Court agrees broken appeals systems is unfair

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Friday, June 22, 2018

DALLAS – A U.S. District Court’s recent opinion prohibiting CMS from recouping alleged overpayments from a provider going through the appeals process until after the administrative law judge level sends a strong message, industry stakeholders say.

As part of the June 4 opinion, Judge Ed Kinkeade of the U.S. District Court for the Northern District of Texas agreed to issue a temporary restraining order against CMS, the latest development in Family Rehabilitation, Inc. vs. Azar.

“The system, which is supposed to offer a fair appeals process for providers, has been broken for some time,” said Wayne van Halem, president of The van Halem Group. “The fact that it has been acknowledged now is very important.”

The district court in October 2017 “reluctantly dismissed” Family Rehab’s initial request for a temporary restraining order for lack of jurisdiction, prompting the home health company to appeal to the U.S. Court of Appeals for the 5th Circuit. The circuit court in March of this year clarified relevant case law and kicked it back to the district court, prompting the recent opinion.

At issue in the case is a requirement that the ALJ hear cases and issue decisions within 90 days—a timeframe that has ballooned to multiple years due to a massive backlog at the third level of appeals.

“Many providers can’t afford to refund the money and wait four years for a hearing,” van Halem said. “We have many clients whose cases are being assigned for hearings now that went out of business since the time we submitted them. It’s sad.”

That was the crux of Family Rehab’s argument. It argued the continued recoupment of the $7.5 million in alleged overpayments would force the company to shut down long before an ALJ hearing, causing “irreparable injury.”

“Having already laid off most of its employees and limiting home healthcare to only eight of its previous 289 patients, Family Rehab will be forced to permanently close its doors,” Kinkeade wrote in the opinion. “Not only is it suffering a dramatic financial hardship currently, but Family Rehab will go out of business permanently, with its remaining employees losing their employment and patients losing their healthcare provider.”

The opinion pokes holes in CMS’s “favorite defense,” says Ross Burris, a healthcare lawyer for Polsinelli based in Atlanta.

“They’re famous for saying, ‘You can’t sue us because there are administrative remedies,’” he said. “But what the court is saying here is, ‘Those remedies are non-existent.’”

While the opinion has limitations, it does open the door for other providers and their lawyers to try and use the same argument, van Halem and Burris say.

“If you’re appealing and you believe your company is going to be in dire circumstances under the recoupment—you’re not just angry; you have an immediate chance of irreparable harm—you now have an option,” Burris said.

Elizabeth Hogue, a healthcare lawyer based in Washington, D.C., agreed.

“This case is definitely one for providers to watch,” she said. “It now looks possible for providers to avoid recoupment in the face of multi-year wait times for hearings before ALJs.”