The statutory time frames for submitting and issuing appeal decisions can  vary by level. Medicare Appeals and Untimely Appeal Decisions Increased from Fiscal Years 2010 through 2014

The total number of Medicare appeals filed and the number of appeal  decisions that were issued after statutory time frames at Levels 1 through  4 increased from fiscal years 2010 through 2014, with the largest rate of  increase at Level 3. Reversal rates also decreased during this time for  most levels of appeals. While Level 3 handled fewer appeals overall, it experienced the largest  rate of increase in appeals from 41,733 to 432,534 appeals—936  percent—during this period. Among the four levels,  Level 3 experienced both the largest increase in appeals overall, as well  as the largest increase in Part A appeals, which increased over 2,000  percent between fiscal years 2010 and 2014. HHS also attributed the increase in appeals to a greater propensity  among providers to appeal denied claims. In fiscal year  2014, Levels 3 and 4 issued decisions within the statutory time frames for  a greater percentage of beneficiary-filed appeals than appeals filed by  providers or state Medicaid agencies. As a result, CMS interest payments  have increased. Data Systems Used by HHS to Monitor Appeals Process Do Not Capture Data to Identify Important Trends or Provide Consistent Data for Monitoring Appeals across Levels

HHS agencies use appeals data to monitor the Medicare appeals  process, but do not collect information on the reasons for Level 3 appeal  decisions or the amounts of allowed Medicare payments in dispute. HHS Agencies Use Data to Monitor Appeals but Do Not Collect Other Data on Reasons for Level 3 Appeal Decisions and Actual Amounts of Medicare Payments at Issue

HHS agencies use data collected in CROWD, MAS, and MODACTS to  monitor the Medicare appeals process for Levels 1 through 4. These data  systems collect information such as the date when the appeal was filed,  the type of service or claim appealed, and the length of time taken to  issue appeal decisions. This would be consistent with the federal standards  for internal control that require agencies to conduct ongoing monitoring to  assess the quality of performance over time to ensure operational  effectiveness, and to run and control agency operations using relevant,  reliable, and timely information. Inconsistencies across Appeals Data Systems Limit HHS Agencies’ Ability to Monitor Appeals

Our review found data inconsistencies across the three appeals data  systems and within the appeal levels that use MAS, such as variation in  how appeal decisions are recorded at the claim level and how HHS  agencies track appeal decisions. These data inconsistencies limit HHS  agencies’ ability to monitor emerging trends in appeals using consistent  and reliable data. Specifically, the three data systems use  different categories to track the type of Medicare service at issue in the  appeal, such as whether the appeal relates primarily to an inpatient  hospital claim or a transportation claim. However, the  Medicare appeals backlog is likely to persist despite actions taken to  date, and HHS efforts thus far do not address inefficiencies with the way  certain repetitive claims are adjudicated. HHS Agencies Took Actions to Reduce the Number of Medicare Appeals, the Number of Appeals Reaching Levels 3 and 4, and the Current Appeals Backlog

In order to provide more timely adjudication of appeals of Medicare claim  denials, HHS agencies have taken various actions, which can be grouped  into three categories:  1.  changes to Medicare prepayment and postpayment claims reviews,  which may reduce claim denials and, therefore, the number of filed  appeals;  2.  actions aimed at reducing the number of decisions at lower appeal  levels that lead to appeals at Levels 3 and 4; and  3.  actions aimed at resolving the current backlog of undecided appeals  at Levels 3 and 4. If  the appeal for the initial claim is later reversed in favor of the appellant,  the appeals of the subsequent claims must continue to go through the  appeals process, awaiting separate decisions, because the favorable  appeal decision on the initial claim cannot generally be applied to the  other appeals of subsequently denied claims. HHS generally agreed with four of the five  draft recommendations and outlined a number of initiatives it is taking to  improve the efficiency of the Medicare appeals process, reduce the  backlog of pending appeals, and mitigate the possibility of future  backlogs. In commenting, HHS provided further information for  two of the recommendations with which it generally agreed. Appendix I: Scope and Methodology

