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American Hospital Association v. Burwell

United States District Court, D. Columbia.

December 18, 2014

SYLVIA M. BURWELL, in her official capacity as SECRETARY OF HEALTH AND HUMAN SERVICES, Defendant

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For KATHLEEN SEBELIUS, in her official capacity as SECRETARY OF HEALTH AND HUMAN SERVICES, Defendant: Caroline Lewis Wolverton, LEAD ATTORNEY, U.S. DEPARTMENT OF JUSTICE, Civil Division, Federal Programs Branch, Washington, DC.


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JAMES E. BOASBERG, United States District Judge.

No one likes the waiting game, and Plaintiffs in this case are no exception. As hospitals that provide services to Medicare patients, they have reimbursement claims languishing in an administrative process that is unable to manage an ever-growing backlog of appeals. Without a change, these hospitals will likely have to wait years for resolution of these claims -- and their money. Seeking to break the logjam, Plaintiffs brought this suit against the Secretary of Health and Human Services for an order compelling her to process their administrative appeals in accordance with statutory timelines. They now move for summary judgment, and the government simultaneously moves to dismiss. While the Court sympathizes with Plaintiffs' plight, for the time being the waiting game must go on. HHS's delay in processing their administrative appeals, while far from ideal, is not so egregious as to warrant intervention. The Court, accordingly, will grant Defendant's Motion to

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Dismiss and deny Plaintiffs' Motion for Summary Judgment.

I. Background

To understand the basis of Plaintiffs' claim here, a brief primer on Medicare reimbursement may prove helpful. After furnishing Medicare-eligible services, health-care providers submit claims for reimbursement to Medicare Administrative Contractors or MACs. See 42 U.S.C. § § 1395kk-1(a)(1)-(4),1395ff(a)(2)(A). If a claim is denied, a provider may appeal through a four-step administrative process. See id. § 1395ff. First, it may present its claim to the MAC for redetermination, which decision must occur within 60 days. Id. § 1395ff(a)(3). A provider may then appeal a negative redetermination to a Qualified Independent Contractor. A QIC must conduct an " independent, on-the-record review of an initial determination, including the redetermination and all issues related to payment of the claim," and, in so doing, it must " review[] the evidence and findings upon which the [previous determinations were] based," together with " any additional evidence the parties submit or that the QIC obtains on its own." 42 C.F.R. § 405.968(a). The QIC also has 60 days to resolve claims. Id. § 1395ff(c). Both of these stages are overseen by the Centers for Medicare & Medicaid Services (CMS) within HHS.

After these initial determinations, a provider whose claim has been denied may request a hearing before an Administrative Law Judge. See 42 U.S.C. § § 1395ff(b)(1)(E)(i), (d)(1)(A). The ALJ level of review is overseen by the Office of Medicare Hearings and Appeals (OMHA), a division within the Office of the Secretary that is functionally and fiscally separate from CMS. This is the first opportunity a provider gets for independent review of a denied claim. See Def. MTD & Opp., Att. 1 (Declaration of Nancy Griswold), Exh. 1 (July 10, 2014, Written Testimony) at 3; Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA), Pub. L. No. 108-173, § 931(b)(2), 117 Stat. 2066, 2398 (2003) (" The Secretary shall assure the independence of administrative law judges . . . . In order to assure such independence, the Secretary shall place such judges in an administrative office that is organizationally and functionally separate from [CMS]." ). ALJs have 90 days to issue a decision from the time appellants request a hearing. See 42 U.S.C. § 1395ff(d)(1)(A). In the last stage of review, an ALJ's decision may be appealed to the Departmental Appeals Board (DAB). See id. § 1395ff(d)(2). The division of the DAB that actually reviews these claims is the Medicare Appeals Council, referred to as the " MAC" in regulatory provisions. Following the convention of the parties, the Court will refer to it as the " DAB" to avoid confusion with the MACs that conduct initial determinations and redeterminations. The DAB provides the final level of review within HHS, and its decision is considered that of the Secretary, subject to judicial review. See 42 C.F.R. § § 405.980, 405.1130; Def. MTD & Opp., Att. 4 (Declaration of Constance Tobias), ¶ 1.

Based on these statutory timelines, a Medicare appeal should pass through all four levels of review within a year or so -- and for years they did. See Griswold Testimony at 3. Recently, however, the pipeline has become clogged with cases at the ALJ level. Although OMHA has increased its productivity in response -- the average number of dispositions per ALJ more than doubled between 2009 and 2013, and OMHA has added seven new ALJs -- the workload far outstrips its capacity. See id. at 3-4.

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To see just how overworked OMHA is, it is instructive to look at the numbers. Between 2012 and 2013, the backlog of ALJ-level appeals quintupled. See Pl. MSJ, Exh. 3 (Memorandum from Nancy J. Griswold to OMHA Medicare Appellants dated Dec. 24, 2013) at 1. In 2013, for example, OMHA received 350,629 appeals and decided only 79,303 of them. See id., Exh. 2 (OMHA Medicare Appellant Forum) at 16. As of December 2013, it took an average of sixteen months before an ALJ even heard a case, and that wait is expected to continue to grow along with the queue of pending appeals. See Griswold Memo at 1. Things have gotten so backed up that OMHA has suspended assigning new hearing requests to ALJs (except from Medicare beneficiaries, who appeal through the same process) for at least two years. See id. At the moment, OMHA receives enough appeals every four to six weeks to keep it busy for a year. See Griswold Testimony at 4. The DAB, although not flooded to the same extent, is also receiving more appeals than it can process. See OMHA Forum at 106-08. Based on the increased caseload, the DAB admits that it is " unlikely" that it will " meet the 90-day deadline for issuing decisions in most appeals." Id. at 110.

