Medicare Appeals: Disparity between Requirements and Responsible
Agencies' Capabilities (29-SEP-03, GAO-03-841).
Appellants and others have been concerned about the length of
time it takes for a decision on the appeal of a denied Medicare
claim. In December 2000, the Medicare, Medicaid, and SCHIP
Benefits Improvement and Protection Act of 2000 (BIPA), required,
among other things, shorter decision time frames. BIPA's
provisions related to Medicare appeals were to be applied to
claims denied after October 1, 2002, but many of the changes have
not yet been implemented. GAO was asked to evaluate whether the
current Medicare appeals process is operating consistent with
BIPA's requirements and to identify any barriers to meeting the
law's requirements.
-------------------------Indexing Terms-------------------------
REPORTNUM: GAO-03-841
ACCNO: A08602
TITLE: Medicare Appeals: Disparity between Requirements and
Responsible Agencies' Capabilities
DATE: 09/29/2003
SUBJECT: Claims processing
Health care programs
Insurance claims
Interagency relations
Medical expense claims
Medical information systems
Noncompliance
Decision making
Managed health care
Program coordination
Timeliness
Medicare Program
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GAO-03-841
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
Highlights of GAO-03-841, a report to the Committee on Energy and
Commerce, House of Representatives
Appellants and others have been concerned about the length of time it
takes for a decision on the appeal of a denied Medicare claim. In December
2000, the Medicare, Medicaid, and SCHIP Benefits Improvement and
Protection Act of 2000 (BIPA), required, among other things, shorter
decision time frames. BIPA's provisions related to Medicare appeals were
to be applied to claims denied after October 1, 2002, but many of the
changes have not yet been implemented. GAO was asked to evaluate whether
the current Medicare appeals process is operating consistent with BIPA's
requirements and to identify any barriers to meeting the law's
requirements.
GAO recommends 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.
www.gao.gov/cgi-bin/getrpt?GAO-03-841.
To view the full product, including the scope and methodology, click on
the link above. For more information, contact Leslie G. Aronovitz at (312)
220-7600.
September 2003
MEDICARE APPEALS
Disparity between Requirements and Responsible Agencies' Capabilities
BIPA demands a level of performance, especially regarding timeliness, that
the appeals bodies-the contract insurance carriers responsible for the
first two levels of appeals, the Social Security Administration's (SSA)
Office of Hearings and Appeals (OHA), and the Department of Health and
Human Services (HHS) Medicare Appeals Council (MAC)-have not demonstrated
they can meet. While the carriers have generally met their pre-BIPA time
requirements, in fiscal year 2001, they completed only 43 percent of first
level appeals within BIPA's 30-day time frame. In addition to average
processing times more than four times longer than that required by BIPA,
OHA and the MAC-the two highest levels of appeal-have accumulated sizable
backlogs of unresolved cases. Delays in administrative processing due to
inefficiencies and incompatibility of their data systems constitute 70
percent of the time spent processing appeals at the OHA and MAC levels.
Average Time Spent in Each Stage of Processing for Cases Adjudicated by
OHA and the MAC in Fiscal Year 2001
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 four
levels of the process has precluded successful management of the appeals
system as a whole. Uncertainty about funding and a possible transfer of
OHA's Medicare appeals workload from OHA to HHS has also complicated the
appeals bodies' ability to adequately plan for the future.
Contents
Letter
Results in Brief
Background
Appeals Process Operations Inconsistent with BIPA's
Requirements Appeals Bodies' Lack of Coordination and Resources Is a
Barrier to
BIPA Implementation Conclusions Recommendations for Executive Action
Agency Comments and Our Evaluation
1
2 3
9
14 20 21 21
Appendix I Scope and Methodology
Appendix II The Scope of Part B Claims Rejections, Denials, and Appeals
Appendix III Changes Mandated by Section 521 of BIPA
Appendix IV Comments from the Department of Health and Human Services
Appendix V Comments from the Social Security Administration
Appendix VI GAO Contact and Staff Acknowledgments 45
GAO Contact 45 Acknowledgments 45
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
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
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copyright holder may be necessary if you wish to reproduce this material
separately.
