion of oppressive tactics and further dominance by the the Centers for Medicare & Medicaid Services (CMS). Bush’s plan would have transferred responsibility for the adjudication of Medicare appeals from independent ALJs employed by the Social Security Administration to the biased and controlling CMS by October 1. ALJ decisions have heavily favored the rights of HME providers. Thankfully, this plan was killed. Savor the moment.

The administration’s plan was presented under the guise of trying to make the Medicare appeals process more “efficient.” Since CMS already controls the denial of benefits, the audit process and the audit outcome, why not centralize appeals from a faulty process that routinely spits out bad decisions with CMS too? What a great idea, hardly.

As HME dealers know all too well, CMS, its hired guns and the DMERCs need to justify their existence. They make and interpret their own policies and routinely deny valid claims. Innocent suppliers and unsuspecting beneficiaries are then compelled to go through the extremely lopsided CMS maze of demands, deadlines, extrapolations and interest calculations only to end up with an unfavorable outcome.

If the administration’s plan to rid ALJs from the Medicare appeals system had been implemented, aggrieved victims of unfair practices and downright wrong CMS decisions would have had nowhere to turn for an independent review of the facts and the law. Allowing the next level of appeals to be heard by CMS employees would also have exacerbated the devastating political bias and pressure that already runs rampant throughout the CMS system.

An example of this type of pressure happened to one of my HME clients last year. We attended a “Fair Hearing” before a CMS hearing officer to defend an “overpayment” claim. At the conclusion of the hearing, the CMS hearing officer announced that she was more than satisfied that the relevant Medicare requirements had been met and payments to the supplier were warranted. Weeks later, the hearing officer issued an unfavorable opinion. Shocked by the hearing officer’s decision, I called and asked her why she had changed her mind. Rather sheepishly, she replied: “My boss made me do it, but don’t worry, the ALJ will look at it differently.” We appealed and after several more months of financial hardship and emotional suffering, my embattled client prevailed. The ALJ reversed the CMS decision in full. No surprise.

The Department of Health and Human Services reports that 81% of home health appeals studied “were reversed at the ALJ level.” So, does this mean that CMS wrongfully denied 81% of the appeals filed by HME providers? Absolutely, it does.

The department further reports that beneficiaries and providers won more than half of the 77,388 Medicare appeals decided by ALJs in the past year. So, is the CMS wrong over 50% of the time? Yes, and when the statistics are compared, it is clear that HME suppliers are being singled out by CMS at an astounding rate.

Many appeals could be avoided under the present system, if CMS representatives were willing to spend more time reviewing the facts with HME suppliers during the audit. If CMS were more willing or able to extend some of its harsh and counterproductive deadlines, there would be more time to obtain and review additional information or more detailed documentation that is eventually supplied during an appeal. Many cases are reversed on appeal simply because a modifier was changed or a proper coding number was provided. Regrettably, CMS works in a slanted manner against providers and subjects them to unwarranted constraints and practices. In some cases, the audit rules are stricter than the original coverage requirements themselves.

The CMS system needs to be revamped, not the ALJ process. If the Bush administration is that interested in economizing the Medicare appeals process and decreasing the number of appeals, it should start by carefully examining why there are so many bad CMS decisions. Eliminate the bad decisions and the appeal rates will decline. CMS audit criteria and guidelines must change and CMS representatives must be compelled to more fully appreciate the regulatory problems and business challenges all HME providers endure every day in their endeavor to provide quality service and care to Medicare beneficiaries.

Thankfully, the ALJ process affords victims of erroneous CMS decisions with their proverbial “day in court.” A hearing before an independent ALJ allows providers and beneficiaries to obtain a fair and impartial hearing without any hint of political bias or pressure.

HME providers should savor the moment and fight any further attempt by the administration to eliminate independent administrative law judges from the Medicare appeals process.

— Judson H. Lipowitz is a partner at, Gann and Franz, LLP and can be reached at or 800-558-6801.