Am. Hosp. Ass'n v. Burwell

• Decision Date: 09 February 2016
• Docket Number: No. 15–5015.,15–5015.
• Citation: 812 F.3d 183
• Parties: AMERICAN HOSPITAL ASSOCIATION, et al., Appellants v. Sylvia Mathews BURWELL, in Her Official Capacity as Secretary of Health and Human Services, Appellee.
• Court: U.S. Court of Appeals — District of Columbia Circuit

812 F.3d 183

AMERICAN HOSPITAL ASSOCIATION, et al., Appellants

v.Sylvia Mathews BURWELL, in Her Official Capacity as Secretary of Health and Human Services, Appellee.

No. 15–5015.

United States Court of Appeals, District of Columbia Circuit.

Argued Nov. 9, 2015.

Decided Feb. 9, 2016.

Catherine E. Stetson argued the cause for appellants. With her on the briefs was Jaclyn L. DiLauro. Adam K. Levin entered an appearance.

Ronald S. Connelly was on the brief for amicus curiae Fund for Access to Inpatient Rehabilitation in support of appellants.

Joshua M. Salzman, Attorney, U.S. Department of Justice, argued the cause for appellee. With him on the brief were Benjamin C. Mizer, Principal Deputy Assistant Attorney General, Vincent H. Cohen Jr., Acting U.S. Attorney, Mark B. Stern, Attorney, William B. Schultz, General Counsel, U.S. Department of Health and Human Services, Janice L. Hoffman, Associate General Counsel, and Susan Maxson Lyons, Deputy Associate General Counsel.

Before: TATEL, KAVANAUGH, and SRINIVASAN, Circuit Judges.

Opinion for the Court filed by Circuit Judge TATEL.

TATEL, Circuit Judge:

At heart, this case is about an agency caught between two congressionally assigned tasks. Congress has prescribed specific time frames for the Secretary of Health and Human Services to reach decisions on various stages of administrative appeals of Medicare reimbursement claim denials. But Congress has also directed the Secretary to implement the Medicare Recovery Audit Program to detect waste, fraud, and abuse. Although the audit program has recovered billions of dollars in fraudulently or otherwise improperly paid funds, it has also contributed significantly to a volume of appeals that makes compliance with the statutory time frames impossible. Plaintiffs, including several hospitals with a significant amount of money tied up in the appeals process for far longer than the statute contemplates, seek a writ of mandamus compelling the Secretary to act within those time frames. Although Plaintiffs disclaim any desire or authority to force the Secretary to curtail the audit program or take any other particular action to meet the deadlines, the record suggests that absent further congressional action, the Secretary would likely have to drastically curtail that program to comply with such an order. The district court concluded that mandamus relief was unwarranted, noting the political branches' ongoing efforts to resolve this tension and the audit program's success in detecting improper payments. For the reasons set forth in this opinion, we reverse and remand with instructions to the district court to consider the problem as it now stands—worse, not better.

I.

After a hospital or other health-care provider performs Medicare-eligible services, it submits a claim for reimbursement to a Medicare Administrative Contractor (MAC). 42 U.S.C. §§ 1395ff(a)(1)-(2), 1395kk–1(a) ; 42 C.F.R. §§ 405.904(a)(2), 405.920 –405.928. The MAC decides whether to pay or deny the claim. If a claim is denied, the Medicare Act provides a four-level administrative appeal process, followed by judicial review. At the first level, the health care provider presents its claim again to the MAC for "redetermination." 42 U.S.C. § 1395ff(a)(3)(A), (a)(3)(C)(ii). The second level involves "reconsideration" by a Qualified Independent Contractor (QIC). Id. § 1395ff(c). The Centers for Medicare and Medicaid Services (CMS) oversees initial determinations and redeterminations by the MACs, as well as reconsiderations by the QICs.

If the provider remains unsatisfied, and if its claim exceeds $150, it may continue to the third stage: de novo review by an administrative law judge, including a hearing. Id. § 1395ff(b)(1)(E)(i), (b)(1)(E)(iii), (d)(1)(A) ; 42 C.F.R. § 405.1006(b) ; 80 Fed.Reg. 57,827, 57,827 (2015). This stage of the process is overseen by the Office of Medicare Hearings and Appeals (OMHA), which houses ALJs and their support staff, and which is funded by a separate appropriation.

See Medicare Prescription Drug, Improvement, and Modernization Act of 2003, Pub.L. No. 108–173, § 931, 117 Stat.2066 (requiring the Secretary to create an "administrative office that is organizationally and functionally separate from [CMS]" to "assure the independence of administrative law judges"). The fourth and final administrative stage involves de novo review by the Medicare Appeals Council, a division of the Departmental Appeals Board (DAB). Although the DAB has authority to hold a hearing, it does so only if "there is an extraordinary question of law/policy/fact." Mot. for Summ. J. Ex. 2, at 118. Finally, after completing the administrative appeal process, providers may seek review in district court of claim denials worth at least $1,500. 42 U.S.C. § 1395ff(b)(1)(E)(i), (b)(1)(E)(iii) ; 42 C.F.R. § 405.1006(c) ; 80 Fed.Reg. at 57,827. We apologize to our readers for all of the acronyms, but this is, after all, a Medicare case, and acronyms seem integral to the parties' native language.

