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June 2018


Medicare Appeals: How to Navigate the Dreaded Backlog


As a family physician, few things are more daunting than receiving a letter from a Medicare contractor retroactively “adjusting” or “denying” previously approved claims. These “overpayment determinations” are usually accompanied by a demand that you return the alleged overpayments and state that, if you don’t, the contractor will begin “recouping” (i.e., subtracting) the amount owed against future Medicare claims. These letters are becoming increasingly common, as Medicare contractors have recently been tasked with clamping down on perceived “fraud and abuse” in the Medicare system. The primary mechanism by which these retroactive adjustments can be reversed is the Medicare appeals process. This article generally describes the Medicare appeals process, briefly explores the current backlog plaguing the system, and offers some remarks on how to navigate it.


Appeals Levels One and Two: Worth a Shot, But Gather Your Evidence

Medicare has a four-level administrative appeals process. While this may sound Kafkaesque (more on that below), it provides the appealing physician with four chances to overturn an overpayment determination (before bringing a lawsuit, if desired). The first level of appeal is decided by the same Medicare contractor who made the initial overpayment determination (e.g., Noridian LLC), and the second level of appeal is decided by an independent contractor (usually assigned to a different geographical region). Any recoupment on the alleged overpayments is suspended during these first two stages. Preventing (or at least delaying) recoupment may be significant to a physician who receives a large percentage of his/her income from Medicare. We have also seen favorable results early on, especially at the second level, and contractors typically issue decisions relatively quickly. As such, we generally recommend physicians consider appealing overpayment determinations for non-nominal amounts, through at least the first two levels of appeal.


Please note that the second level of appeals is also the last opportunity for a provider to easily introduce documentary evidence supporting his or her position. As such, we strongly recommend that a provider contemplating an appeal to the third level (explained below) consult with an attorney early on to ensure evidentiary rights are preserved.


Medicare Appeals Levels Three and Four: Prepare for the Backlog

If an overpayment determination is not favorably resolved during the first two appeal stages, a provider has the option to appeal to the third level, which is before a federal Administrative Law Judge (ALJ). Unfortunately, Medicare is permitted to recoup alleged overpayments while an appeal is pending before an ALJ. This fact is important in light of the current backlog of appeals. While the law states that an ALJ must generally decide the appeal in 90 days, at this time, a provider should expect to wait 3-5 years before an ALJ is even assigned to their appeal.


This incredible backlog appears to have been primarily caused by the 2011 congressionally mandated Medicare Recovery Audit program. Under that program, recovery audit contractors (RACs) were financially incentivized to aggressively audit Medicare providers, and the result has been a 10-fold increase in pending appeals – from 60,000 in 2011 to 600,000 in 2017.1 Unfortunately, this backlog is projected to worsen, with current estimates speculating that some already-filed appeals could take a decade or more to resolve.2 Technically, if no ALJ is assigned within 90 days, providers have the right to “escalate” to the fourth level of appeal, which is before the Medicare Appeals Council (MAC). However, escalation waives certain procedural rights, including the right to a hearing. This is all made especially frustrating as recent evidence suggests that ALJ’s rule in favor of the providers approximately 60% of the time.3


Concluding Remarks

While the Medicare appeals process is effectively broken, we still encourage providers to utilize it—especially the first two levels for non-nominal amounts. As noted above, the first two stages are relatively efficient, and minimum effort can yield positive results.


Additionally, there may be other options available, and providers are becoming more creative as the ALJ backlog increases. For example, one provider recently sued the government demanding that Medicare stop recouping while they waited 3-5 years for an ALJ. The trial court initially dismissed the action, finding that the provider would have to wait for the ALJ or escalate to the MAC before bringing suit; however, the appellate court reversed and remanded, finding that escalation was not necessarily a sufficient remedy for the excessive delay, which it suggested might violate the provider’s constitutional rights.4 We expect further clarity as these cases work their way through the courts but this recent decision highlights the legal complexity involved in the Medicare system. As always, this article does not reflect a complete list of legal issues that may arise, nor does it constitute legal advice.




1. Am. Hosp. Ass’n v. Price, 867 F.3d 160, 163 (D.C. Cir. 2017).
2. Id.
3. See Opening Statement of the Honorable Orrin Hatch at April 28, 2015 Hearing before the Finance Committee of the United States Senate, Creating A More Efficient and Level Playing Field: Audit and Appeal Issues in Medicare.
4. In Family Rehab., Inc. v. Azar, 886 F.3d 496 (5th Cir. 2018).




About the Author

Scott Kessenick practices in all areas of Kessenick Gamma & Free, LLP specialization, a San Francisco firm providing legal representation to physicians, physician groups, and other health care professionals. He may be reached at




The articles provided in Practice Management News are general. They do not constitute legal, practice management or coding advice in any particular factual situation or create at attorney-client relationship. Consult your attorney or other professional for advice in your particular situation.