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After ALJ: Options and Opportunities in the Face of an Unfavorable ALJ Decision



In the five-step audit appeals process, hospices often stop their appeal efforts after finding success at the third step, a hearing before an administrative law judge (ALJ). However, if an ALJ issues an unfavorable decision, the hospice still has recourse. In this episode, Husch Blackwell’s Meg Pekarske and Bryan Nowicki talk about dealing with an unfavorable ALJ decision, including how to evaluate the strengths, weaknesses, costs, and benefits of pursuing the remaining steps of the appeal process.

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This transcript was auto-generated using Adobe Premiere Pro.

00;00;05;01 - 00;02;05;23
Meg Pekarske
Hello and welcome to Hospice Insights, The Law and Beyond, where we connect you to what matters in the ever changing world of hospice and palliative care. Hospice Audit Series. After ALJ: Options and Opportunities in the Face of an Unfavorable ALJ Decision. Now, Bryan, this is a podcast I've been looking forward to recording. So even though they're not going to be released in this order, we just recorded one of the statistics which, Bryan, it was a snooze fest, but no, no, but this is this is actually very interesting developments. I mean, it's not happy news as to why we're getting here, but I think we've seen a trend in our audit work that at least certain ALJ are less favorable and so people are having big liabilities. Even after they get their ALJ decision, they're still left with what could be hundreds of thousands of dollars. And so over the last number of months, we had a growing mix of clients who were interested in saying so. Now what? And one client had asked, I didn't even know that there was any level of appeal after ALJ. And so maybe that's where we start, is we, as I think a hospice industry, haven't historically had to use the to other levels of appeal after ALJ Bryan, you get a negative ALJ decision. There's two levels of appeal after that. One is the Medicare appeals counsel and then the next one is federal district court. And so to set the table here, Bryan, why don't you explain those two levels of appeal just briefly and then we can go into what's the exciting part of what we're talking about, because it's actually really the federal court piece.

00;02;06;02 - 00;04;27;19
Bryan Nowicki
Sure. And I think this podcast is a great one because it's really one of hope. Like you said, people think with an ALJ decision that that's the end of the road no matter what. And for a lot of our history in doing the these things, it's been a good end of the road because we've been very successful at that. But there are two levels. If you do get an unfavorable ALJ decision, two levels beyond that. The first is a written appeal to the Medicare appeals counsel, which is due within 60 days of the ALJ decision, goes up to the Medicare appeals counsel, hence the name. And you kind of identify to the counsel what you disagree with in the alleged decision. The Medicare appeals counsel, in our view, is not a real attractive adjudicator because they're not terribly provider friendly and they have a real bad backlog. Last we checked a few weeks ago, they were still working on appeals that were submitted back in 2017. So you're going to wait a long time unless you take the extraordinary year. I guess you take advantage of this opportunity to escalate that appeal to the federal district court. So if the counsel doesn't issue a decision based on your appeal within 90 days, you can escalate that appeal to your local federal district court. And I think that's very important when you appeal the Medicare Appeals Council decision or failure to decide to federal court. You look at the district court in your area. So if you're in Kansas, you're going to file this in the district court in Kansas. If you're in Florida, you're going to file it in southern middle or northern District of Florida. And it could be some advantage to you in that. And what the federal court is going to do is take a look at the most recent full written decision. And if the Medicare Appeals Council has punted on this and it's going to go back to the ALJ decision, and once you get to federal court, it's kind of up to that judge who controls his or her docket to figure out how they're going to hear the case. But it's not a trial is not a jury. There are no witnesses. It's a decision the federal court makes based upon the administrative record. So all the things that have been submitted before is the entirety of what is considered, which makes it very important you develop that record before these stages.

00;04;27;29 - 00;04;43;11
Meg Pekarske
This list continues to grow, I think week by week. Is it 13 different cases that we're bringing to federal court in all over the country? I mean, it's not in any one particular region. Is that the current count?

