CMS's much-anticipated interim final regulation overhauling the appeals process for Medicare fee-for-service claims, 70 Fed. Reg. 11,420 (Mar. 8, 2005), amended by 70 Fed. Reg. 37,700 (Jun. 30, 2005), is the product of a number of legislative changes from BIPA and the MMA. The regulation makes a number of important structural and procedural changes to the Medicare appeals process, including:

Unifying the appeal process for Part A and Part B denials and overpayments
Reducing decision-making time frames and permitting cases to be escalated to the next level of appeal if decisions are not made timely
Creating a new independent entity to handle second-level appeals (now known as reconsiderations)
Requiring submission of all evidence early in the appeal process, absent a showing of good cause
Transferring authority for administrative law judges (ALJs) to CMS
Limiting the use of in-person ALJ hearings in favor of hearings conducted by videoconference
Requiring substantial deference to CMS guidance
Clarifying the reopening process for correcting minor errors or omissions without the need for a formal appeal

The regulation became effective May 1, 2005. The correcting amendment became effective July 1, 2005. Overall, the changes are intended to increase efficiency and maintain fairness in the appeals process. At this time, it remains difficult to gauge the practical impact of the regulation on beneficiaries as well as on providers and suppliers. Only time will tell.

Timeliness
According to CMS, the goal of the new appeals process is to reduce the timeframes for adjudicating appeals of fee-for-service Medicare claims. The appeals process can now take upwards of 1,000 days; CMS hopes to reduce the process to 300 days.

Redetermination
Under the regulation, providers and suppliers continue to have the right to appeal initial determinations to their FIs and carriers. These first-level appeals are known as "redeterminations." Contractors now have 60 days to process a redetermination. If a decision has not been reached within 60 days, a provider or supplier has the option of immediately escalating the appeal to the next level of decision.

Reconsideration
The second-level appeal is now known as a reconsideration. Reconsiderations are conducted by Qualified Independent Contractors (QICs), new Medicare contractors who are "independent" of FIs and carriers. The independence of the QICs is somewhat questionable given that they are Medicare contractors and, thus, may feel some allegiance to CMS. The number of required QICs has been reduced from 12 to 4.

The regulations require the submission of all evidence prior to the QIC's decision. If a provider fails to submit evidence prior to the QIC decision, then the evidence may not be raised during subsequent proceeding, including ALJ hearings, absent a showing of good cause. The net effect of this change is that beneficiaries, providers, and suppliers will have to prepare cases more thoroughly, earlier in the appeal process.

Where an appeal is based on medical necessity, the QIC review will be conducted by a panel of physicians or other appropriate health care professionals. If an appeal relates to items or services provided by a physician, then the QIC review must be conducted by a physician. The QIC decision must be based on the patient's medical record and applicable medical, technical, and scientific evidence. Reconsideration must be completed within 90 days. If a reconsideration decision has not been reached within 90 days, the provider or supplier has the option of immediately escalating the appeal to the next level of decision.

ALJ Hearings and MAC Reviews
Decisions of the Medicare Appeals Council (MAC) of the Departmental Appeals Board (DAB) as well as of the ALJs must be completed within 90 days. If such decisions have not been reached within 90 days, the provider or supplier has the option of immediately escalating the appeal to the next level of decision.

Under the new regulations, an ALJ may request (but not require) that CMS participate in an ALJ hearing. In addition, CMS may elect to participate in an ALJ hearing. Such hearings may become more adversarial and more costly as the providers and suppliers are forced to respond to CMS's arguments.

Responsibility for ALJ appeals is transferred from the Social Security Administration to HHS. The ALJs are to remain independent of CMS. Nevertheless, various changes in the regulations raise questions about the independence of the ALJs.

The regulations provide that ALJs must give "substantial deference" to Local Coverage Determinations (LCDs), Local Medical Review Policies (LMRPs), and CMS guidance such as memoranda and manual instructions. If an ALJ refuses to follow CMS guidance, the ALJ opinion must detail the reasons for the departure. In addition, such departures have no precedential value in future cases. The new regulations also generally require that ALJ hearings be conducted by videoteleconferencing (VTC). In-person ALJ hearings are only permitted if VTC technology is unavailable or "special or extraordinary circumstances" exist. Overall, the various changes to the ALJ hearing process will likely limit the discretion of ALJs.

Reopenings
The regulations now make clear that reopening is a remedial effort to address overpayments and underpayments resulting from human and mechanical clerical errors. The regulations try to differentiate between reopening and appeals. The regulations permit reopening claims for any reason within one year of the initial determination. In addition, reopening may be requested for "good cause" within four years. Good cause is limited to the existence of new and material evidence that was not available when the initial determination was made. Finally, CMS has strengthened its ability to reopen claims determinations where "fraud or similar fault" is suspected. This last provision is designed to permit CMS to recoup overpayments where enforcement authorities have not found sufficient evidence to proceed based on the existence of fraud.

Conclusion
The overhaul of the appeals process for Medicare fee-for-service claims is intended to increase efficiency and maintain fairness in the appeals process. As discussed above, some of the changes to the appeals process are significant. However, the true impact of the changes may not be apparent for some time as appeals work their way through the new system.