United States General Accounting Office GAO Report to the Committee on Energy and Commerce, House of Representatives September 2003 MEDICARE APPEALS Disparity between Requirements and Responsible Agencies’ Capabilities GAO-03-841 September 2003 MEDICARE APPEALS Disparity between Requirements and Highlights of GAO-03-841, a report to the Committee on Energy and Commerce, Responsible Agencies’ Capabilities House of Representatives Appellants and others have been BIPA demands a level of performance, especially regarding timeliness, that concerned about the length of time the appeals bodies—the contract insurance carriers responsible for the first it takes for a decision on the appeal two levels of appeals, the Social Security Administration’s (SSA) Office of of a denied Medicare claim. In Hearings and Appeals (OHA), and the Department of Health and Human December 2000, the Medicare, Medicaid, and SCHIP Benefits Services (HHS) Medicare Appeals Council (MAC)—have not demonstrated Improvement and Protection Act of they can meet. While the carriers have generally met their pre-BIPA time 2000 (BIPA), required, among other requirements, in fiscal year 2001, they completed only 43 percent of first things, shorter decision time level appeals within BIPA’s 30-day time frame. In addition to average frames. BIPA’s provisions related processing times more than four times longer than that required by BIPA, to Medicare appeals were to be OHA and the MAC—the two highest levels of appeal—have accumulated applied to claims denied after sizable backlogs of unresolved cases. Delays in administrative processing October 1, 2002, but many of the due to inefficiencies and incompatibility of their data systems constitute 70 changes have not yet been percent of the time spent processing appeals at the OHA and MAC levels. implemented. GAO was asked to evaluate whether the current Medicare appeals process is Average Time Spent in Each Stage of Processing for Cases Adjudicated by OHA and the MAC in Fiscal Year 2001 operating consistent with BIPA’s requirements and to identify any Office of Hearings and Appeals barriers to meeting the law’s requirements. Legal analysis Administrative processing and adjudication 7 months 3 months 4 months GAO recommends that the Secretary of HHS and the Appellant Case materials Case Appeals Commissioner of SSA more closely submits received by materials body issues coordinate their efforts to improve request for local hearing assigned to decision review office legal staff administrative processing, develop strategies for reducing the backlog of pending cases, and establish Medicare Appeals Council data requirements to facilitate the successful implementation of Legal analysis BIPA’s mandated changes. HHS Administrative processing and adjudication and SSA agreed that inefficiencies in the appeals process require attention and that the process 3 months 3 months 11 months 4 months would benefit from better Appellant The MAC Case Case Appeals coordination. submits requests materials materials body issues request for case files received assigned to decision review legal staff Sources: OHA and the MAC. The appeals bodies are housed in two different agencies—HHS and SSA. The lack of a single entity to set priorities and address operational problems—such as incompatible data and administrative systems—at all www.gao.gov/cgi-bin/getrpt?GAO-03-841. four levels of the process has precluded successful management of the To view the full product, including the scope appeals system as a whole. Uncertainty about funding and a possible transfer and methodology, click on the link above. of OHA’s Medicare appeals workload from OHA to HHS has also complicated For more information, contact Leslie G. Aronovitz at (312) 220-7600. the appeals bodies’ ability to adequately plan for the future. Contents Letter 1 Results in Brief 2 Background 3 Appeals Process Operations Inconsistent with BIPA’s Requirements 9 Appeals Bodies’ Lack of Coordination and Resources Is a Barrier to BIPA Implementation 14 Conclusions 20 Recommendations for Executive Action 21 Agency Comments and Our Evaluation 21 Appendix I Scope and Methodology 25 Appendix II The Scope of Part B Claims Rejections, Denials, and Appeals 28 Appendix III Changes Mandated by Section 521 of BIPA 31 Appendix IV Comments from the Department of Health and Human Services 33 Appendix V Comments from the Social Security Administration 40 Appendix VI GAO Contact and Staff Acknowledgments 45 GAO Contact 45 Acknowledgments 45 Page i GAO-03-841 Medicare Appeals Tables Table 1: Reason for Denials of Initial Medicare Part B Claims in Fiscal Year 2001 29 Table 2: Growth in Part B Appeals Cases Submitted by Appeal Level from Fiscal Year 1996 through Fiscal Year 2001 30 Figures Figure 1: Levels and Time Frames for the Pre-BIPA and BIPA- Mandated Appeals Process 6 Figure 2: Average Time Spent in Each Stage of Processing for Cases Adjudicated by OHA and the MAC in Fiscal Year 2001 12 Page ii GAO-03-841 Medicare Appeals Abbreviations ALJ administrative law judge BIPA The Medicare, Medicaid, and SCHIP Benefits Improvement and Protection Act of 2000 CMS Centers for Medicare & Medicaid Services CROWD Contractor Reporting of Operational and Workload Data DAB Departmental Appeals Board HCFA Health Care Financing Administration HHS Department of Health and Human Services LCD local coverage determination LMRP local medical review policy MAC Medicare Appeals Council MOU memorandum of understanding NCD national coverage determination OHA Office of Hearings and Appeals QIC qualified independent contractor SOW statement of work SSA Social Security Administration This is a work of the U.S. government and is not subject to copyright protection in the United States. It may be reproduced and distributed in its entirety without further permission from GAO. However, because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately. Page iii GAO-03-841 Medicare Appeals United States General Accounting Office Washington, DC 20548 September 29, 2003 The Honorable W.J. “Billy” Tauzin Chairman The Honorable John D. Dingell Ranking Minority Member Committee on Energy and Commerce House of Representatives In fiscal year 2002, Medicare—the nation’s largest health insurer—paid over $200 billion to provide medical care to 40 million elderly and disabled beneficiaries. The Centers for Medicare & Medicaid Services (CMS),1 an agency within the Department of Health and Human Services (HHS), administers the Medicare program with the help of about 50 claims administration contractors. Among other things, CMS is charged with protecting the program by identifying and denying health care claims that are invalid, incomplete, or otherwise appear to be improper. Beneficiaries and providers2 may pursue the payment of denied claims through a multilevel administrative appeals process. The entities—or appeals bodies—that constitute the process include the Social Security Administration (SSA) and HHS’s Departmental Appeals Board (DAB), in addition to CMS. In fiscal year 2001, 3.7 million Part B3 appeals were submitted to the first level in the process. In recent years, there has been widespread concern about the length of time it takes the appeals bodies to render decisions. In December 2000, the Congress enacted the Medicare, Medicaid, and SCHIP Benefits Improvement and Protection Act of 2000 (BIPA). Section 521 of BIPA amended section 1869 of the Social Security Act by mandating shorter 1 On June 14, 2001, the Secretary of Health and Human Services announced that the name of the Health Care Financing Administration (HCFA) had been changed to the Centers for Medicare & Medicaid Services. In this report, we will refer to HCFA where our findings apply to operations that took place under that organizational structure and name. 2 For the purposes of this report, the term “provider” refers to any nonbeneficiary appellant, including physicians and other suppliers. 3 Medicare fee-for-service consists of two parts—A and B. Part A claims cover inpatient hospital, skilled nursing facility, hospice, and certain home health services. Part B claims cover physician services, diagnostic tests, and related services and supplies. Page 1 GAO-03-841 Medicare Appeals time frames and expedited procedures for processing Medicare appeals.4 It also added the requirement that the Secretary of HHS report on the number of appealed claims and consistency of appeals decisions. The provisions were to be applied to claims denied on or after October 1, 2002. Concerned about the appeals bodies’ ability to implement BIPA’s provisions, you asked that we conduct an assessment of the Medicare appeals process. Specifically, we examined whether (1) the current appeals process is operating consistent with BIPA’s requirements and (2) there are any barriers in meeting the law’s requirements. Because the majority of appeals are related to the denial of Part B claims, we limited our work to assessing the appeals process for these claims. We reviewed statutes, regulations, policies, and other documentation related to the four levels of the administrative appeals process, including Part B carriers,5 which conduct the first two levels of appeal; the Office of Hearings and Appeals (OHA) within SSA, which hears the third level of appeals; and the Medicare Appeals Council (MAC) within HHS’s DAB, which reviews OHA’s decisions. To assess the conditions present at the time BIPA was passed, we analyzed fiscal year 2001 appeals processing data. We subsequently reviewed more current data and confirmed that the conditions were relatively unchanged. We interviewed officials from CMS, OHA, and the MAC to discuss the management of the appeals process and the implementation of BIPA requirements. We conducted our work from November 2001 through September 2003, in accordance with generally accepted government auditing standards. (See app. I for more information on our scope and methodology.) The appeals bodies are not currently performing at the level that would Results in Brief enable them to meet BIPA’s more rigorous timeliness requirements. Their performance is far from meeting BIPA requirements with the two higher levels of appeal taking, on average, more than four times the amount of time BIPA requires to complete an appeal. In addition, both OHA and the MAC face large backlogs of pending appeals because they have been unable to routinely resolve all of the appeals that they receive. Long- 4 Pub. L. No. 106-554, app. F, 114 Stat. 2763, 2763A-534 (codified at 42 U.S.C. § 1395ff (2000)). 