00;04;43;11 - 00;05;38;08
Bryan Nowicki
I think we have 11 who have decided currently that they want to go through the counsel and go to federal court. We've had three that are still deciding in that they wanted us to go to the appeals counsel and then after 90 days elapses and they had the opportunity to go to federal court, they're going to revisit that. So 11 are going to federal court. Could be three more after that. And you're right, maggots. It's all over the country, really coast to coast that federal judges now for the first time are going to really have a good opportunity to look at aspects of the Medicare hospice benefit, at the level of what does eligibility mean and how are LCDs applied and how does the limitation of liability work if you tried to? Fine. Well, I've tried to find case law in those areas and it's really not a lot. So hopefully will develop some good law here.

00;05;38;11 - 00;06;25;08
Meg Pekarske
We do look to a Sarah care that's an appellate case and what is at the 11th Circuit where Florida is. I mean, that was a false claim case, but it was the first case that I think had sort of delved into in looking at the Medicare hospice benefit and what's required now, because that was a false claim case. They didn't, I think, go and focus as much on the kinds of things that you and I are wanting to focus these federal court appeals on, which is, I guess one troubling thing we have seen is allergies are plain doctor. And Bryan, why don't you expand on how that's showing up for us?

00;06;25;15 - 00;08;07;02
Bryan Nowicki
Sure. So wouldn't it's kind of the euphemism we've used for these cases, the ages playing doctor and it typically happens the classic circum stance that has led to these appeals is you go to a hearing, they're all telephonic and often the hospice is the only party that shows up. The hospice is expert, physician is the only witness who provides any testimony. And of course that testimony illustrates demonstrates that all of these the medical record for all these claims supported the terminal prognosis. And you think, okay, well, there's only one party showed up, there's only one expert. What can the ALJ do with that except agree with us? And you would like to think that. But in fact, we get have gotten some ALJ decisions where the ALJ says, well, I just don't think the patient was sick enough. And I'm paraphrasing, of course, but that's the gist of their decisions that yeah, there was decline, but I don't think it was enough decline. And our reaction to that is, well, based upon what? ALJ There's nothing in the record, no opinion from a physician in the record that supports what you're saying. Instead, the ALJ, who is likely a former attorney, apparently is looking at clinical data and making a clinical judgment about how sick is sick enough for a patient to be terminal. Now, the LCDs include some information, but it is far from allowing a layperson, a non-physician, non clinician, even to start making judgments about people and the degree of their sickness. At least that's that's our view. And we think that's a problem.

00;08;07;04 - 00;08;50;13
Meg Pekarske
Well, and I guess, Bryan, sort of the cherry on the top, I think, happened in a couple of cases where there is even a statement that maybe this wasn't the proper diagnosis for this patient, because my guess is some some folks would say, well, judges all the time have to make judgment calls based on what's in the record. And they're not technical experts in everything and whatever. But I mean, when someone is is saying, geez, they didn't they might not have had this diagnosis and really, you're a lawyer who's looking at the medical record and you know that that was really a head scratcher.

00;08;50;13 - 00;10;34;29
Bryan Nowicki
Yeah, that's that was kind of the most extreme example that we've seen of this of this kind of situation. But it's troubling even when it is not that extreme to have these ALJ kind of come in and give their opinion. Now in a in a normal court case, you do have opposing sides, you have opposing experts. And so a record is developed between opposing experts. It's the battle of the experts. And therefore a judge or even a jury would have a basis based upon medical testimony to rule one way or the other. But as I mentioned, these are cases where the other side doesn't show up and these are JS at times are saying, Hey, I heard the hospice physician and I find that physician to be very credible. And so it's not as if they're saying, Well, I think the physician was lying that I that the ALJ does not point out any mistakes, specific mistakes in the AJ's analysis or testimony. It's just really a conclusory statement that, you know, not not enough decline, not sufficient impairment and this or that which we think really crosses the line into. ALJ is playing doctor. And it's a theory that has gained that has a lot of traction in a different context, and that's with Social Security disability hearings. Now that case law where courts have said, ALJ, you can't play doctor, that is not directly binding on this Medicare hospice appeals process, but it is a concept that we think can easily be introduced into the Medicare hospice appeals context. And that's exactly what we aim to do.

