An Undue Burden? The 5 Levels of Medicare’s Standard Appeals Process

Doctor looking with concern at a letter while seated at a desk behind a laptop.

Fraud, waste, and improper payments are a serious problem within the Medicare network. As a response, the U.S. Congress passed a resolution in 2003, creating the Medicare Recovery Audit Contractors (RAC) Program, designed to identify and reduce fraud. The results have been controversial: While billions of taxpayer dollars have been recovered, the program has also been the subject of industry criticism, litigation and even federal government hearings.

For health care practitioners—including those making good-faith compliance efforts—it can be difficult to avoid the attentions of RACs. An unfavorable audit can result in denied claims, delayed claims, and demands for repayment with interest, creating significant financial hardship for providers whose business model relies on serving Medicare patients. If you disagree with the audit findings, the appeals process is not much kinder.

“The RAC appeals process is complicated and adheres to strict deadlines,” warns Managing Shareholder Trey Hendershot. “You only have 60 to 180 days to initiate an appeal, depending on its level, and the penalties for not adhering to these deadlines are severe.”

In addition, the Medicare appeals process is plagued by backlogs, in spite of a 2018 federal court order ordering the U.S. Department of Health and Human Services—which oversees the Centers for Medicare & Medicaid Services (CMS)—to eliminate that backlog by the end of fiscal year 2022.

5 Levels of the Medicare Appeals Process

Administered by the CMS, the RAC program permits hired contractors to conduct audits on hospitals, physician practices, nursing homes, home health agencies, durable medical equipment supplies, and any provider or supplier that submits claims to Medicare. RACs use proprietary software and data mining to review Medicare billing records in search of coding and billing errors.

Should you find yourself the subject of a Medicare audit, do not panic and never ignore a letter from an RAC auditor. Instead, know your rights and options. Ask an attorney to assist you in complying with the audit. Should you disagree with the findings, an attorney can also help you initiate the appeals process.

The Medicare appeals process includes five levels. While it can be an administrative and financial burden, CMS has made efforts to reduce this burden. According to a May 2019 press release, the center has improved oversight of RACs, reduced the burden on providers, and increased program transparency. Already, HHS has reduced backlog of Medicare appeals by almost half.

Below are the five standard levels of the appeals process, and what to expect at each level:

Level One: Redetermination by a Medicare Contractor

If you would like to request an appeal from the contractor, you must do so within 120 days from the date indicated on the initial determination receipt. Be sure to include any documentation that supports the overturn of the determination. You can expect a notice within 60 days; however, you may advance your appeal to the next level within 180 days if you disagree with their decision.

Level Two: Reconsideration by a Qualified Independent Contractor (QIC)

To file a level 2 appeal, you must complete the Medicare Reconsideration Request Form and send a written request explaining why you disagree with the redetermination results. This appeal is conducted by a QIC who did not participate in the decision on the first level of the appeal process. Again, you should expect a response within 60 days. You have the right to continue to the next appeal level but must do so within 60 days.

Level Three: Hearing Before an Administrative Law Judge (ALJ)

To be eligible for level 3, your claim must meet a specific dollar amount. If you reach this level, your case will be heard by an ALJ. Hearings are generally held by video teleconference or telephone, though you may request it to take place in person. However, the ALJ may come to a judgement without testimony if he or she feels there is sufficient information.

By law, the ALJ must provide a judgement within 90 days of receipt of the hearing request. In practice however, as of the third quarter of 2020, the average processing time was 1,447 days, or close to four years. This time frame is expected to decrease as the backlog of claim appeals is reduced.

Level Four: Review by the Appeals Council

Within 60 days of the ALJ's decision or 90 days of no decision, you can request in writing a determination by the Appeals Council. Similar to level 3, there is a minimum amount requirement, determined annually.

Level Five: Judicial Review in Federal District Court

If you reach level 5, you can request a judicial review, and a decision will be made by the U.S. District Court, but only if a specific dollar amount remains in controversy following the council decision.

What to Do If You Are Audited by a Medicare Recovery Audit Contractor (RAC)

RAC audits can have serious ramifications for health care providers. Similarly, the appeals process can be complex and difficult to navigate—full of deadlines, documents, and hearings. If an RAC auditor contacts your practice, let the skilled attorneys of Hendershot Cowart P.C. guide you through the process as efficiently as possible, so you can get back to doing what you do best: serving your patients. We are proud to be an industry leader in health law, and we are committed to providing quality legal assistance to health care providers.

Contact the Houston health care lawyers at (713) 909-7323 if you have questions or concerns about the RAC program and the appeals process.

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