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July/August 2005

Practice Perfect: Coding & Reimbursement
Key Changes to Medicare’s Payment Appeals Process
By Chris McDonagh, Associate Editor

The Medicare appeals process is in transition. The Centers for Medicare & Medicaid Services is currently phasing in a new set of regulations that will significantly impact the way you contest a denied claim or dispute the result of a postpayment review.

Why change the regulations?  The incoming regulations were designed to streamline and speed up the appeals process. While the outgoing regulations feature two separate processes—one for appealing a Financial Intermediary’s decisions and another for appealing a carrier’s decisions—the incoming regulations have one unified process for both types of appeal. Other significant changes to the process include new timelines and new evidentiary rules.

When do the incoming regulations affect you? The changes to the appeals process are so far-reaching that CMS decided that it wouldn’t be feasible to implement them all at once. So although the incoming regulations have applied to the decisions of Financial Intermediaries (essentially, Part A claims) since May 1, they won’t apply to carriers’ decisions (Part B claims) until Jan. 1.

The Appeals Proces
In its initial denial, the carrier must include its reason for refusing your claim, including whether a local medical review policy, a local coverage determination or national coverage determination was applied. The significance of this is that it forces carriers to consider whether they have notified physicians about a particular policy, said Alan Reider, JD, who is a partner at Arent Fox, a law firm in Washington, D.C. If a LMRP covers the circumstances of your claim, then the carrier can argue that you should have been aware of that policy.  “But if the carrier hasn’t used the LMRP or LCD process to notify you that a policy is out there, then that lack of notice will greatly help your ability to appeal the denial,” he said.

Your first level of appeal—a swifter “redetermination.” If you want to contest the carrier’s initial denial, you have 120 days to request that the carrier make a redetermination of its initial decision, and you can do so regardless of the amount of money that is in dispute.

Under the outgoing regulations, Part B requests for review could be made over the phone but under the incoming regulations the request must be made in writing. CMS hopes that this new requirement will provide a reliable record of the request and encourage the submission of evidence to support the request.

The new regulations make one significant change to how this first level of appeal is conducted—the carrier must now reach a decision within 60 days. Previously, “the carrier’s timeframe for responding to your appeal was based on the carrier’s own internal guidelines,” said Mr. Reider.

Your second level of appeal—an independent “reconsideration.” If your redetermination is denied, you have 180 days to request a reconsideration of the decision and can do so regardless of the amount of money in dispute.

Under the outgoing regulations, this level of appeal is known as a Fair Hearing. It would be heard by a carrier employee, the Fair Hearing Officer. “The FHO was bound by the carrier’s policies and determinations and would often be a former claims processor who had no clinical background,” said Mr. Reider. You would be able to submit new evidence and you could choose to attend your hearing in person, conduct it by phone or conduct it “on the record.” If you chose this last option, there was no live interaction with the FHO. You would submit a document that explained your position, and the Fair Hearing Officer would make a decision that was based solely on the paper record.

Under the incoming regulations, the good news is that the person who adjudicates this stage of the appeal process is no longer an employee of the carrier—you now make your case to a Qualified Independent Contractor. “Unlike the FHO, the QIC is not bound by the carrier’s policies and determinations,” said Mr. Reider. “If the QIC denies your appeal, he or she must include a summary of the clinical evidence that was used in making that denial. The QIC, must therefore have enough medical expertise to make an informed decision based on that scientific evidence.”

The bad news is that you can no longer make your appeal in person or by phone; it must be done on the record. In another noteworthy change, this is the last level of appeal where you can file new evidence. “If you are going to be successful on the substantive clinical issues, you need expert testimony,” said Mr. Reider. “And if there is any expert testimony to be provided, it needs to be provided now.”

In your third level of appeal—the Administrative Law Judge Hearing—you can no longer submit new evidence. If you are again denied, you have 60 days to appeal to the next level. The minimum amount in dispute must be roughly $100. (The amount is adjusted in accordance with the consumer price index.)

Under the outgoing rules, this would be a de novo appeal, which means that the judge would start from scratch. This allows you to submit new evidence.

Under the incoming regulations, you can no longer submit new evidence. You can submit new arguments, but you must rely on the evidence that you and the carrier submitted during the earlier stages of the appeals process. In a potentially significant organizational change, Mr. Reider pointed out that the judges who hear these appeals will no longer be employees of the Social Security Administration—they are being transferred to the Department of Health and Human Services, the agency that runs Medicare. This begs the question of whether the judges can maintain the same level of independence now that they have moved from SSA to HHS.

Where next? If the administrative law judge rules against you, you have 60 days to appeal to the next level—the Medicare Appeals Board. If you’re not happy with the board’s decision, you can take your complaint to the Federal District Court.

Evolution of a Rule
Five years ago, Congress passed legislation that began reform of the Medicare appeals process. This statute was the Medicare, Medicaid and SCHIO Benefits Improvement and Protection Act of 2000, more commonly known as BIPA. The statute required that CMS (then known as HCFA) make a wide range of structural and procedural changes to the Medicare appeals process. In November 2002, CMS published some proposed regulations that incorporated those changes.

However, before those regulations could go into effect, they were superseded by a new statute—the Medicare Prescription Drug, Improvement, and Modernization Act of 2003—which included provisions affecting the appeals process. The CMS rewrote its proposed regulations and published its interim final rule in March 2005.

To read the rule, go to and search for “42 cfr parts 401 and 405.”