00;10;34;29 - 00;11;48;11
Meg Pekarske
Another issue that's that's getting raised in these cases that we're taking to federal court is how the ALJ applies the LCD. And I think that, you know, fundamentally the law, the Medicare hospice benefit is that prognosis based standard. You go back to the history of the LCD and they were developed in part by the industry as a tool or resource to to help provide some guidelines. I mean, they have not been updated for so, so very long in any substantive way. And so this has been, I think, a chronic issue not to use, but a chronic issue of applying the LCD in a very rote way, like you must meet ID in order to be eligible and and we know that people die of terminal illnesses for which there is no disease specific LCD. And so this whole idea that you must meet an LCD in order to be eligible for hospice is, you know, a real concern. And that's at play in a lot of these cases too, right?

00;11;48;11 - 00;14;02;29
Bryan Nowicki
Bryan Yeah, that's correct. And there's a lot of iterations of the what we believe misapplication of the LCDs. One of them, as you mentioned, Meg, is the certain ALJ seemed to apply the LCDs as if they were requirements that you have to meet the LCD and if you don't you're not eligible. That ignores what CMS has said about the LCDs, that they're guidelines, not mandatory requirements, and it often defies the evidence we present at hearings. It always defies it. Where we have the doctor say, even if the LCD was not applicable, this patient would still be eligible. Another more granular way that as some ages apply, it is take the MDGs and CGS LCDs, which have kind of a checklist approach with some detailed clinical data. It appears that some ALJ does kind of go through those lists and require that every box be checked off, or they require that a certain number of boxes be checked off. And it kind of brings up the plain doctor question Who's the ALJ to decide which number of boxes is the magic number that makes someone terminally ill, especially when you have an expert physician saying this is enough boxes to check this patient is terminally ill to have an ALJ say, no, I think you needed to check two more boxes and then they would have been terminally ill. It just kind of defies my experience in dealing with expert witnesses and the Palmetto ALS CDs. We typically like those because they don't take a checklist approach and they seem to more or less provide direction to a physician to apply clinical judgment in a general way. And so it's harder for ALJ is to say, well, you didn't check off all these boxes, but nonetheless, when we have a physician saying meet the Palmetto LCD, we still have ALJ saying, well, there wasn't enough structural impairment or I didn't see these exact secondary conditions or co-morbidities. So again, even when they're looking at the LCD, they seem to be playing doctor where in our view, you really need to have that clinical physician experience even to accurately, appropriately apply LCDs.

00;14;03;07 - 00;14;20;00
Meg Pekarske
The last issue is my most favorite, which, you know, for 15 years we've wanted, you know, ALJ is to focus on the statutory waiver of liability that exists in the law and 1870 is it G?

00;14;20;00 - 00;14;22;12
Bryan Nowicki
1879 G2

00;14;22;22 - 00;16;31;24
Meg Pekarske
Oh, 1879 G2, 1870s, another waiver, but 1879 G2 is about and you know, so this is the statute. It was passed by Congress, which is essentially saying if someone disagrees on eligibility and there's no way I'm paraphrasing here, you could or should have no, you should be held without fault and not have liability. And so this has been in the law for a very long time. And while it is addressed, it is in a very perfunctory way. It's it's like a boilerplate statement when they apply this, because they think when you explain to clients about, oh, yeah, there's the statutory waiver of liability, they're like, why is there are all of these audits to begin with? Like, how did you show that I should have known something different, especially to when you look at that hospices themselves as organizations can't practice medicine, right? They have to hire people who are physicians to to make that determination. And and when you're there, there really isn't a lot of statutory history and the section. But what there is in terms of what was Congress thinking and what Ed and created this law, they were saying, geez, hospices end up being sort of like insurance companies. They take on all of these costs for this patient. They pay all of these employees, they pay all these contractors. And then for some, you know, years from now, someone to say, oh, I'm going to take a different position. Then they're out. All this money, that just doesn't seem right. And so that's the sort of background, the statutory waiver of liability. And so so, Bryan, I guess, why is this bubbling up and where are you going add these federal appeals on this limitation of liability.