5 Medicare contractors that process Part A claims are called fiscal intermediaries, while those that process Part B claims are called carriers. Page 2 GAO-03-841 Medicare Appeals standing administrative problems among the appeals bodies, such as time- consuming transfers of paper appeals files and delays caused by outdated technology, which account for about 70 percent of the time spent in processing appeals at OHA and the MAC, have not been corrected. BIPA’s provision allowing appellants the right to bypass appeals bodies that do not resolve their appeals within prescribed time frames by elevating them to the next level may only shift processing delays to the higher appeals bodies. The combined effect of these factors has prevented the appeals bodies from attaining the level of performance BIPA demands. The appeals bodies face several barriers to the successful implementation of BIPA. Because appeals bodies are housed in different agencies, the coordination among them is inherently difficult. Each agency has its own priorities and, although officials from the appeals bodies worked together to develop a proposed rule for the implementation of BIPA, they have not coordinated their BIPA implementation strategy. The lack of adequate data to pinpoint weaknesses in the appeals process and enable informed decision-making has further hindered BIPA’s implementation. And, although some of the appeals bodies are planning to obtain or have implemented new data management systems, they have not coordinated with their counterparts to ensure compatibility of the systems across agencies. Uncertainty about funding and a possible transfer of the OHA’s Medicare appeals workload from OHA to HHS has also complicated the appeals bodies’ ability to adequately plan for the future. We are recommending that the Secretary of HHS and the Commissioner of SSA more closely coordinate their efforts to improve administrative processing, develop strategies for reducing the backlog of pending cases, and establish data requirements to facilitate the successful implementation of BIPA’s mandated changes. HHS and SSA agreed that inefficiencies in the appeals process require attention and that the process would benefit from better coordination. Providers and beneficiaries may appeal any denied claim. Claims are Background denied for a variety of reasons. In fiscal year 2001, the most common reason for denying claims was that the services provided were determined not to have been medically necessary for the beneficiaries. Other reasons for denials include that Medicare did not cover the services, or that the beneficiary was not eligible for services. Claims that do not meet the Page 3 GAO-03-841 Medicare Appeals requirements outlined in Medicare statutes and federal regulations may be denied.6 In addition, denials may be issued for claims that are inconsistent with CMS’s national coverage determinations (NCD) and carrier-based policies, including local medical review policies (LMRP), local coverage determinations (LCD), and other carrier instructions.7 Relatively few denied claims are ever appealed, and only a small fraction is appealed to the highest level. (App. II contains more information regarding the denial of claims, including common reasons for denials.) The Medicare Part B appeals process consists of four levels of administrative appeals performed by three appeals bodies. Medicare carriers are responsible for the first two levels of appeal—the carrier review8 and the carrier hearing. Through a memorandum of understanding (MOU) implemented in March 1995—when SSA was separated from HHS and became an independent agency—OHA’s administrative law judges (ALJ) within SSA continue to hear the third level of appeal. OHA’s continued role in Medicare appeals is uncertain, as SSA officials have indicated that they plan to discontinue adjudicating Medicare appeals and expect to transfer the workload to HHS. However, until an agreement between SSA and HHS is reached, OHA will continue to adjudicate Medicare appeals. The MAC adjudicates appeals at the fourth level of the administrative appeals process. In addition, appellants who have had their appeals denied at all four levels of the administrative appeals process have the option of filing their appeals in federal court. Section 521 of BIPA requires numerous administrative and structural changes to the appeals process, including moving the second level of appeals—the carrier hearing—from the Medicare carriers to a group of 6 The Medicare program is governed by title XVIII of the Social Security Act, 42 U.S.C. §§ 1395 et seq. (2000), and related regulations, 42 C.F.R. pts. 400-425 (2002). 7 NCDs are developed by CMS to describe the circumstances for Medicare coverage for a specific medical service, procedure, or device. All Medicare carriers must observe NCDs in determining if a claim is payable; appeals bodies at all levels must apply NCDs when adjudicating appeals. LMRPs and LCDs, developed by contractors, specify the clinical circumstances under which a service is covered to enhance or clarify national Medicare guidance. Due to carrier-based policies, services covered by Medicare in one area may not be covered in another area served by a different carrier. For more information on Medicare coverage policy, see U.S. General Accounting Office, Medicare: Divided Authority for Policies on Coverage of Procedures and Devices Results in Inequities, GAO-03-175 (Washington, D.C.: Apr. 11, 2003). 8 BIPA refers to the carrier review level as the “redetermination.” Page 4 GAO-03-841 Medicare Appeals yet-to-be-established contractors, known as qualified independent contractors (QIC). Figure 1 outlines the steps of the existing appeals process and the process BIPA requires. BIPA’s changes to the appeals process were to apply with respect to initial determinations—that is, claims denials—made on or after October 1, 2002. Although CMS published a rule9 on October 7, 2002, the ruling implemented only two of BIPA’s provisions—revising the deadline for filing an appeal to the carrier review level and reducing the dollar threshold for filing an appeal at the th OHA level. The October 7 rule outlines the criteria used to select the changes that would be immediately implemented; among the criteria is that the provision can be implemented using existing CMS resources. CMS published a proposed rule for complete implementation of BIPA-mandated changes on November 15, 2002,10 but the final rule has not been issued. As of June 2003, the appeals process is generally operating in accordance with regulations established prior to BIPA’s passage. (See app. III for a comprehensive list of BIPA’s changes.) 9 67 Fed. Reg. 62,478. 10 67 Fed. Reg. 69,312. Page 5 GAO-03-841 Medicare Appeals Figure 1: Levels and Time Frames for the Pre-BIPA and BIPA-Mandated Appeals Process Pre-BIPA BIPA-mandated Oversight/agencies appeals process appeals process Initial claim Initial claim determination determination 45 days 45 days 180 days/any dollar 120 days/any dollar amount amount CMS oversees the carriers who perform First level of - intitial claim determinations and administrative - the carrier appeals functions Carrier review Carrier review 45 days 30 days (hearing and review). appeal 180 days/$100 180 days/any dollar amount Second level of BIPA requires that the Secretary of HHS administrative contract with QICs for the new Carrier hearing QIC reconsideration appeal 120 days second-level review. 30 days 60 days/$500 60 days/$100 Third level of SSA oversees OHA. administrative appeal OHA no time limit OHA 90 days 60 days/any dollar 60 days/any dollar amount amount Fourth level of HHS (but not CMS) oversees the MAC. administrative The MAC no time appeal The MAC 90 days limit 60 days/$1,000 60 days/$1,000 Judicial appeal (Courts are independent and Federal district court not part of the administrative Federal district court no time limit no time limit appeals process.) Time allowed for Medicare or the appeals bodies to issue a decision Time allowed for appellant to request an appeal/dollar threshold required to file appeal Sources: CMS, BIPA, and 20 CFR 422.210 § (2002). Beneficiaries and providers have the right to appeal denied claims if appeals are filed within the deadline. CMS’s October 2002 ruling implemented the BIPA-mandated deadline for filing an appeal at the Page 6 GAO-03-841 Medicare Appeals carrier review level, shortening it from 180 to 120 days—one of two BIPA provisions implemented thus far. Appeals at the carrier hearing level must be submitted within 180 days of the denial or unfavorable determination. Appellants who are dissatisfied with decisions reached at the carrier hearing level may appeal to OHA and then to the MAC, and their appeals must be filed within 60 days of receiving an unfavorable determination at the previous level. There is no dollar minimum required to file an appeal at the carrier review level. However, an appeal at the carrier hearing and OHA levels must meet specific dollar thresholds of $100 and $500, respectively. To meet the thresholds, multiple denied claims may be aggregated into a single appeals “case.” The MAC does not have a dollar threshold for considering appeals. Finally, appellants who receive unfavorable determinations from the MAC may appeal the decisions in federal court if the amount in dispute is at least $1,000. BIPA provisions change the threshold amounts at the second level of appeal and OHA. When QICs replace carrier hearings as the second level of appeal, the dollar threshold for submitting an appeal at that level will be eliminated. Further, CMS’s October 2002 ruling implemented BIPA’s reduced dollar threshold for filing an appeal at OHA—the second of two BIPA