So what happened? Plaintiffs blame the surge in appeals on the introduction of Medicare Recovery Audit Contractors or RACs. RACs are private entities with whom the Secretary contracts to audit provider-favorable MAC decisions in " post-payment" review. See 42 U.S.C. § 1395ddd(f)(7)(A). These contractors receive a cut of any improper payments they recover and can challenge claims going back as far as three years. See 42 U.S.C. § 1395ddd(h)(1); Statement of Work for the Medicare Fee-for-Service Recovery Audit Program at 9-10, available at According to Plaintiffs, it is the RACs' over-auditing that has backed up the appeal process: " As Medicare's only contingency-fee-based contractors, RACs have engaged in wide-ranging audits of Medicare claims, frequently questioning the medical judgment of health care providers and denying claims for the types of services that qualify for the largest amount of reimbursement." Pl. MSJ at 3. The way Plaintiffs see it, more meritless post-payment challenges by RACs means more appeals by providers, and more appeals means a longer wait. The agency does not deny that RACs have played a part in the increased appeals, but it also attributes the spike to " more Medicare beneficiaries, increased use of covered services," and " additional appeals from Medicaid State agencies." Def. MTD & Opp. at 1.

As to the delays, Plaintiffs are not without statutory recourse. The Medicare Act provides for a process referred to as " escalation," by which health-care providers may bypass the QIC, ALJ, and DAB levels of review if those decisionmakers are unable to resolve their claims within the statutorily prescribed timelines. If, for instance, a QIC is unable to complete its review within 60 days, an appellant may " escalate" its appeal to an ALJ. See 42 U.S.C. § 1395ff(c)(3)(C)(ii). If an ALJ, in turn, has not rendered a decision within 90 days, a claimant may escalate to the DAB, id. § 1395ff(d)(3)(A), in which case it is the QIC's decision that is under review. See 42 C.F.R. § 405.1104; 42 C.F.R. § 405.1108(d). On escalated appeal, the DAB has 180 days within which to act -- as opposed to its typical 90-day deadline. See 42 C.F.R. § 405.1100(c)-(d). If, however, the DAB cannot render a timely decision, a claimant may bypass it altogether and seek judicial review in federal

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court so long as its claim meets an amount-in-controversy requirement (currently $1,430). See 42 U.S.C. § 1395ff(d)(3)(B); 42 C.F.R. § 405.1132(b); 42 C.F.R. § 405.1006(c); Medicare Program; Medicare Appeals: Adjustment to the Amount in Controversy Threshold Amounts for Calendar Year 2014, 78 Fed.Reg. 59702-03 (Sept. 27, 2013). Together, these provisions allow that, in the event any level of the appeals process gets too far behind, claimants may leapfrog it and move on to the next stage.

According to Plaintiffs, however, escalation is not the panacea it might seem. This is because they believe ALJ review to be an invaluable step in the appeals process, which they do not wish to forgo. It represents the first opportunity for hospitals to provide oral testimony in support of their cases, and claimants are able to engage with ALJs and respond to questions in real time. See Pl. MSJ, Exh. 11 (Declaration of Ivan Holleman), ¶ 11; id., Exh. 12 (Declaration of John Geppi), ¶ 14; id., Exh. 14 (Declaration of John Wallace), ¶ 14. Health-care providers are also able to provide written submissions supporting their arguments to the ALJ. See Geppi Decl., ¶ 14. If, however, a party escalates past the QIC and ALJ, the only record available for review is the MAC record. And although the DAB may conduct additional proceedings, it is not required to do so. See 42 C.F.R. § 405.1108(d)(2). Indeed, for escalated claims the DAB has admitted that it will not hold a hearing " unless there is an extraordinary question of law/policy/fact." OMHA Forum at 117. As a consequence, hospitals find that they are most likely to succeed on their appeals at the ALJ level. See, e.g., Geppi Decl., ¶ 13.

Because escalation does not provide sufficient relief, Plaintiffs feel compelled to bring this suit. Those filing are the American Hospital Association, Baxter Regional Medical Center, Covenant Health, and Rutland Regional Medical Center. They seek mandamus relief that would force Defendant Sylvia Burwell, Secretary of HHS, to adjudicate their pending administrative appeals in a timely fashion. An Amicus for Plaintiffs, the Fund for Access to Inpatient Rehabilitation (FAIR), also submitted a brief. FAIR is a corporation comprised of inpatient rehabilitation hospitals and rehabilitation units that have Medicare claims tied up in the appeals process. Plaintiffs now move for summary judgment, and the Secretary moves to dismiss for lack of jurisdiction.

II. Legal Standard

Summary judgment may be granted if " the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(a); see also Anderson v. Liberty Lobby, Inc.,477 U.S. 242, 247-48, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986); Holcomb v. Powell,433 F.3d 889, 895, 369 U.S.App.D.C. 122 (D.C. Cir. 2006). A fact is " material" if it is capable of affecting the substantive outcome of the litigation. SeeLiberty Lobby, 477 U.S. at 248; Holcomb, 433 F.3d at 895. A dispute is " genuine" if the evidence is such that a reasonable jury could return a verdict for the nonmoving party. See Scott v. Harris,550 U.S. 372, 380, 127 S.Ct. 1769, 167 L.Ed.2d 686 (2007); Liberty Lobby, 477 U.S. at 248; Holcomb, 433 F.3d at 895. " A party asserting that a fact cannot be or is genuinely disputed must support the assertion" by " citing to particular parts of materials in the record" or " showing that the materials cited do not establish ...

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