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
1On 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.
2For the purposes of this report, the term "provider" refers to any
nonbeneficiary appellant, including physicians and other suppliers.
3Medicare 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.
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.)
Results in Brief The appeals bodies are not currently performing at the
level that would 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-
4Pub. L. No. 106-554, app. F, 114 Stat. 2763, 2763A-534 (codified at 42
U.S.C. S: 1395ff (2000)).
5Medicare contractors that process Part A claims are called fiscal
intermediaries, while those that process Part B claims are called
carriers.
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.
Background Providers and beneficiaries may appeal any denied claim.
Claims are 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
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
6The Medicare program is governed by title XVIII of the Social Security
Act, 42 U.S.C. S:S: 1395 et seq. (2000), and related regulations, 42
C.F.R. pts. 400-425 (2002).
7NCDs 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).
8BIPA refers to the carrier review level as the "redetermination."
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
OHA level. The October 7th 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.)
967 Fed. Reg. 62,478. 1067 Fed. Reg. 69,312.
Figure 1: Levels and Time Frames for the Pre-BIPA and BIPA-Mandated Appeals
Process
Sources: CMS, BIPA, and 20 CFR 422.210 S: (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
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
11OHA and MAC time limits may be waived at the appellant's request.
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.
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,
but all appeals bodies-the carriers, OHA, and the MAC-fall far short of
meeting BIPA's time frames. The large backlog of pending cases at OHA and
the MAC, combined with BIPA's escalation provision and the requirement for
de novo review at the MAC, will demand a level of 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 Process Operations Inconsistent with BIPA's Requirements
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 Standards reviews within CMS's current 45-day time frame, this is
insufficient by
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
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.
12At 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.
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 Processing at OHA and the MAC Further Suggest
BIPA's Time Frames Will Not Be Met
The bulk of time at OHA and the MAC is spent on assembling files and
completing other administrative tasks rather than in performing legal
analyses of appeals and adjudicating cases. Each agency takes more than a
year, on average, to complete an appeal. For example, OHA spent 14 months,
on average, to complete a case in fiscal year 200113 and an average 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.
13OHA completed more than 56,300 Part B cases in fiscal year 2001.
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.
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
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 as a single process, several separate and uncoordinated bodies are
responsible for administering the various appeals levels. The appeals
bodies have traditionally worked independently; however, close
coordination is critical to successful planning for BIPA changes. Further,
appeals bodies lack the management data to track cases and analyze case
characteristics, preventing them from identifying barriers to efficiency-a
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.
14Since QICs have not yet been implemented, there are no data to assess
whether any of their cases will be eligible for escalation.
Appeals Bodies' Lack of Coordination and Resources Is a Barrier to BIPA
Implementation
Appeals Bodies Need Stronger Coordination to Successfully Implement BIPA's
Requirements
CMS, OHA, and the MAC-located within two federal agencies-are each
responsible for administering a portion of the appeals process. However,
neither the agencies nor the appeals bodies have the authority to manage
the entire process. The appeals bodies focus primarily on their individual
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 Inhibits Appeals Bodies' Ability to Understand
Barriers to Efficiency
We found that the appeals bodies are not sufficiently coordinated to track
an appealed claim, or group of claims, through all four levels of the
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
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
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
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 Regulations, Funding, and the Role of OHA Hinder BIPA
Implementation Planning
While BIPA mandated several changes to the current appeals process, CMS,
OHA and the MAC are charged with developing regulations for implementing
BIPA's mandates in accordance with the Administrative Procedures Act.15 As
of September 2003, guidance regarding two provisions-adjusted deadlines
for appellants filing first-level appeals and 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
15With 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. S: 553(b)
(2000).
1667 Fed. Reg. 69,182 (Nov. 15, 2002).
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
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
17H.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).
18HHS 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.
Conclusions
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- 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.
Recommendation for Executive Action
o
o
o
Agency Comments and Our Evaluation
We recommend that the Secretary of HHS and the Commissioner of SSA
create an interagency steering committee with representatives from CMS,
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
comments from both agencies. In its comments, HHS emphasized its
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.