This appendix provides additional details regarding our analysis of (1)  trends in Medicare fee-for-service (FFS) appeals for fiscal years 2010  through 2014; (2) differences in claim-level and appeal-level reversal  rates; (3) appeals resolved by the Centers for Medicare & Medicaid  Services’ (CMS) global settlement; (4) CMS’s estimate of interest paid by  the agency to certain providers; and (5) data reliability. According to the Department of Health and Human Services’ (HHS) budget  justification materials, this filing fee will allow HHS to invest in the appeals system to improve  responsiveness and efficiency.
Why GAO Did This Study

In fiscal year 2014, Medicare processed 1.2 billion FFS claims submitted by providers on behalf of beneficiaries. When Medicare denies or reduces payment for a claim or a portion of a claim, providers, beneficiaries, and others may appeal these decisions through Medicare's appeals process.
In recent years there have been increases in the number of filed and backlogged appeals (i.e., pending appeals that remain undecided after statutory time frames). GAO was asked to examine Levels 1 through 4 of Medicare's appeals process. This report examines (1) trends in appeals for fiscal years 2010 through 2014, (2) data HHS uses to monitor the appeals process, and (3) HHS efforts to reduce the number of appeals filed and backlogged. GAO analyzed data from the three data systems used to monitor appeals, reviewed relevant HHS agency documentation and policies, federal internal control standards, and interviewed HHS agency officials and others.

What GAO Found

The appeals process for Medicare fee-for-service (FFS) claims consists of four administrative levels of review within the Department of Health and Human Services (HHS), and a fifth level in which appeals are reviewed by federal courts. Appeals are generally reviewed by each level sequentially, as appellants may appeal a decision to the next level depending on the prior outcome. Under the administrative process, separate appeals bodies review appeals and issue decisions under time limits established by law, which can vary by level. From fiscal years 2010 and 2014, the total number of filed appeals at Levels 1 through 4 of Medicare's FFS appeals process increased significantly but varied by level. Level 3 experienced the largest rate of increase in appeals—from 41,733 to 432,534 appeals (936 percent)—during this period. A significant portion of the increase was driven by appeals of hospital and other inpatient stays, which increased from 12,938 to 275,791 appeals (over 2,000 percent) at Level 3. HHS attributed the growth in appeals to its increased program integrity efforts and a greater propensity of providers to appeal claims, among other things. GAO also found that the number of appeal decisions issued after statutory time frames generally increased during this time, with the largest increase in and largest proportion of late decisions occurring at appeal Levels 3 and 4. For example, in fiscal year 2014, 96 percent of Level 3 decisions were issued after the general 90-day statutory time frame for Level 3.
The Centers for Medicare & Medicaid Services (CMS) and two other components within HHS that are part of the Medicare appeals process use data collected in three appeal data systems—such as the date when the appeal was filed, the type of service or claim appealed, and the length of time taken to issue appeal decisions—to monitor the Medicare appeals process. However, these systems do not collect other data that HHS agencies could use to monitor important appeal trends, such as information related to the reasons for Level 3 decisions and the actual amount of Medicare reimbursement at issue. GAO also found variation in how appeals bodies record decisions across the three systems, including the use of different categories to track the type of Medicare service at issue in the appeal. Absent more complete and consistent appeals data, HHS's ability to monitor emerging trends in appeals is limited and is inconsistent with federal internal control standards that require agencies to run and control agency operations using relevant, reliable, and timely information.
HHS agencies have taken several actions aimed at reducing the total number of Medicare appeals filed and the current appeals backlog. For example, in 2014, CMS agreed to pay a portion of the payable amount for certain denied hospital claims on the condition that pending appeals associated with those claims were withdrawn and rights to future appeals of them waived. However, despite this and other actions taken by HHS agencies, the Medicare appeals backlog continues to grow at a rate that outpaces the adjudication process and will likely persist. Further, HHS efforts do not address inefficiencies regarding the way appeals of certain repetitious claims—such as claims for monthly oxygen equipment rentals—are adjudicated, which is inconsistent with federal internal control standards. Under the current process, if the initial claim is reversed in favor of the appellant, the decision generally cannot be applied to the other related claims. As a result, more appeals must go through the appeals process.

What GAO Recommends

GAO recommends that HHS take four actions, including improving the completeness and consistency of the data used by HHS to monitor appeals and implementing a more efficient method of handling appeals associated with repetitious claims. HHS generally agreed with four of GAO's recommendations, and disagreed with a fifth recommendation, citing potential unintended consequences. GAO agrees and has dropped that recommendation.