Waiting Room: Medicare Appeals Tie Up Hospitals' Millions

by Mark Friedman  on Monday, Jun. 30, 2014 12:00 am  

At Baxter Regional Medical Center in Mountain Home, Ron Peterson waited about a year before he decided to replace the leaky roof.

Spending about $400,000 fixing the roof meant the 268-bed hospital couldn’t buy a type of X-ray machine that was needed, said Peterson, president and CEO of Baxter.

Peterson said the hospital didn’t have the cash to do both projects because it has $3 million in limbo in a seeming black hole of Medicare claim appeals at the U.S. Department of Health & Human Services.

Baxter Regional’s money is tied up because recovery audit contractors, known as RACs, have decided that care the hospital provided to some Medicare patients didn’t meet Medicare guidelines. The RACs force the hospitals to return the money, and the hospitals then have to turn around and fight to get the money back.

Adding to hospital frustration is the way that the RACs, which are private companies, are paid: They have a financial incentive to deny as many claims as possible because they receive up to 12.5 percent of the money recovered.

Because of the massive logjam in the appeals process experienced by Baxter and other hospitals around the country, hospitals might have to wait up to 16 months before they get a hearing to plead their case that the billings were justified and the Medicare money should be returned. Then it might take months after the hearing to get a ruling.

“It’s hitting our cash flow,” Peterson said. “If this process continues, then it will definitely affect the operating income. This will max our reserves.”

Last month, Baxter joined the American Hospital Association of Washington and two out-of-state hospitals in filing suit against HHS in U.S. District Court in Washington. The plaintiffs are trying to force HHS to comply with federal law by issuing decisions in their appeal cases within 90 days.

Hospitals reported that when they appeal the RAC denials, the hospitals win 72 percent of the time, the lawsuit said.

“There is no other remedy that folks have in order to resolve their cases,” said Lawrence Hughes, assistant general counsel for the AHA.

Making matters worse, in December, the HHS’ Office of Medicare Hearing & Appeals declared a moratorium on assigning new provider appeal cases to administrative law judges for at least two years — and possibly longer — because of the backlog, the lawsuit said.

More than 480,000 appeals were awaiting assignment with OMHA as of Feb. 12, with about 15,000 appeals filed each week, the lawsuit said.



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