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Proposed Regulation Would Give Secretary of HHS Authority to Review and Reverse DAB Decisions in Provider Appeals from Final Agency Decisions
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A December 28, 2007, proposed regulation published in the Federal Register would drastically alter the current system of appeals from certain final agency decisions by allowing the Secretary of the U.S. Department of Health and Human Services (HHS) to review and reverse decisions issued by the federal Departmental Appeals Board (DAB). The impact of the proposed rule, if adopted, could be enormous for affected health care providers unhappy with the results of a final agency decision by removing one of the few due process safeguards available to providers that want to challenge decisions of the agency and the Centers for Medicaid & Medicare Services (CMS). The Proposed Rule seeks to impose uniform, sweeping changes to nearly all current Medicare administrative appeals processes under the DAB’s jurisdiction; however, the Proposed Rule would have different and far-reaching implications for each unique category of administrative appeal. Many national and state provider organizations have expressed opposition to the draft regulation.

Overview of Appeals System

The DAB provides impartial, independent review of disputed decisions in a wide range of Department programs under more than 60 statutory provisions. The DAB generally issues the final decision for the Department, which may then be appealed to federal court. The DAB resolves disputes with a wide variety of outside parties such as state agencies, Head Start grantees, universities, nursing homes, hospitals, doctors, and Medicare beneficiaries.

Disputes reviewed by the DAB include:

  • adjudicatory civil money penalties (CMPs) and exclusions imposed under a wide range of fraud and abuse authorities;
  • appeals in provider and supplier participation, enrollment and enforcement cases brought by the CMS;
  • final review of ALJ decisions under 42 C.F.R. Part 498 (e.g., initial determinations concerning participation in the Medicare and Medicaid programs, the imposition of sanctions on certain providers including skilled nursing facilities, the imposition of enforcement remedies on laboratories under both Medicare and the Clinical Laboratories Improvement Amendments of 1988);
  • appellate review authority concerning Medicare Local Coverage Determinations; original jurisdiction over National Coverage Determinations; and
  • the imposition of CMPs by CMS for violations of the HIPAA portability and health information privacy requirements.

Under the current system, providers that wish to challenge survey findings may file an appeal with the DAB, a division of HHS. The DAB consists of both the individual administrative law judges (ALJs) who initially hear provider appeals and appeals panels of three DAB members who sit as an appeals court of sorts to review ALJ decisions with which either the provider or CMS is unhappy. Following an initial decision by an ALJ, either the provider or CMS may appeal that decision to the DAB appellate panel. Currently, providers unhappy with a decision of the appeals panel may further appeal the decision to the U.S. District Court in their jurisdiction. CMS, however, does not have the power to appeal decisions of the DAB with which it disagrees.

As such, a decision of an ALJ which is not appealed to the DAB by either CMS or the provider becomes the final agency decision of HHS. If either the provider or CMS appeals the ALJ’s decision to the DAB, then the DAB decision becomes the final agency decision of HHS unless the provider further appeals to federal court. While the DAB is far from perfect, it is generally viewed as an unbiased quasi-judicial body that sometimes rules in favor of HHS and sometimes in favor of providers. Appeals before the DAB are difficult to win, but with the right set of facts and a well-prepared case, providers at least have a fighting chance to correct erroneous decisions by the agency and CMS.

Change Proposed

In the proposed regulation, the Secretary complains about two problems that the regulation would address: 1) currently the ALJs and DAB must follow applicable statutes and regulations governing appeals but are not expressly required to follow the Secretary’s published interpretations of those authorities or other “informal guidance” published by the Secretary; and 2) the Secretary currently has no authority to review decisions of the DAB with which he disagrees. The proposed regulation would address those issues by 1) requiring the ALJs and DAB to follow both applicable statutes and regulations and published interpretations of those authorities and other informal guidance published by the Secretary; and 2) allowing the Secretary to review and affirm, reverse or remand decisions of the ALJs or DAB with which he disagrees.

The rule affects all decisions on provider and supplier enrollment and certification, sanctions imposed by the Office of Inspector General in fraud and abuse matters, sanctions issued under the Clinical Laboratory Improvement Act, certain sanctions imposed under HIPAA, and nursing facility survey decisions, among others. The regulation, if adopted, would not affect final decisions already issued by the DAB, but would apply to any “pending litigation.” Thus, many provider appeals that are not fully decided would fall under the regulation and would be subject to review by the Secretary.

One of the more troubling aspects of the proposed regulation is the requirement for the DAB to follow the “published guidance” of the Secretary on the interpretation of applicable statutes and regulations, to the extent such guidance is not in conflict with the Department’s governing statutes and regulations. The proposed rule identifies “published guidance” as including any guidance that has been “publicly disseminated” by the Secretary, such as manual provisions, State Medicaid Agency Director Letters or information posted on the CMS website. Published guidance would not include statements included in briefs filed by CMS in appeal litigation, but the Secretary would require in the rule that the ALJs and DAB defer to arguments about the meaning of applicable statutes and regulations by giving weight to statements made by CMS counsel in provider appeal briefs, unless those statements conflict with published guidance of the Secretary or other agency statements of position. As applied to nursing facilities, for example, this would give CMS counsel defending a state survey agency decision an enormous advantage in survey appeals with providers by equating their litigation arguments with HHS policy, unless the provider could persuade the ALJ or DAB that such arguments conflict with guidance already issued by the Secretary.

Provider Concerns

The proposed rule would allow the Secretary to simply overrule ALJ or DAB decisions with which the Department disagrees by claiming those decisions are contrary to the Secretary’s interpretation of governing statutes and regulations. Appeals by health care providers are already difficult to win, given the paucity of due process protections for providers in the current system. This proposed regulation would essentially turn ALJ and DAB decisions from final agency decisions to “recommended” or “proposed” decisions subject to being overturned by the Secretary. The rule proposes no limits to the Secretary’s discretion in choosing when and how often to review and reverse or remand ALJ or DAB decisions. If the Secretary remands a decision to the ALJ or DAB, then the ALJ or DAB would be required to follow the Secretary’s statement of policy or interpretation of the law, and would simply be limited to applying the facts of the case according to the Secretary’s interpretation. It is not difficult to imagine the Secretary issuing ad hoc policy through his ability to reverse ALJ or DAB decisions with which he or his subordinate agency, CMS, simply disagrees.

The proposed regulation stresses that providers unhappy with the Secretary’s decision on an appeal could still appeal to federal court. Providers can already appeal to federal court, so that reassurance is little comfort to providers, particularly given that the vast majority of such appeals in federal court are decided in favor of the Secretary. This is largely due to the lack of understanding of the complex world of health care regulatory and compliance issues by federal judges and a policy inherent in federal law that gives great deference to the Secretary in complex technical matters. The Secretary suggests in the proposed regulation that his review authority would be used sparingly, but few providers or their attorneys take much comfort in this assertion. Most provider counsel believe the concerns expressed by the Secretary would be more appropriately addressed by affording the Secretary the same opportunity providers have had since adoption of appeals regulations for providers – the chance to appeal to federal court.

Under the proposed regulation, the Secretary would have authority to decide which final agency decisions to review and neither CMS nor the provider would have the right to request such review by the Secretary. Neither party would have the right to offer additional evidence or file briefs supporting its position with the Secretary, although the Secretary would in his discretion have the authority to request additional briefing. The Secretary would have 30 days following an ALJ or DAB decision to decide whether to review a decision, and an additional 45 days to render the Department’s final decision. However, that latter time period could be extended without limitation in the discretion of the Secretary.

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