Health Law Daily Despite ‘grotesque’ backlog, mandamus denied to provider
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Tuesday, March 8, 2016

Despite ‘grotesque’ backlog, mandamus denied to provider

By Harold Bishop, J.D.

The Fourth Circuit held that the Medicare Act does not guarantee a health care provider a hearing on its administrative appeals for reimbursement within 90 days. Despite the provider having over 750 appeals awaiting assignment and HHS having over 800,000 appeals backlogged, the provider was required to wait until an administrative law judge (ALJ) heard the case or seek escalation of the process to the next level of administrative review prior to seeking judicial review (Cumberland County Hospital System, Inc. v. Burwell, March 7, 2016, Niemeyer, P.).

Cumberland County Hospital System, Inc., d/b/a Cape Fear Valley Health System (Cumberland), brought an action for a writ of mandamus and declaratory judgment to compel the Secretary of HHS to immediately adjudicate its administrative appeals on claims for Medicare reimbursement. With over 750 of its appeals awaiting assignment to an ALJ for more than 90 days, Cumberland asserted that the Secretary’s delay violated the congressional mandate in 42 U.S.C. § 1395ff(d)(1)(A) that its appeals be heard and decided by ALJs within 90 days.

As of February 2014, the Secretary had 480,000 appeals awaiting assignment to an ALJ. The Secretary later conceded that the number of backlogged appeals had actually climbed to more than 800,000, creating a 10-year backlog. The Secretary attributed the backlog to an increased number of appeals within the Medicare system and inadequate funding by Congress to hire additional personnel. In fiscal year 2013, the average processing time was over 400 days for an ALJ appeal. In December 2013, the Office of Medicare Hearings and Appeals temporarily suspended assignment of most new requests for hearings, stating that the wait time for general assignments was at least two years.

Cumberland alleged that recovery audit contractors (RACs) are the cause of the problem, as they receive compensation based on the value of recovered Medicare payments, and are thus motivated to find reimbursements to be improper during an audit. Cumberland asserted that its inpatient rehabilitation facility (IRF) has been singled out for auditing because its services are generally expensive and RACs receive greater compensation for overturning its reimbursements. At the time of Cumberland’s complaint, 1,169 claims from Cumberland’s IRF had been audited with payment for 940 claims reversed, totaling $12.3 million.

District court dismissal. The district court dismissed Cumberland’s complaint on two grounds. First, the court concluded that Cumberland’s complaint failed to state a plausible claim for a mandamus order because (1) it failed to demonstrate a “clear and indisputable right” to relief, as Congress did not grant providers “an absolute right to an ALJ hearing . . . within the 90-day timeframe,” and (2) it failed to demonstrate that the Secretary has “a clear duty to provide such a hearing” within the 90-day time frame.

Second, as a matter of discretion, the district court concluded that to grant mandamus relief would interfere with HHS’ problem-solving efforts and would fail to recognize its comparable institutional advantage in crafting a solution to the delays. The district court also denied Cumberland’s claim for declaratory relief because the Declaratory Judgment Act does not supply a right of action in the absence of a valid substantive claim, and the mandamus claim was the substantive claim (see Providers must continue to wait on backlogged Medicare appeals, March 23, 2015).

On appeal. The Fourth Circuit affirmed the decision of the district court. While it agreed that the delay in the administrative process for Medicare reimbursement was “incontrovertibly grotesque,” it found that the Medicare Act does not guarantee Cumberland a hearing before an ALJ within 90 days, as it claimed. Instead, it found that the Medicare Act provides an administrative process that Cumberland must exhaust before ultimately obtaining review in a U.S. district court. Within that administrative process, the court found that if the ALJ review is delayed beyond the 90 days requirement, Cumberland had the right to escalate the review to the Department Appeals Board (DAB).

Consequently, instead of creating a right to go to court to enforce the 90-day deadline, the court decided that Cumberland had a choice of either waiting for the ALJ hearing beyond the 90-day deadline or continuing within the administrative process by escalation to the next level of review.

The court also found that the issuance of a judicial order directing the Secretary to hear Cumberland’s claims in the middle of the administrative review process would unduly interfere with the process and the obligations of the political branches. In addition, the court decided that judicial intervention at this time would invite other health care providers suffering similar delays to likewise seek a mandamus order, thereby causing the judicial process to replace and distort the HHS administrative process.

The case is No. 15-1393.

Attorneys: Amy O. Garrigues (K&L Gates LLP) for Cumberland County Hospital System, Inc. d/b/a Cape Fear Valley Health System. Janice L. Hoffman, U.S. Department of Health and Human Services, for Sylvia Mathews Burwell, Secretary, U.S. Department of Health and Human Services.

Companies: Cumberland County Hospital System, Inc., d/b/a Cape Fear Valley Health System; U.S. Department of Health and Human Services

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