provisions to be implemented thus far—by dropping the threshold from $500 to $100. BIPA also shortened the time frames the appeals bodies have for adjudicating appeals at the first two levels and established time frames for the first time at the higher levels. BIPA’s provisions that revise the timelines for processing appeals have not been implemented, and the appeals bodies are following previously issued performance standards specifying that 95 percent of carrier reviews be completed within 45 days and 90 percent of carrier hearings be completed within 120 days. BIPA required that carrier reviews be completed in 30 days and that the QICs issue their decisions in 30 days. While OHA and the MAC have not previously been bound by time limits, BIPA required that they issue decisions within 90 days of the date an appeal was filed.11 BIPA also gave appellants the right to escalate their appeals to the next level in the process for adjudication when a decision is not issued within the specified time frame. Escalation is available from any level of appeal except the first—carrier review. However, CMS’s November 2002 proposed rule regarding BIPA’s implementation provides that appellants who escalate 11 OHA and MAC time limits may be waived at the appellant’s request. Page 7 GAO-03-841 Medicare Appeals their appeals to the next level will, in essence, be waiving their right to a decision within the statutory time frame governing that level. For example, an appeal that is escalated from the OHA to the MAC would not be subject to the 90-day limit that applies to appeals received by the MAC that have not been escalated. The first three levels of appeal share a protocol for adjudication, called de novo review, which permits adjudicators to consider results from earlier decisions but requires them to independently evaluate evidence and issue original decisions. The appeals bodies reexamine the initial claim to determine if it should be paid and consider any new documentation or information supporting the claim that the appellant submitted. The fourth level of review, the MAC, does not share this protocol. Rather than performing de novo review of evidence, it evaluates the appropriateness of OHA decisions and considers whether new evidence submitted will alter the decision. BIPA changes require that the MAC performs de novo review in all cases. The appeals bodies reach decisions through either a review of the file for the initial claim or through hearings. At the first level of appeal, a carrier review officer who was not involved in the initial denial reexamines the initial claim and any new supporting documentation provided by the appellant but does not conduct a hearing. The second level of appeal—the carrier hearing—provides the appellant with an opportunity to participate in a hearing at the carrier’s facility or by telephone. OHA conducts hearings at the third level of review. OHA’s hearings are held at its central office in Falls Church, Virginia, or at one of its 140 local hearing offices nationwide. The MAC’s adjudication is based on a review of OHA’s decisions, and it does not conduct hearings. Appeals bodies have several options when deciding a case. The case may be decided fully or partially in favor of the appellant and payment awarded for all or part of the claim or claims in dispute. Alternatively, the decision may be unfavorable to the appellant and the initial denial of payment upheld. The MAC has an additional option of remanding the appeal— returning it to the OHA judge who issued the original decision—for a variety of reasons. For example, the MAC may determine that more evidence is needed, additional action by OHA is warranted, or that OHA should issue a modified decision based on the MAC’s instructions. Finally, the MAC may deny an appellant’s request for review if it finds that OHA’s decision is factually and legally adequate. Page 8 GAO-03-841 Medicare Appeals In making a determination regarding whether the claim is payable or will continue to be denied, the first two levels of appeal are bound by the same guidance used in the initial denial determination—Medicare statutes, federal regulations, CMS’s NCDs, the carrier’s own LMRPs and LCDs, and, pursuant to carrier’s contracts with CMS, CMS’s general instructions, such as manuals and program memoranda. The statutes, regulations, and NCDs also bind OHA and the MAC—and the QICs, when they are established. But QICs, OHA, and the MAC only need to consider—rather than definitively follow—the carrier-based LMRPs and LCDs in rendering their decisions. Management of the Medicare appeals process is currently divided among CMS, SSA, and the MAC. CMS is charged with establishing procedures for carriers to follow in considering appeals—including developing guidelines for timeliness and quality of communications with the appellant—and is also responsible for ensuring that the carrier review and carrier hearing processes comply with statutory and regulatory requirements. SSA establishes its own requirements and procedures, with input from CMS, for OHA’s review of third-level appeals. CMS reimburses OHA for its appeals work. The MAC independently establishes its own procedures and guidelines for completing Medicare appeals. Carriers generally meet CMS’s existing time frames for processing appeals, Appeals Process but all appeals bodies—the carriers, OHA, and the MAC—fall far short of Operations meeting BIPA’s time frames. The large backlog of pending cases at OHA and the MAC, combined with BIPA’s escalation provision and the Inconsistent with requirement for de novo review at the MAC, will demand a level of BIPA’s Requirements performance that the appeals bodies have not demonstrated they can meet. Administrative delays, caused by inefficiencies such as difficulties in transferring and locating files and outdated technology, constitute a large portion of time spent in the appeals process—especially at OHA and the MAC. QICs have not yet been implemented and there is insufficient information to predict their ability to meet BIPA’s performance measures. Appeals Bodies’ Current There is a substantial gap between carriers’ current performance and that Performance Is Far from required by BIPA’s standards. For example, at the first level of appeals— Meeting BIPA’s Timeliness the carrier review—while carriers completed about 91 percent of their reviews within CMS’s current 45-day time frame, this is insufficient by Standards BIPA’s standards. Only about 43 percent of the carrier reviews completed in fiscal year 2001 met BIPA’s mandated 30-day deadline. At the carrier hearing level—eventually to be replaced by the appeals to the QICs—the Page 9 GAO-03-841 Medicare Appeals ability to meet BIPA’s time frames remains largely unanswered because the QICs have not yet been established. Although the carriers exceeded CMS’s performance standards in fiscal year 2001 by completing more than 90 percent of the carrier hearings within 120 days, this standard is much less stringent than the one imposed by BIPA, which requires the QICs to complete all appeals within 30 days. Similarly, OHA and the MAC fall far short of BIPA’s required 90-day time frame for completing 100 percent of their cases. For example, in fiscal year 2001, OHA took an average of 14 months from the date an appeal was filed to complete adjudication. The MAC took even longer to process appeals during the same year, with cases taking an average of 21 months to adjudicate. As of September 2003, OHA and the MAC had not implemented BIPA-mandated time frames and continued to operate without time frames for rendering decisions. Although officials at both appeals bodies told us that they are concerned with meeting BIPA time frames, neither body has developed strategies for doing so. Instead, the officials stated that they would take action once regulations implementing BIPA are finalized and they are more certain how the new regulations will affect them. Existing backlogs of unprocessed cases may also interfere with the appeals bodies’ compliance with BIPA’s mandated time frames for appeals of claims denied after October 2002. While backlogs at the carrier review and carrier hearing levels are relatively small,12 OHA and the MAC have been unable to meet workload demands. For example, OHA’s backlog at the end of fiscal year 2001 included nearly 35,000 Part B cases—equal to about the average number of cases processed in 7 months. At the end of that same year, the MAC had a backlog of 15,000 cases—twice the number of cases it adjudicated in 2001. The MAC has been making strides to improve its efficiency and, near the end of fiscal year 2003, reported reducing its backlog to 10,100 cases. According to OHA and MAC representatives, BIPA-governed cases—appeals of claims denied after October 1, 2002—will have higher priority than cases filed earlier, virtually ensuring that pre-BIPA cases experience even longer delays. However, as of July 2003, none of the appeals bodies had determined how they would prioritize the processing of BIPA appeals while completing their pre-BIPA workloads. 