Recent opinions by the Fifth Circuit, the Northern and Southern Districts of Texas, and the District of South Carolina offer hope to providers seeking relief from substantial monetary recoupments during the Medicare appeals process. The uptick in audits by Medicare contractors, such as Zone Program Integrity Contractors (ZPICs), over the past several years has caused a significant backlog in the Medicare claims appeal process. Providers have faced the threat of refunding overpayment demands while waiting years to have their appeals heard by an Administrative Law Judge (ALJ). When the recouped amounts involve extrapolated overpayments, many providers are faced with recoupments in the millions of dollars, an amount often too much to allow them to continue to operate.
Recent case decisions promise some relief from this draconian situation. On June 4, 2018, the lower court affirmed the Fifth Circuit ruling in Family Rehab., Inc. v. Azar that a plaintiff need not exhaust its administrative remedies before a collateral claim can be litigated. In its seminal ruling, the Fifth Circuit determined that an alleged overpayment could not be recouped until after the home healthcare provider obtained a hearing before an ALJ, a process that typically occurs three to five years after submitting a request for hearing due to an extensive appeals backlog. Other courts have since adopted this decision to provide welcome relief to providers. These decisions provide a roadmap for providers facing crippling recoupment demands to consider in challenging recoupment efforts.
Family Rehabilitation, Inc. v. Azar
Family Rehabilitation, Inc., a home health agency providing skilled nursing and other services to nearly 300 patients in Texas, underwent a post-payment audit conducted by a ZPIC in October 2016. The audit of 43 claims resulted in a demand for an alleged $7.6 million extrapolated overpayment. Family Rehabilitation appealed the claims denials and extrapolation methodology through the first two levels of the Medicare appeals process and subsequently requested an ALJ hearing.
The Medicare appeals process involves four levels of administrative review before different adjudicators with varying timeframes and opportunities to stay recoupment of funds. Medicare contractors recoup alleged overpayments from providers after the second level of the Medicare appeals process, depriving providers of large sums of money for years before they can obtain meaningful review at the ALJ level. The Medicare appeals process includes the following four levels of review:
- Redetermination: Requests for redetermination by a Medicare contractor, the first level of review, must be filed within 120 days of the initial claim determination or within 30 days to stay recoupment. Redetermination decisions should be issued within 60 days of receipt of the redetermination request.
- Reconsideration: Requests for reconsideration by a Qualified Independent Contractor (QIC), the second level of review, must be filed within 180 days of receipt of the redetermination decision or within 60 days to stay recoupment. Reconsideration decisions should be issued within 60 days of receipt of the reconsideration request. If the reconsideration decision is unfavorable, CMS may begin recoupment immediately upon receipt of the reconsideration decision regardless of whether an appeal is filed to the ALJ level.
- Administrative Law Judge Hearing: Requests for an ALJ Hearing with the Office of Medicare Hearings and Appeals (OMHA) must be filed within 60 days of receipt of the reconsideration decision. The ALJ must issue a decision on an appeal of a QIC reconsideration decision no later than 90 days from receipt of the request for ALJ hearing unless otherwise extended according to the regulations.[1]
- Medicare Appeals Council: Requests for review by the Medicare Appeals Council (Council) within the Departmental Appeals Board must be filed within 60 days after receipt of the decision issued by the ALJ. The Council must issue a decision within 90 days from receipt of the request for review. Parties may appeal Council decisions to federal district court within 60 days of receipt.
In Family Rehab., Family Rehabilitation contended that recoupment of $7.6 million following Reconsideration would cause it to go out of business before it had the opportunity for an ALJ hearing and violate its procedural due process rights despite a genuine billing dispute, among other claims. An extended repayment plan was not an option for Family Rehabilitation due to its contractual obligations prohibiting such a loan arrangement. Family Rehabilitation maintained that recoupment would cause irreparable damage to its ability to operate because of its large share of Medicare patients and would harm its patients by depriving them of care.
Noting that nearly 600,000 appeals are pending at the ALJ level, Family Rehabilitation warned of a widespread threat to similar providers faced with losing their businesses while waiting for a hearing. OMHA data indicates that claim denials are frequently reversed at the ALJ level, which is the first time providers’ claims are reviewed by a neutral adjudicator.[2]
Initially, the Northern District of Texas denied Family Rehabilitation’s requested temporary restraining order (TRO) and injunctive relief, explaining that it lacked subject matter jurisdiction because the claim arose under Medicare and Family Rehabilitation had not exhausted its administrative remedies within the Medicare appeals process.[3] The Court...
