Judge getting impatient with HHS over massive ALJ backlog

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04/06/2018
Elizabeth Hogue

I recently wrote an article entitled "Court Says No Recoupment Until After ALJ Hearings."  This article was about a court decision in which the judge said that recoupment of an extrapolated overpayment as a result of a ZPIC audit could not begin until after ALJ hearings were held. This article is reprinted below in italics.
 
Now comes potentially additional good news!
 
As you may recall, the American Hospital Association (AHA) and others sued the U.S. Department of Health and Human Services (HHS) in December 2016. American Hospital Association v. Alex M. Azar, Civil Action No. 14-CV-851-JEB, (U.S. District Court for the District of Columbia.) As a result, a federal judge ordered HHS to clear pending appeals before Administrative Law Judges (ALJs) incrementally by the end of 2020.
 
HHS asked the U.S. District Court for the District of Columbia to reconsider this order but the request was denied in January 2017.
 
HHS appealed the decision. The U.S. Appeals Court for the District of Columbia overturned the order in August 2017. This means that the lower district court could decide whether, as HHS claimed, it would be impossible to comply with the order's timetable for reducing the backlog.
 
In February 2018, AHA asked the district court to reinstate the deadline for clearing the appeals backlog. AHA argued that HHS "has not shown it is impossible to clear the backlog-minus, perhaps, some claims with serious program-integrity concerns-within five years."
 
Now the judge is getting impatient!
 
The judge in the district court has asked AHA to "elaborate and expand upon the recommendations it has made over the course of litigation for clearing the backlog by June 22."
 
What are AHA's recommendations?
 
AHA's recommendations are laid out in a "Reply Memorandum of Law in Support of Plaintiffs' Cross-Motion for Summary Judgment" dated February 15, 2018.
 
First, AHA points out that the Court has already ordered HHS to clear the backlog. When HHS argues that it is "impossible" to clear the backlog, it really means "prefer not to."
 
AHA suggests the following ways HHS can resolve the backlog:
 

  • Further curtail the RAC Program;
  • Do more to settle outstanding cases;
  • Delay repayment of denied claims; and
  • Toll interest accrual of backlogged appeals for all periods for which  beyond the statutory maximum of 90 days.

 
The deadline for HHS to respond to AHA's suggestions is in July.
 
Stay tuned! Providers need relief and HHS currently has no incentives to provide it! It's past time to fix it!

Court Says No Recoupment Until After ALJ Hearings
 
The U.S. Court of Appeals for the 5th Circuit issued an opinion on March 27, 2018, in Family Rehabilitation, Inc. v. Azar, No. 17-11337 (5th Cir. Mar. 27, 2018) that says that monies cannot be recouped from a home health agency until after hearings have been conducted by an administrative law judge (ALJ).
 
Family Rehabilitation received a notice of overpayment from the Medicare Program in the amount of $7.6 million. It appealed under what the Court described as "Medicare's Byzantine four-stage administrative appeals process" and "the harrowing labyrinth of Medicare appeals." After requests for reconsideration were denied, the agency was subject to recoupment. The agency filed timely requests for hearings before an ALJ.
 
The notice of overpayment was based on a ZPIC audit conducted in 2016 of 43 claims. An extrapolation resulted in the $7.6 million overpayment.
 
ALJ's are required by statute to hear cases and issue a decision within 90 days. "Yet," said the Court "an ALJ hearing is not forthcoming-not within 90 days, and not within 900 days." In fact, it will likely be at least another three to five years before an ALJ hears the agency's appeals.
 
Based on the above, the agency sued for a temporary restraining order and an injunction to prevent the Medicare Administrative Contractor (MAC) from recouping overpayments until administrative appeals are concluded. The agency says that it will be forced to shut down due to insufficient revenues long before the appeals process is complete. The agency claims that the delay (1) violates its rights to procedural due process, (2) infringes its substantive due-process rights, (3) established an "ultra vires" cause of action and (4) entitles it to a "preservation of rights" injunction under the Administrative Procedure Act, 5 U.S.C Section 704-05.
 
The lower federal district court said that it lacked jurisdiction because the Agency had not exhausted administrative remedies. The Agency appealed to the appellate Court.
 
Ordinarily, providers may file suit in the district court only after either (1) satisfying all four stages of administrative appeal or (2) after providers have escalated claims to the Appeals Council after ALJ hearings and the council acts or fails to act within 180 days.
 
In considering the agency's request, the court first noted that full relief in this case cannot be obtained at a post-deprivation hearing because the agency will be closed long before ALJ hearings are held if recoupment occurs. The court found that the agency may suffer irreparable harm in the form of going out of business and disruption to Medicare patients. Consequently, the court could decide the case.
 
The court went on to say that it cannot rule on the substance of the agency's appeals but providers may request that benefits be maintained temporarily until statutory and constitutional procedures have been followed. Since the agency asked for temporary suspension of recoupment until hearings are held as opposed to permanent reinstatement of benefits, the court can rule on the agency's request.
 
Finally, the court noted "HHS's ostensibly Sisyphean attempts to combat the problem" of a backlog of appeals before the ALJ.
 
Consequently, the court reversed the decision of the lower court and remanded the case back to the lower court.
 
This case is definitely one for providers to watch! It now looks possible for providers to avoid recoupment in the face of multi-year wait times for hearings before ALJ's!

Elizabeth Hogue is a private practice healthcare attorney in the Washington, D.C., area. She can be reached at elizabethhogue@elizabethhogue.net.

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