12 At the end of fiscal year 2001, the backlog of cases past their pre-BIPA deadline at both the carrier review and carrier hearing levels was about the average number carriers process in a single month. Page 10 GAO-03-841 Medicare Appeals At OHA, protocols for assigning appeals to ALJs may contribute to delays. Although OHA plays a critical role in resolving Medicare appeals, its primary focus is disability appeals for SSA, which constitute 85 percent of its total caseload. While they are a smaller workload, Medicare appeals are often more complex than disability appeals. Some local OHA hearing offices take advantage of their ALJs’ Medicare expertise by assigning all Medicare cases to a single judge. However, other offices assign cases randomly, requiring judges to refamiliarize themselves with basic Medicare statutes each time they hear a Medicare case—potentially prolonging the process. While all of the appeals bodies are subject to BIPA’s processing time frames, the MAC is uniquely challenged in meeting these deadlines because the requirement for de novo review expands the scope of the MAC’s work. MAC officials pointed out that shifting from ensuring that OHA interprets policy correctly to becoming a fact-finding body requires a substantial amount of additional resources and more time to gather and evaluate evidence. MAC officials report that they do not have a strategy to address the expansion in the scope of their work and the contraction in time to render decisions. Delays in Administrative The bulk of time at OHA and the MAC is spent on assembling files and Processing at OHA and the completing other administrative tasks rather than in performing legal MAC Further Suggest analyses of appeals and adjudicating cases. Each agency takes more than a year, on average, to complete an appeal. For example, OHA spent 14 BIPA’s Time Frames Will months, on average, to complete a case in fiscal year 200113 and an average Not Be Met of 10 months of that was consumed obtaining case files from the lower level appeals bodies and performing related processing tasks. In that same year, the MAC adjudicated nearly 7,100 Part B cases and spent about 17 months, on average, performing administrative tasks. As shown in figure 2, on average, over 70 percent of the time to resolve OHA and MAC cases was spent on administrative activities, rather than on substantive legal analysis of the appeals. 13 OHA completed more than 56,300 Part B cases in fiscal year 2001. Page 11 GAO-03-841 Medicare Appeals Figure 2: Average Time Spent in Each Stage of Processing for Cases Adjudicated by OHA and the MAC in Fiscal Year 2001 Officials from both OHA and the MAC report that it may take months to receive appellants’ case files from the previous level of review or the appropriate storage facility. Case files—which are all paper documents— are a critical component of the adjudication process as they contain all evidence submitted by the appellant in previous appeals. The MAC, in particular, requires OHA’s case files to assess the evidence, the hearing tapes, and the letter of decision so that it may determine whether OHA’s decision was appropriate. Page 12 GAO-03-841 Medicare Appeals OHA and the MAC are dependent on the Medicare carriers to forward the appropriate files to their hearing offices for review. CMS allows carriers 21 to 45 days to forward case files to OHA, depending on the number of appellants and dollar value of the case. However, locating files is further complicated by the fact that appellants are required to include little information in their appeal requests. Therefore, OHA and the MAC may receive appeals that do not identify the carrier that originally denied the claim. Locating files can also be hindered if the appeal has been in process for several years and the carrier that initially denied the claim is no longer a Medicare contractor. Although the defunct carrier should have transferred all of its files, including its appeals records, to the replacement carrier, such transitions are not always smooth. Instead, files are often difficult to locate, causing delays in forwarding specific requested cases. The MAC faces an additional challenge in locating case files. OHA- completed cases are routed to a special clearinghouse contractor for temporary storage. If OHA determines that the appellant is due a full or partial payment, the clearinghouse returns the files to the carrier that initially denied the claim so that payment may be processed. If OHA continues to deny payment, the clearinghouse holds the accompanying file for 120 days to expedite the MAC’s retrieval should the appellant continue to appeal. However, the MAC may not know whether to approach the clearinghouse contractor or the relevant carrier to request needed files. And, like the carriers, the clearinghouse does not always provide files in a timely manner. In fiscal year 2001, the MAC waited an average of nearly 3 months—the entire time allowed for the MAC to adjudicate appeals under the BIPA amendments—to receive case files. The MAC, which is empowered to remand, or return, cases to OHA when there is insufficient information in the existing record to issue a decision, in fiscal year 2001 remanded 1,708 cases—nearly a quarter of the cases it adjudicated that year—to OHA because needed files were either missing or incomplete. Although CMS has not performed a comprehensive evaluation of the clearinghouse’s accuracy in routing appeals files, it recently determined that the clearinghouse had a 10 percent error rate in routing case files to particular carriers for payment. Inadequate technology and the need for manual processing also indicate that the appeals bodies are not prepared to address BIPA’s requirements. For example, providers often aggregate groups of claims for different beneficiaries to meet the dollar threshold for filing an OHA appeal. To maintain beneficiary confidentiality, a separate electronic file—containing the same provider information—is created for each beneficiary. While widely available technology allows the creation of multiple data files by Page 13 GAO-03-841 Medicare Appeals entering the information one time and then quickly duplicating it, OHA’s system requires administrative staff to separately enter repetitive information pertaining to each denied claim that constitutes the appeal. For example, if a provider is appealing a similar group of claims in a single appeal, OHA must nonetheless create a separate case file and data record for each beneficiary. BIPA provides that appellants may escalate their appeals from the QIC or OHA to the next level in the administrative appeals process when it is not resolved within the time frames mandated. MAC cases not meeting the time frame may be escalated to the federal district court. More than 95 percent of OHA appeals and about 85 percent of MAC appeals did not meet BIPA time frames in fiscal year 2001, suggesting that a number of cases would be eligible for escalation.14 However, escalation may not ensure that appellants secure timely adjudication. Escalated cases will lack comprehensive records because the prior level of appeal did not complete the cases and may not have the full collection of case documentation. OHA and MAC officials report that cases without complete records from earlier levels of appeal will require the next level to perform time-consuming research. The MAC may remand cases with incomplete files, causing additional time to be spent locating and transferring files between the appeals bodies. While appellants may view the consideration and resolution of their Appeals Bodies’ Lack appeals as a single process, several separate and uncoordinated bodies are of Coordination and responsible for administering the various appeals levels. The appeals bodies have traditionally worked independently; however, close Resources Is a Barrier coordination is critical to successful planning for BIPA changes. Further, to BIPA appeals bodies lack the management data to track cases and analyze case characteristics, preventing them from identifying barriers to efficiency—a Implementation first step in streamlining the process. Planning for BIPA implementation has also been hampered by (1) proposed regulations that have not been finalized, (2) the uncertainty of funding amounts for implementation, and (3) unresolved details regarding the possible transfer of OHA’s appeals workload to HHS. 14 Since QICs have not yet been implemented, there are no data to assess whether any of their cases will be eligible for escalation. Page 14 GAO-03-841 Medicare Appeals Appeals Bodies Need CMS, OHA, and the MAC—located within two federal agencies—are each Stronger Coordination to responsible for administering a portion of the appeals process. However, Successfully Implement neither the agencies nor the appeals bodies have the authority to manage the entire process. The appeals bodies focus primarily on their individual BIPA’s Requirements priorities, which may differ and complicate planning for making improvements to the process as a whole. Attempts to modernize the appeals process have been undermined when individual appeals bodies have identified opportunities for improvement, but have failed to sufficiently take into account the impact of their plans on the other bodies. For example, CMS issued a draft statement of work (SOW) outlining the expectations for QICs—the BIPA-mandated replacement for the workload of Medicare carriers at the second level of review, the carrier hearing. The draft SOW asks potential QIC applicants whether they have the capacity to convert paper case files into an electronic format, with the expectation that this would ease the transfer of needed files to the higher levels of appeals. However, CMS officials told us that they did not consult with OHA to ensure that it would have the capacity to use and store electronic files. OHA officials agree that electronic files offer an important opportunity to reduce lost files, speed transfers, and permit case tracking. However, OHA has focused its own plans to implement a system of electronic folders—scheduled for January 2004—exclusively on its SSA disability cases. Recent planning for BIPA implementation intensified the need for appeals bodies to work together because the demanding time requirements alone call for a more efficient appeals process. While officials from CMS, OHA, and the MAC worked together to develop the proposed rule for implementing the majority of BIPA’s requirements, the agencies have not taken the opportunity to coordinate strategies to meet the time frames mandated by the act. Lack of Management Data We found that the appeals bodies are not sufficiently coordinated to track Inhibits Appeals Bodies’ an appealed claim, or group of claims, through all four levels of the Ability to Understand process. This is attributable, in part, to the use of different numbering systems for case identification at each appeals body and the fact that the Barriers to Efficiency individual claims making up a “case” can change at every level. For example, appeals bodies often reconfigure cases to group claims with similar issues. Appellants also change the