Based on recent guidance from the Centers for Medicare and Medicaid Services (“CMS”), a long-standing controversy regarding whether federal administrative law judges have jurisdiction over final determinations by Quality Improvement Organizations (“QIO”) appears to have been resolved.  Based on an August 2009 policy memorandum from CMS Region V, which has recently been adopted by other regions, including Region IX, it appears that healthcare providers may seek administrative review of adverse QIO determinations.

The controversy arose from conflicting legal authority in the Medicare regulations.  Certain provisions provided beneficiaries who were dissatisfied with a QIO determination the right to appeal to an administrative law judge.  This same right, however, did not appear to apply to healthcare providers who were limited to contesting an adverse determination by a QIO, by submitting a request for reconsideration with the QIO who had made the adverse determination in the first place.  See 42 CFR §478.15.

When the QIO denied the reconsideration request, which was almost always the case, the provider’s right to further appeal terminated.  This meant that the provider had no right to appeal an adverse QIO determination, such as one affecting the medical necessity of a procedure or reducing the amount of reimbursement pursuant to a DRG, to a higher and more independent level of review. 

In analyzing what now appears to be the newly-broadened scope of ALJ review in its policy memo, CMS referenced more recent regulations which became final in 2005, giving the ALJ the right to review “all the issues brought out in the initial determination, redetermination, or reconsideration that were not decided entirely in the party’s favor.”  See C.F.R. §405.1032.  Coupling this provision with congressional intent stated in the preamble to the regulations1, CMS Region V determined that Providers may appeal adverse QIO determinations to federal administrative law judges. 

While it remains to be seen whether all CMS Regions will ultimately adopt Region V’s policy broadening provider appeal rights, as Region IX has, providers should keep this recent development in mind, when evaluating their options to challenge adverse QIO determinations.

1   “We believe that the interest of the appeals process would be best served by insuring that providers are afforded an equal opportunity to be heard . . . we are specifying that Medicare Providers may file administrative appeals . . . to the same extent as beneficiaries”