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
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
o revised the use of the word "rule" to "ruling;"
o 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;
o defined the term "provider," as used in this report, to include any
nonbeneficiary appellant, including physicians and other suppliers;
o distinguished between claims that are rejected because they are
duplicate or missing information and those that are denied for substantive
reasons, in appendix II;
o revised the legend of figure 1;
o modified our description of BIPA's escalation provision to recognize
that CMS has developed specific requirements for escalation in its notice
of proposed rulemaking;
o 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
o 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.
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
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.
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:
Appendix I: Scope and Methodology
o American Academy of Ophthalmology
o American College of Physicians-American Society of Internal Medicine
o American Hospital Association
o American Orthopedic Association
o American Medical Association
o American Podiatric Medical Association
o American Urological Association
o California Medical Association
o Medical Group Management Association
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
1In 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.
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
Medically unnecessary a 32,480,000 29.4
Services not covered 26,536,000 24.1
Other 19,795,000 17.9
bClaim part of a global fee for a procedure 14,351,000 13.0
Medicare is secondary payer for claimc 7,697,000
Claimant ineligible 7,324,000
Filing limitation exceededd 2,150,000
Total denials 110,333,000 100e
Source: CMS.
aMedicare 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. S: 1395y (a) (A) (1) (2000).
bGlobal 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.
cMedicare 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.
S: 1395ff (2000).
dTo be eligible for payment, claims must be filed no later than the end of
the calendar year following the year the service was provided.
ePercentage 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
2Postpayment 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.
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
1996 4,100,000 69,000 21,000 a
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.
aMAC data for fiscal year 1996 were not available.
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:
o Revises the filing deadline for appellants at the first level of
appeal: reduced from 180 days to 120 days
o Reduces the minimum thresholds for filing appeals:
o To second level, from $100 to no minimum
o To third level, from $500 to $100
o Changes adjudication time frames at all levels of appeal:
o At first level, from completing 95 percent in 45 days to completing
100 percent in 30 days
o At second level, from completing 90 percent in 120 days to completing
100 percent in 30 days
o At third level, time frames of 90 days where none previously existed
o At fourth level, time frames of 90 days where none previously existed
o 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
o Replaces the second level of appeal, currently known as a carrier
hearing, with a redetermination by qualified independent contractors (QIC)
o The Department of Health and Human Services (HHS) must establish
3-year contracts with at least 12 QICs
o 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
o Establishes that the MAC adjudicate cases de novo1 instead of
evaluating OHA's decisions, as had been done
o Requires that QICs have a comprehensive data system to collect and
share information
o 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
o QICs must monitor their decisions to ensure consistency in outcomes
between similar appeals
o QICs must make all decisions available to carriers
o QICs must report annually to the Secretary of HHS
1De novo review allows for new evidence and an in-depth and independent
review.
Appendix III: Changes Mandated by Section 521 of BIPA
o 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
o Requires that the Secretary of HHS annually report the following to
the Congress:
o The number of appeals
o Issues that require administrative or legislative action and
recommendations with respect to actions
o Analysis of consistency of decisions at QICs, including any reasons
for inconsistency
Appendix IV: Comments from the Department of Health and Human Services
Appendix IV: Comments from the Department of Health and Human Services
Appendix IV: Comments from the Department of Health and Human Services
Appendix IV: Comments from the Department of Health and Human Services
Appendix IV: Comments from the Department of Health and Human Services
Appendix IV: Comments from the Department of Health and Human Services
Appendix IV: Comments from the Department of Health and Human Services
Page 40 GAO-03-841 Medicare Appeals
Page 41 GAO-03-841 Medicare Appeals
Page 42 GAO-03-841 Medicare Appeals
Page 43 GAO-03-841 Medicare Appeals
Page 44 GAO-03-841 Medicare Appeals
Appendix VI: GAO Contact and Staff Acknowledgments
GAO Contact Geraldine Redican-Bigott, (312) 220-7678
Acknowledgments Ankit Mahadevia, Margaret J. Weber, Anne Welch, and Craig
Winslow made major contributions to this report.
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