configuration of their cases by aggregating their claims to meet minimum dollar thresholds necessary to file an appeal at a given level. Case numbering is further complicated when a partially favorable decision is made. In these situations, some of the claims within the appeal are paid, while the remaining denied claims are Page 15 GAO-03-841 Medicare Appeals eligible for further appeal by beneficiaries and providers and subject to further reconfiguration with new case numbers. Accordingly, assigning a variety of numbers to any particular claim or group of claims at each level of the process makes it virtually impossible to track an individual claim from one level to the next. Some problems with data quality are also a product of a lack of coordination between appeals bodies. CMS, OHA, and the MAC are making individual efforts to improve their data systems to better manage their caseloads, but their systems remain incompatible. For example, although CMS is gradually shifting its carriers to one common claims processing data system—also used to track appeals at the carrier level—it is not compatible with OHA’s or the MAC’s data systems. OHA has also initiated data system improvements, but did not consult with CMS in setting the parameters for new system requirements or provide CMS’s appeals group with a copy of its planning document. The MAC does not know if the improvements it is instituting—such as its transition to more powerful data management software used to organize its caseload—will be compatible with OHA’s, CMS’s, or the carriers’ systems. Compatible data systems would facilitate the transfer of case information between appeals levels and analyses of the process as a whole. Not only do appeals bodies have incompatible data systems, but data gathered individually by CMS from carriers and by OHA from local hearing offices are aggregated and not used to pinpoint problems and develop solutions to improve the appeals process. For example, CMS only collects workload data from its carriers in the form of monthly productivity totals. OHA collects aggregate data from each of its 140 hearing offices, despite the fact that the local offices are tracking individual cases. The aggregate numbers allow OHA and CMS to develop basic workload statistics, such as the number of cases they resolve and the average time frames for adjudication. However, the data do not allow CMS and OHA to perform more detailed analyses, such as isolating process steps that create a bottleneck or identifying specific cases that linger at an appeals level for unusually lengthy periods. The lack of specific data on case characteristics also limits the appeals bodies’ understanding of the nature and types of appeals that they must resolve. For example, only the MAC collects data on the reason for the appeal, the type of denial being appealed, and the amount in controversy; however, the MAC is not consistent in ensuring that the information is routinely entered in the database. Furthermore, carriers do not collect data that allow CMS to distinguish if the appellant is a beneficiary or a Page 16 GAO-03-841 Medicare Appeals provider, and none of the appeals bodies collects information on the rates of appeal among provider specialty groups. Analyses of case characteristic data could be valuable in identifying confusing or complex policies or requirements that lead to denied claims and the submission of appeals. The data would also be useful to the agencies in understanding the nature of denied claims that are appealed at each level and guiding more appropriate initial reviews of claims and educating providers about proper claim submission. BIPA mandated the use of QICs to replace the second appeals level and required them to develop management information through a data system that would identify (1) the types of claims that give rise to appeals, (2) issues that could benefit from provider education, and (3) situations that suggest the need for changes in national or local coverage policy. QICs must report their information to the Secretary of HHS and, among other things, must monitor appeals decisions to ensure consistency between similar appeals. However, the requirements do not affect data collection at the other appeals bodies. As a result, without corresponding changes at the other appeals bodies, it will remain difficult to evaluate the performance of the appeals process as a whole and make informed decisions affecting more than one appeals level. CMS stated that it plans to expand the QICs’ data system to the third level of appeal—the ALJ-adjudicated level—and, eventually, to all levels of appeal. Until the compatible data systems are in place at all appeals bodies—which CMS plans for 2005—the appeals bodies will not be able to perform the most fundamental types of analyses to improve the management of the process. Uncertainties in While BIPA mandated several changes to the current appeals process, Regulations, Funding, and CMS, OHA and the MAC are charged with developing regulations for the Role of OHA Hinder implementing BIPA’s mandates in accordance with the Administrative Procedures Act.15 As of September 2003, guidance regarding two BIPA Implementation provisions—adjusted deadlines for appellants filing first-level appeals and Planning reduced dollar thresholds required for filing appeals at OHA—have been issued. CMS officials stated that they expect that the proposed regulations16 implementing the remaining provisions of BIPA section 521 15 With limited exceptions, the Administrative Procedures Act requires agencies to publish proposed rules and provide an opportunity for the public to comment on them before they become effective. 5 U.S.C. § 553(b) (2000). 16 67 Fed. Reg. 69,182 (Nov. 15, 2002). Page 17 GAO-03-841 Medicare Appeals will be finalized by early 2004. The regulations, once finalized, will provide directions specifying how each body will operate. Without final regulations, officials from carriers, OHA, and the MAC said that they have had difficulty estimating what the actual effect on their workloads will be and, accordingly, have not made specific plans to comply with BIPA’s mandates. Even after the regulations are finalized, several important issues will not have been resolved. For example, when it published its ruling on October 7, 2002, CMS acknowledged that transition issues from the current appeals process to the new process would require additional policy guidance prior to implementation. Specifically, questions will remain regarding the necessity of operating two separate appeals processes concurrently, dependent on the date of the initial claim determination. Appeals of claims denied before the effective date of the BIPA amendments are not governed by them, barring specific guidance to the contrary, and are subject to pre- BIPA guidelines and processes. No additional funding was provided to the appeals bodies in fiscal year 2003 to implement BIPA’s changes. Moreover, uncertainties exist about the funds available in fiscal year 2004. The first uncertainty concerns funding for HHS. The President’s proposed budget for fiscal year 2004 includes $126 million in funding for CMS to complete BIPA’s changes— including establishing the QICs, developing the QIC data systems, and implementing the shortened time frames at the first and second appeals levels—as well as assuming the workload currently performed by OHA. However, this funding level was premised on the assumption that BIPA would be amended to reduce the number of QICs, increase the time frames for completing appeals at all levels, and require that providers pay a $50 user fee for filing appeals at QICs. However, as of September 2003, BIPA had not been amended. Moreover, the proposed budget contained no additional funding for the MAC to implement BIPA. The second budgetary uncertainty concerns funding for the third level of the appeals process, currently performed by OHA. While SSA’s fiscal year 2003 budget included a $90 million “direct draw” from the Medicare Trust Fund for Medicare appeals, the proposed 2004 budget eliminates the direct draw and does not include a new source for Medicare appeals funding, reflecting SSA’s plan to transfer OHA’s Medicare appeals workload to HHS. Although BIPA required CMS to establish QICs in time for them to begin adjudicating appeals of claims denied as of October 1, 2002, CMS estimated, in its fiscal year 2004 budget request, that QICs would become operational, at the earliest, February 2005. Agency officials detailed that Page 18 GAO-03-841 Medicare Appeals the implementation of QICs would require approximately 10 months of drafting and finalizing the related regulations and conducting the bidding process, and 6 months for hiring staff, renting space, and performing other tasks associated with making QICs operational, including developing the QICs’ data systems. In commenting on a draft of this report, HHS stated that CMS now plans for QICs to begin operation in fiscal year 2004. However, we were not provided with CMS’s implementation plan or sufficient details to evaluate its feasibility. Finally, one of the critical issues related to BIPA’s implementation involves the possible transfer of the Medicare caseload currently adjudicated by SSA’s OHA to HHS. Several issues remain unresolved. In 1995, when SSA separated from HHS and became an independent agency, SSA entered into an MOU with the Health Care Financing Administration to continue to perform the Medicare appeals work it had been conducting. Recently, SSA has taken the position, which is reflected in its budget request for fiscal year 2004, that it intends for OHA to discontinue adjudicating Medicare appeals and has proposed a revised MOU outlining the transfer of OHA work to HHS. However, as of September 2003, HHS had not signed the revised MOU and the transfer of the workload to HHS had not been finalized. In addition, legislation has been introduced that would expressly provide for the transfer of Medicare appeals to HHS.17 However, provider and beneficiary groups have protested because they believe shifting responsibility to HHS will compromise the ALJs’ independence. OHA’s departure from the appeals process would create a new challenge for HHS. OHA’s process for adjudicating administrative appeals includes 140 local hearing offices and over 1,000 ALJs. Because SSA disability appeals constitute about 85 percent of OHA’s work, OHA would continue to require the use of its hearing offices and judges regardless of whether it continues to hear Medicare appeals. BIPA language specifies that the third level of appeal be adjudicated by ALJs, but because HHS has far less capacity than OHA to hear ALJ cases,18 HHS would have to compensate for 17 H.R. 810, 108th Cong. (2003); S. 1127, 108th Cong. (2003); H.R. 1, 108th Cong. (2003); and H.R. 2473, 108th Cong. tit. IV (2003). 