00;16;31;29 - 00;18;46;12
Bryan Nowicki
All right. And I think it's what you described, I think, as the perfunctory or boilerplate kind of decision that ail. JS and and the other contractors. And it seems like CMS as a whole has taken on this. So, Meg, like you said, the this this 1879 to g limitation of liability or waiver applies to eliminate a hospice liability unless it can be shown that the hospice knew or should have known that these claims would be denied once they were reviewed. Now what the decision makers typically say to say that the hospice should have known is that, well, they publish their laws and regulations. The LCDs are publicly available and other guidance manuals are publicly available. And how do you read those documents? Apparently, you would have known that these patients were ineligible for hospice. And it just, again, kind of flies in the face of how the hospice, even guidance, materials and LCDs are set up to be guideline guardrails guidelines as opposed to dispositive detailed criteria. And it flies in the face of CMS and Congress talking about prognostication is an inexact science. And so if it's inexact, how are these hospices supposed to definitively know that these patients would be ineligible? And if they're only going to rely on what they publish, which by law they publish, then it really eliminates the this limitation of liability at all. Why would Congress enact a statute limiting liability if it is defeated over and over again? Because Congress and CMS published their laws. It really makes no sense. But that's the response we've gotten. It has not gotten a lot of activity. And I think these contractors and perhaps even the O'Jays are hesitant to do anything more with that because there's not a lot of caselaw out there. A federal judge hasn't yet stepped in to say, Here's how you apply that. So they're going it's going to go with their boilerplate response until somebody challenges it and we're going to be challenging it.

00;18;46;23 - 00;20;45;05
Meg Pekarske
Well Bryan, that's such a great note to land on, because I do think it's a really important legal issue that I am hopeful we will get some favorable decisions on. So I'm sure more to come on this subject as we take these cases and growing number of cases to federal court. And I think since so many folks are moving forward with this, they've become, I think, more cost effective to to do them. And as you say, Bryan may gather some briefing, but the record sort of baked from, you know, the lower levels. So I think a closing note is just I think it's really important to and not in a self-serving way, but to work with legal counsel when you're dealing with and this is obviously larger scale appeals where there's a lot of money at stake, because how you build that record from the very beginning is important. If if because as we started this, there is a growing number of ALJ is still a minority who are taking and not that we expect that oh geez, we're going to win every case. But a growing number of ALJ is who are looking pretty unfavorably on hospice cases. And so I think how you position your cases is will be really important to make this a really helpful option because you can't argue your case. This isn't a re arguing of everything that was hashed out before, so it has to be a bit more laser focused on what are the the errors that are being made. It is a really interesting time. And so why, when do you think we'll start hearing back? I know these are obviously staggered over time and that they're getting filed, but how long do you think this process will take once you file to get a decision?

00;20;45;05 - 00;20;59;07
Bryan Nowicki
Yeah, it will depend on each separate court's docket and the speed of that docket. But I'm hoping that by the end of this year, we will be deep into briefing all of these issues with decisions starting to come out in 2024.

00;20;59;12 - 00;21;06;09
Meg Pekarske
All right. Fingers crossed. Yes. So exciting stuff. Thanks for leading this up, Bryan.

00;21;06;18 - 00;21;11;25
Bryan Nowicki
Thanks, Meg.

00;21;11;25 - 00;21;27;28
Meg Pekarske
Well, that's it for today's episode of Hospice Insights, The Law and Beyond. Thank you for joining the conversation. To subscribe to our podcast, visit our website at or sign up wherever you get your podcasts. Till next time, may the wind be at your back.