For providers and suppliers, Medicare can be a nightmare to bill and get paid by. In particular, the Medicare intermediaries and contractors are notorious for arbitrarily denying claims. Vendors are then forced to go through multiple levels of appeal, with long delays, even though they usually win the appeals. It certainly looks like just a way for CMS to save money by delaying payment and hoping providers give up on valid claims. The Government Accounting Office has looked at this process before and in a recent report finds little improvement, in fact things are getting worse. (GAO Report) This is truly out-of-control bureaucracy. First, the provider or vendor generally has at least two levels of appeal they have to go through at the contractor level. Then there are two or more levels of appeal at CMS. Finally, after all that, you can get to federal court. It is not a trivial issue; in 2014 Medicare denied 128 million claims, or over 10% of all claims submitted. There are time frames in which decisions are supposed to be issued and CMS is supposed to be monitoring the appeals process to ensure it is being run fairly, but the facts indicate that it doesn’t take these obligations seriously.
The GAO looked at trends for 2010 to 2014. Appeals at all four levels are up significantly during this time period; for example, 63% more at the first appeal level and 936% more at level three, which is the appeal at CMS. Hospital inpatient and DME appeals had the greatest increase by category. While there was significant variation over the study period in how many appeals were not decided in the statutory timeframe, at times it was a significant number; for example in 2012 68% of DME claims at level one were decided late. And in 2014, even though they are required to issue a decision in 90 days, level 3 (CMS ALJs) issued 96% of decisions after 180 days, and level 4, the appeals council, issued 67% after 180 days. It wouldn’t be quite as bad a problem if it weren’t that reversal rates are astoundingly high, indicating that these were valid claims that should have been paid when submitted. Level 1 full reversals were 36% in 2014, level 2 were 19% and level 3 were 54%. Cumulatively this suggests that well over half of all denied claims are reversed on appeal.
It is truly outrageous that CMS has basically done nothing to address this issue. While GAO identifies a number of actions CMS says it has taken to address the problem, based on 2014 data, it doesn’t look like there is much improvement. Since many of the problems arise at the contractor level, one simple solution is to allow providers and vendors to take these contractors to court and for CMS and the courts to hold them responsible for wronging denying claims. Another possibility is to say that if the contractor or CMS doesn’t issue a decision on time, then the appeal is automatically granted. Obviously there is concern about paying fraudulent or inappropriate claims, but given the pathetic record of the contractors on appeal, something needs to change. And there is an effect on patient care, as Medicare beneficiaries are potentially deprived of needed services and products.