18 HHS has nine additional ALJs—one at the Food and Drug Administration and eight who hear enforcement cases including those on Medicare fraud and provider penalties. The latter have a backlog of 700 unresolved cases. HHS’s DAB, which houses both the MAC and the Medicare fraud ALJs, is located in Washington, D.C. It has five satellite locations but no hearing rooms—its ALJs use the hearing rooms of local courts or other agencies. Page 19 GAO-03-841 Medicare Appeals OHA’s departure by developing plans that would enable it to adjudicate the current workload demands within BIPA’s time frames and to address the backlog of cases accumulated before the transfer to HHS. As of June 2003, CMS was evaluating OHA’s Medicare operations, workload, and facilities and developing and assessing the feasibility of various options. A CMS official stated that assuming OHA’s workload would be a notable challenge for the agency. BIPA demands a level of performance—especially regarding timeliness— Conclusions that the appeals bodies have not demonstrated they can meet. In addition to lengthy processing times, OHA and the MAC have developed sizable backlogs of unprocessed cases. The backlogs raise a question about how BIPA-governed cases, with their mandated time frames, will be prioritized relative to unresolved cases filed before BIPA’s mandated implementation date. Administrative and systemic inefficiencies, which span all levels of appeals, strongly indicate the need for improvement. Without significant improvements, the appeals bodies will be unable to meet BIPA’s more rigorous performance requirements. Uncertainties regarding BIPA regulations and funding further complicate the challenge the appeals bodies face in implementing BIPA and meeting its requirements. Moreover, the transfer of OHA’s Medicare appeals work from SSA to HHS involves major challenges, and until all of the stakeholders resolve workload and timeliness issues, the full impact of such a transfer will not be known. CMS, its carriers, OHA, and the MAC have traditionally not coordinated their management of the appeals process. Instead, each has operated as though the process consisted of discrete and independent segments. Greater coordination could enable them to resolve the barriers that currently preclude successful management of the appeals process as a whole. Inefficiencies in file transfer and case file tracking, developing comprehensive and meaningful data, and planning for BIPA implementation require a joint effort including each appeals body and its agency. The lack of a single entity that sets priorities and addresses operational problems at all four levels of the process makes it imperative that all bodies work closely together. If OHA’s Medicare appeals workload is to be transferred to HHS, it is critical that all of the current appeals bodies work together to develop a carefully planned transition and build efficiencies to help HHS assume the workload. We believe that the creation of a Medicare appeals process that can consistently address BIPA’s requirements will require a commitment for close coordination from all appeals bodies. Page 20 GAO-03-841 Medicare Appeals We recommend that the Secretary of HHS and the Commissioner of SSA Recommendation for create an interagency steering committee with representatives from CMS, Executive Action the carriers, OHA, and the MAC to serve as an advisory body to the Secretary of HHS and the Commissioner of SSA with the following responsibilities: • make administrative processes, such as file tracking and transfer, compatible across all appeals bodies; • negotiate responsibilities and strategies for reducing the backlog of pending cases, especially at OHA and the MAC, and establish the priority for adjudicating pre-BIPA cases relative to BIPA-governed cases; and • establish requirements for reporting specific and comparable program and performance data to CMS, SSA, and HHS so that management can identify opportunities for improvement, and determine the resource requirements necessary to ensure that all appeals bodies will be able to meet BIPA’s requirements. We provided a draft of this report to HHS and SSA and received written Agency Comments comments from both agencies. In its comments, HHS emphasized its and Our Evaluation commitment to implementing the appeals provisions in BIPA and highlighted the steps it has taken to do so. Similarly, SSA emphasized its efforts to provide quality service to Medicare appellants. We have reprinted HHS’s and SSA’s letters in appendixes IV and V, respectively. HHS agreed with our conclusion that a more coordinated approach to the appeals process is needed. HHS said, however, that we understated its progress in this area and described a variety of efforts it has engaged in to facilitate improved coordination between the appeals bodies. As we noted in the draft report, HHS has made strides in enhancing coordination, but we believe that greater progress can be made by creating an interagency steering committee to develop a consolidated and strategic approach to implementing BIPA. SSA’s comments also emphasized the benefits of enhanced coordination between the appeals bodies. It largely attributed the inefficiencies that exist in the current appeals process to the lack of a single entity with ownership of, and accountability for, Medicare appeals. SSA indicated that it believes that HHS is the sole entity with the authority to unify the policies and procedures for the Medicare appeals process. Page 21 GAO-03-841 Medicare Appeals HHS stated that it would consider the appropriateness of an interagency steering committee but did not specifically agree or disagree with our recommendation to create such a body. However, it stated that the transfer of the work performed by SSA’s OHA to HHS is critical to achieving the level of coordination needed to address the inefficiencies outlined in our report. SSA indicated that it generally agreed with the specific responsibilities of the steering committee. It also stated that it believes that HHS has ultimate responsibility for Medicare appeals and that HHS should carry out the functions of the steering committee through CMS. SSA stated that its budget anticipates the transfer of OHA’s appeals workload to HHS, and SSA has submitted a new MOU to HHS to facilitate a smooth transition. While SSA emphasized its commitment to serving Medicare appellants during the expected transition, it also pointed out that Medicare appeals make up a small portion of its work. Therefore, SSA cautioned that while it will participate in efforts to improve the Medicare appeals process, it must consider the demands of its total workload in allocating its resources. While HHS did not specifically comment on our recommendation to make administrative processes, such as file tracking and transfer, compatible across all levels of appeal, SSA agreed that an interagency steering committee could be beneficial in ensuring such compatibility among appeals bodies. SSA also noted that the steering committee would be helpful in defining the roles of the appeals bodies both in their current operating status and during the anticipated transfer of the OHA workload to HHS. Regarding our recommendation to negotiate responsibilities for reducing the backlog of pending cases, HHS agreed that a strategy for setting clear requirements to prioritize pre-BIPA and BIPA cases and reduce the backlog of cases at all levels is needed. HHS also reported that the MAC has already reduced its backlog and we revised the report to reflect the reduction. HHS also said that prioritizing cases and other transition matters would be addressed in the forthcoming final regulations. SSA agreed that strategies for reducing both the backlog of pending cases and the lengthy processing times for Medicare appeals are needed and expressed a willingness to help resolve the backlogs and delays. HHS agreed with our recommendation to establish comparable program and performance data across appeals levels and indicated that improved appeals data capabilities are needed. To that end, HHS noted that it has issued a request for proposals to develop the data system required by BIPA. SSA acknowledged that fragmentation of the appeals process has Page 22 GAO-03-841 Medicare Appeals precluded the development of comparable data. However, SSA pointed out that preparations to transfer OHA’s work to HHS have created a need for greater data sharing. SSA also pledged to work to capture comparable data to facilitate the transfer of the OHA’s work. In addition, in response to HHS’s specific comments, we have • revised the use of the word “rule” to “ruling;” • clarified that the scope of our work excluded managed care, Medicare entitlement, and overpayment cases, as well as Part B claims processed by durable medical equipment contractors and fiscal intermediaries; • defined the term “provider,” as used in this report, to include any nonbeneficiary appellant, including physicians and other suppliers; • distinguished between claims that are rejected because they are duplicate or missing information and those that are denied for substantive reasons, in appendix II; • revised the legend of figure 1; • modified our description of BIPA’s escalation provision to recognize that CMS has developed specific requirements for escalation in its notice of proposed rulemaking; • revised our explanation of the MAC’s procedures