To prevent appeals from lingering unresolved, the statute includes specific time frames for each step of the process. In particular, redetermination by the MACs "shall be concluded" within sixty days, 42 U.S.C. § 1395ff(a)(3)(C)(ii), and, with exceptions not relevant here, QICs "shall conduct and conclude" reconsiderations within sixty days, id. § 1395ff(c)(3)(C)(i). Similarly, ALJs "shall conduct and conclude a hearing ... and render a decision" within ninety days, id. § 1395ff(d)(1)(A), although the appealing provider may "waive" this "deadline," id. § 1395ff(d)(1)(B). And finally, the DAB "shall conduct and conclude a review ... and make a decision or remand the case to the administrative law judge for reconsideration" within ninety days. Id. § 1395ff(d)(2)(A). If all these time periods are met, appeals will work their way through the administrative process within about a year.

The statute also prescribes "consequences of failure to meet" several of the statutory "deadlines." In a process commonly referred to as "escalation," a provider that has been waiting for longer than the statutory time limit may advance its appeal to the next stage. Thus, a provider may "escalate" its appeal to the ALJ stage if the QIC fails to act within the required sixty days, id. § 1395ff(c)(3)(C)(ii), to the DAB stage if the ALJ fails to act within the required ninety days, id. § 1395ff(d)(3)(A), and to district court review if the DAB fails to act within the required ninety days, id. § 1395ff(d)(3)(B).

For years, the administrative appeal process functioned largely as anticipated, with its various stages typically completed within the statutory time frames. American Hospital Ass'n v. Burwell, 76 F.Supp.3d 43, 46 (D.D.C.2014). Then, in 2010, the Secretary fully implemented the Medicare Recovery Audit Program, which Congress had required the Secretary to set up "for the purpose of identifying underpayments and overpayments and recouping overpayments." 42 U.S.C. § 1395ddd(h)(1). Specifically, Congress directed that the Secretary "shall enter into contracts with recovery audit contractors" (RACs), who must be paid "on a contingent basis for collecting overpayments" and "in such amounts as the Secretary may specify for identifying underpayments." Id. § 1395ddd(h)(1)(B). Although Congress also specified certain other features of the program, such as that it must have "[n]ationwide coverage," id. § 1395ddd(h)(3), it left the Secretary broad discretion to determine many other program details.

The RAC program has had two primary effects. First, the government has recovered a great deal of improperly paid money.

According to the Secretary, "[i]n 2012, the program identified $2.3 billion in overpayments, and in fiscal year 2013, the recovery auditors identified and corrected $3.65 billion in overpayments." Appellee's Br. 8–9 (footnotes omitted). In 2012, the Secretary adds, "only 7% of claims identified by audit contractors as overpayments were challenged and overturned on appeal," and only 9.3% were in 2013. Id. at 9.

But because RAC denials are appealable through the same administrative process as initial denials, the RAC program has contributed to a drastic increase in the number of administrative appeals. Thus, the number of appeals filed ballooned from 59,600 in fiscal year 2011 to more than 384,000 in fiscal year 2013. Mot. for Summ. J. Ex. 7, at 4. Although the Secretary explains that other factors, such as "increased utilization of Medicare-covered services," have played a role in increasing the number of appeals filed, Appellee's Br. 9, the government acknowledged at oral argument that 46% of the appeals currently pending before OMHA originated from the RAC program. Oral Arg. Tr. 35.

Between RAC and non-RAC appeals, OMHA currently receives many more cases than it can process in a timely fashion. Indeed, every two months or less, it receives as many appeals as it can process in a full year. Appellants' Br. 12. As of February 2015, the decisions ALJs were releasing had been pending for an average of 572 days. Appellee's Br. 10. This number will almost certainly continue to grow as the backlog worsens.

The Secretary has worked to address the backlog and corresponding delays. As a result of various reforms, the number of appeals the average ALJ resolves each year has more than doubled since 2009. Mot. for Summ. J. Ex. 7, at 4. Moreover, the agency secured funding for seven additional ALJs and associated staff in fiscal year 2014—an increase of about 10% over previous staffing levels. Id. at 5.

Despite these additional resources and significant improvements, the Secretary and OMHA find themselves in an untenable position. OMHA still has the capacity to process only about 72,000 appeals per year, a far cry from the almost 400,000 appeals it received in fiscal year 2013, or from the over 800,000 appeals that composed its backlog in July 2014. Id. These figures suggest that at current rates, some already-filed claims could take a...