regarding the parameters for accepting evidence in its current decision-making process and the MAC’s criteria for denying an appellant’s request for review; and • added that CMS policy is a binding element in carrier review. However, we did not revise the draft report in response to HHS’s specific comment regarding our use of the word “review.” While BIPA refers to the first level of appeal as “redetermination,” we have used the term “carrier review” because the adjudication process at the review level is unchanged by BIPA. Nor did we make revisions in response to HHS’s specific comment that both OHA and the MAC use their own systems for processing appeals and conduct their own hiring. As we noted in the draft report OHA and the MAC independently establish their own procedures and guidelines. Finally, we did not revise the draft in response to HHS’s specific comment that we imply that the MAC has done no planning related to BIPA requirements. As we noted in the draft report, the MAC has made some improvements, but as MAC officials told us, and as HHS indicated in its comments, a detailed action plan to meet BIPA requirements has not been developed. In its comments, HHS noted that a detailed plan is premature because the MAC will not receive BIPA cases for some time— until after they have passed through the other levels of appeal—however, BIPA requirements apply to claims denied on or after October 1, 2002, and such cases have already been submitted. Page 23 GAO-03-841 Medicare Appeals HHS also provided us with technical comments, which we incorporated as appropriate. As agreed with your offices, unless you announce its contents earlier, we plan no further distribution of this report until 30 days after its issuance date. At that time, we will send copies to the Secretary of HHS, the Commissioner of SSA, interested congressional committees, and other interested parties. We will then make copies available to others upon request. In addition, the report will be available at no charge on GAO’s Web site at http://www.gao.gov. If you or your staff have any questions about this report, please call me at (312) 220-7600. An additional GAO contact and other staff who made contributions to this report are listed in appendix VI. Leslie G. Aronovitz Director, Health Care—Program Administration and Integrity Issues Page 24 GAO-03-841 Medicare Appeals Appendix I: Scope and Methodology Our analyses were limited to the appeals process for denied Part B claims—rather than managed care, Medicare entitlement, and overpayment cases—because Part B cases constitute the majority of appeals. We also excluded Part B claims processed by durable medical equipment contractors and fiscal intermediaries to focus on the work performed by carriers. We reviewed the four levels of the administrative appeals process; our scope did not extend to the federal district court level. To gain a better understanding of the process for Part B appeals at the time the Medicare, Medicaid, and SCHIP Benefits Improvement and Protection Act of 2000 (BIPA) was passed and the changes it mandated, we reviewed agency procedures for completing Part B appeals regulations and agreements guiding Medicare appeals and other laws. We also analyzed appeals workload data and interviewed officials at the Centers for Medicare & Medicaid Services (CMS) and at all levels of the administrative appeals process—the carriers, the Office of Hearing and Appeals (OHA), and the Medicare Appeals Council (MAC). We reviewed regulations and procedures pertaining to the initial denials of claims and the submission of appeals by providers and beneficiaries. We also examined the processes for data management and guidelines and regulations for adjudicating cases at all levels. We reviewed the memorandum of understanding between the Health Care Financing Administration and the Social Security Administration, which outlines the responsibilities of both agencies in the adjudication of Medicare appeals. In addition, we reviewed the October 2002 ruling implementing selected BIPA amendments and the proposed rule for the implementation of the balance of the BIPA amendments to the appeals process. We also analyzed appeals data from CMS, four selected carriers, OHA, and the MAC to understand the scope and efficiency of the Medicare appeals process and the characteristics of appeals. All data examined were for cases adjudicated from fiscal years 1996 through 2001, with a primary focus on fiscal year 2001, which represents the conditions that existed at the time BIPA was passed. In reviewing later data and in conversations with the appeals bodies, we confirmed that the conditions reflected in the data are relatively unchanged. Limitations in collected and reported data at each level precluded comprehensive and consistent analyses in some cases. CMS and the MAC alerted us to some limitations in their data, including inconsistency in data entry, changes in data systems that caused the loss of data, and poorly defined variables. At some levels, only aggregated data were available, which did not permit detailed analysis. Page 25 GAO-03-841 Medicare Appeals Appendix I: Scope and Methodology We studied carrier performance by selecting four carriers located in different regions of the country and obtaining processing data on appeals submitted to those carriers at the first two levels of appeals. We also reviewed the results of CMS’s contractor performance evaluations of carriers’ appeals activities in fiscal years 1999, 2000, and 2001. We visited three OHA local hearing offices located in proximity to three of the four selected carriers’ appeals operation centers to learn more about their role in the appeals process and to assess the impact of carrier performance on their operations. We also examined the processes and procedures used at the OHA local hearing offices. To understand the efficiency of the appeals process, we examined the average total time to process appeals at each level, and the average time spent in each step of the adjudication process at OHA and the MAC. We also examined MAC data to determine the number of cases remanded to OHA because of lost files in fiscal year 2001. Appeals bodies performed analyses of their appeals data at our request. CMS performed analyses of the Contractor Reporting of Operational and Workload Data (CROWD), including the reason for initial claims denials, the time each carrier took to process carrier reviews and carrier hearings, and the number of cases at the first three levels of appeal. CMS analyses of CROWD, OHA analyses of its data, and our analyses of the MAC’s data also provided information on the average time spent in adjudicating appeals and the number of pending cases. OHA’s central facility analyzed its Part B data based on our request, and we analyzed data provided by the MAC to determine the time elapsed between processing milestones at OHA and the MAC. In the analysis of the time spent in the various phases of case processing at the MAC, cases with missing date information or cases with negative dates were omitted. All results of, and methodologies for, our analyses of MAC data were examined and confirmed by the MAC. To gain a better understanding of the concerns of appellants regarding the current appeals process and the potential effects of BIPA, we interviewed representatives from three Medicare beneficiary advocacy organizations that assist beneficiaries with Medicare appeals—the Center for Medicare Advocacy, the Center for Medicare Rights, and the Medicare Advocacy Project of Massachusetts. We conducted a focus group with representatives from billing companies through an association for billers and coders—the Health Care Billing and Management Association. In addition, we interviewed representatives from nine medical professional associations: Page 26 GAO-03-841 Medicare Appeals Appendix I: Scope and Methodology • American Academy of Ophthalmology • American College of Physicians-American Society of Internal Medicine • American Hospital Association • American Orthopedic Association • American Medical Association • American Podiatric Medical Association • American Urological Association • California Medical Association • Medical Group Management Association Page 27 GAO-03-841 Medicare Appeals Appendix II: The Scope of Part B Claims Rejections, Denials, and Appeals In fiscal year 2001, carriers processed about 773 million Medicare Part B claims and rejected or denied, in full or in part, about 161 million—or 21 percent—of the claims processed. Many claims are rejected because they are missing information or are duplicates of claims previously processed and paid or denied.1 In fiscal year 2001, carriers rejected over 19.5 million claims that were missing information and more than 40 million claims that they considered duplicate. Duplicate claims may be submitted for several reasons. For example, inconsistent regulations may confuse providers causing them to resubmit denied Part B claims—even though Medicare rules do not allow this—because Medicare allows denied Part A claims to be resubmitted for payment. Also, turnover in administrative and billing personnel at providers’ offices may result in confusion about whether a claim was previously submitted, and under what circumstances a claim can be resubmitted for payment. According to officials from the Centers for Medicare & Medicaid Services’ (CMS), carrier error also contributes to the rate of duplicate submissions because some carriers have system limitations that do not always recognize appropriate claims. For example, if a claim is submitted that appropriately includes the performance of the same service to two separate limbs, the two distinct services may be construed as duplicate claims by some carrier systems. Claims are denied if they do not meet the requirements in Medicare statutes, federal regulations, or CMS’s national coverage determinations. Carriers may also deny claims based on their own local medical review policies and local coverage determinations, which may enhance or clarify national Medicare policy. CMS compiles data submitted by carriers categorizing the reason for denying claims. Table 1 shows the reasons for denials of Part B claims in fiscal year 2001, excluding rejections. Although CMS has established the categories for data submission shown in table 1, it has not provided strict definitions of these categories for carriers to follow. Instead, each carrier has developed its own unique set of definitions for each category. As a result, these data do not provide a precise or reliable explanation of the reasons for denial. For example, the category “other,” which comprised more than 17 percent of reported Part B denials in fiscal year 2001, may 1 In its comments on a draft of this report, HHS pointed out that unprocessable claims— duplicate claims and claims missing information—are rejected, rather than denied. According to HHS, such claims can be resubmitted but not appealed. Page 28 GAO-03-841 Medicare Appeals Appendix II: The Scope of Part B Claims Rejections, Denials, and Appeals include denials at one carrier that another carrier would have included in another category. Table 1: Reason for Denials of Initial Medicare Part B Claims in Fiscal Year 2001 Reason for denial Number of denials Percentage of total a Medically unnecessary 32,480,000 29.4 Services not covered 26,536,000 24.1 Other 19,795,000 17.9 b Claim part of a global fee for a procedure 14,351,000 13.0 c Medicare is secondary payer for claim 7,697,000 7.0 Claimant ineligible 7,324,000 6.6 d Filing limitation exceeded 2,150,000 1.9 Total denials 110,333,000 100e Source: CMS. a Medicare law requires that for services to be covered, they must be “reasonable and necessary for the diagnosis or treatment of illness or injury or to improve the functioning of a malformed body member.” 42 U.S.C. § 1395y (a) (A) (1) (2000). b Global fee is a total charge for a bundled set of services, such as a single surgery that encompasses presurgical and postsurgical care or a diagnostic service that represents physician and equipment charges. Individual services included in the global fee cannot be paid separately. c Medicare is the secondary payer when a beneficiary has an insurance policy or health plan, other than Medicare, that has primary responsibility for covering the cost of the beneficiary’s care. 42 U.S.C. § 1395ff (2000). d To be eligible for payment, claims must be filed no later than the end of the calendar year following the year the service was provided. e Percentage does not total to 100 due to rounding. Relatively few cases are appealed when compared to the number of denials, and only a small fraction is appealed to the highest level. CMS, the Office of Hearings and Appeals (OHA), and the Medicare Appeals Council (MAC) do not track the number of denied claims that are appealed, although CMS collects the number of claims that are adjudicated in the appeals process for the carrier review, carrier hearing, and OHA levels. In fiscal year 2001, about 7.1 million claims—less than 7 percent of denied Part B claims—were adjudicated at the carrier review level.2 In that year 2 Postpayment denials—denials of claims that have been paid but selected for medical review at a later date—are not included in the denial rates shown. Postpayment denials generate some appeals; however, CMS does not collect data on the proportion of appeals resulting from post-payment denials. Page 29 GAO-03-841 Medicare Appeals Appendix II: The Scope of Part B Claims Rejections, Denials, and Appeals about 554,000 Part B appeals were adjudicated at the carrier hearing level and over 201,000 at OHA. The MAC received about 8,800 Part B appeals cases in fiscal year 2001; however, the MAC does not track the number of claims comprising cases. Appeals requests at the higher levels have grown rapidly in recent years, as shown in table 2. For example, requests for Medicare appeals at OHA—the third level of appeals—increased a total of 200 percent from fiscal year 1996 to fiscal year 2001, and the MAC’s workload grew by nearly 500 percent from fiscal year 1997 to fiscal year 2001. Table 2: Growth in Part B Appeals Cases Submitted by Appeal Level from Fiscal Year 1996 through Fiscal Year 2001 Carrier Carrier OHA MAC Fiscal year review hearing hearing adjudication a 1996 4,100,000 69,000 21,000 1997 3,900,000 87,000 35,000 1,500 1998 3,500,000 95,000 35,000 2,700 1999 3,500,000 93,000 61,000 6,300 2000 3,300,000 101,000 62,000 7,600 2001 3,700,000 102,000 63,000 8,800 Total growth over the -400,000 32,000 42,000 7,300 period (percent) (-10) (47) (200) (487) Sources: CMS, OHA, and the MAC. Note: Appeals cases may contain several claims. a MAC data for fiscal year 1996 were not available. Page 30 GAO-03-841 Medicare Appeals Appendix III: Changes Mandated by Section 521 of BIPA Section 521 of the Medicare, Medicaid, and SCHIP Benefits Improvement and Protection Act of 2000 (BIPA) mandates administrative, structural, and management changes in the appeals process. It includes the following: • Revises the filing deadline for appellants at the first level of appeal: reduced from 180 days to 120 days • Reduces the minimum thresholds for filing appeals: • To second level, from $100 to no minimum • To third level, from $500 to $100 • Changes adjudication time frames at all levels of appeal: • At first level, from completing 95 percent in 45 days to completing 100 percent in 30 days • At second level, from completing 90 percent in 120 days to completing 100 percent in 30 days • At third level, time frames of 90 days where none previously existed • At fourth level, time frames of 90 days where none previously existed • Allows appellants to escalate the appeal to the next level, including federal district court, when adjudication time frames have not been met at the second, third, or fourth levels of appeal • Replaces the second level of appeal, currently known as a carrier hearing, with a redetermination by qualified independent contractors (QIC) • The Department of Health and Human Services (HHS) must establish 3-year contracts with at least 12 QICs • QICs, like the Office of Hearings and Appeals (OHA) and the Medicare Appeals Council (MAC), are not bound by, but shall consider, local coverage determinations • Establishes that the MAC adjudicate cases de novo1 instead of evaluating OHA’s decisions, as had been done • Requires that QICs have a comprehensive data system to collect and share information • QICs must maintain accurate records of each decision that enable it to identify specific types of claims that give rise to appeals, situations suggesting the need for provider education, situations suggesting changes in national or local coverage policy, and situations suggesting changes in local medical review policy • QICs must monitor their decisions to ensure consistency in outcomes between similar appeals • QICs must make all decisions available to carriers • QICs must report annually to the Secretary of HHS 1 De novo review allows for new evidence and an in-depth and independent review. Page 31 GAO-03-841 Medicare Appeals Appendix III: Changes Mandated by Section 521 of BIPA • Requires that, at least every 5 years, the Secretary of HHS survey a sample of appellants regarding their satisfaction with education on the appeals process and with the process itself; and that the Secretary must report the results and any recommendations to the Congress • Requires that the Secretary of HHS annually report the following to the Congress: • The number of appeals • Issues that require administrative or legislative action and recommendations with respect to actions • Analysis of consistency of decisions at QICs, including any reasons for inconsistency Page 32 GAO-03-841 Medicare Appeals Appendix IV: Comments from the Department of Health and Human Services Page 33 GAO-03-841 Medicare Appeals Appendix IV: Comments from the Department of Health and Human Services Page 34 GAO-03-841 Medicare Appeals Appendix IV: Comments from the Department of Health and Human Services Page 35 GAO-03-841 Medicare Appeals Appendix IV: Comments from the Department of Health and Human Services Page 36 GAO-03-841 Medicare Appeals Appendix IV: Comments from the Department of Health and Human Services Page 37 GAO-03-841 Medicare Appeals Appendix IV: Comments from the Department of Health and Human Services Page 38 GAO-03-841 Medicare Appeals Appendix IV: Comments from the Department of Health and Human Services Page 39 GAO-03-841 Medicare Appeals Appendix V: Comments from the Social Security Administration Page 40 GAO-03-841 Medicare Appeals Appendix V: Comments from the Social Security Administration Page 41 GAO-03-841 Medicare Appeals Appendix V: Comments from the Social Security Administration Page 42 GAO-03-841 Medicare Appeals Appendix V: Comments from the Social Security Administration Page 43 GAO-03-841 Medicare Appeals Appendix V: Comments from the Social Security Administration Page 44 GAO-03-841 Medicare Appeals Appendix VI: GAO Contact and Staff Acknowledgments Geraldine Redican-Bigott, (312) 220-7678 GAO Contact Ankit Mahadevia, Margaret J. Weber, Anne Welch, and Craig Winslow Acknowledgments made major contributions to this report. (290140) Page 45 GAO-03-841 Medicare Appeals The General Accounting Office, the audit, evaluation and investigative arm of GAO’s Mission Congress, exists to support Congress in meeting its constitutional responsibilities and to help improve the performance and accountability of the federal government for the American people. GAO examines the use of public funds; evaluates federal programs and policies; and provides analyses, recommendations, and other assistance to help Congress make informed oversight, policy, and funding decisions. GAO’s commitment to good government is reflected in its core values of accountability, integrity, and reliability. The fastest and easiest way to obtain copies of GAO documents at no cost is Obtaining Copies of through the Internet. 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Medicare Appeals: Disparity between Requirements and Responsible Agencies' Capabilities
Published by the Government Accountability Office on 2003-09-29.
Below is a raw (and likely hideous) rendition of the original report. (PDF)