Conditional Payments: Is Medicare’s Reopen Process Right for You? Which Regulation Can Medicare Ignore?

On November 17, 2016, Medicare states the following during a townhall presentation, click here for link to transcript.

As many of you may be aware the CRC systematically filters all claims before issuing CPLs, CPNs and Demand letters so that the conditional payments specifically sought for recovery are related to the No-Fault insurance or Workers’ Compensation claim.

You may have received letters for the Statement of Reimbursement or SOR, including conditional payments that do not relate to the No-Fault insurance or Workers’ Compensation claim that was reported. Through feedback from the NGHP community and analysis of disputes and cost demand redetermination, the CRC revised the auto grouping or filtering logic used to define associated medical claims to the accident or injury being pursued as part of its NGHP ORM recovery effort.

After several rounds of enhancements, the CRC is pleased to report improved grouping logic as observed through accuracy of claim relatedness during clinical reviews.

The system Medicare is using to search for charges associated with a claim can request reimbursement for charges that do not relate to the claim. 

While Medicare states in 2016 it has improved its group logic, I would like to present an example from 2021 and a common complaint in the industry:

  • Applicable plan reports ongoing responsibility (ORM) for medical associated with a low back claim: M54.5
  • Medicare’s payment summary form lists dates of services in 2019 with ONLY diagnosis code D83.9 – Common variable immunodeficiency, unspecified.

With only low back reported, how could Medicare’s system think immunodeficiency is associated with the claim and require reimbursement? Is Medicare purposefully asking for unrelated charges to be reimbursed?

I do not believe this is the situation. However, on appeal or reopen process, Medicare is continuously failing to recognize their searches and collections are imperfect. What is important to remember: if Medicare is not following its regulations, it may be violating the Administrative Procedures Act and a party’s due process. These issues may be appropriate for judicial review.

Medicare regulation 42 C.F.R. 405.980(c) states the following:

(c)       Time frame and requirements for reopening initial determinations and redeterminations requested by a party.

(1)      A party may request that a contractor reopen its initial determination or redetermination within 1 year from the date of the initial determination or redetermination for any reason.

(2)      A party may request that a contractor reopen its initial determination or redetermination within 4 years from the date of the initial determination or redetermination for good cause in accordance with §405.986.

(3)      A party may request that a contractor reopen its initial determination at any time if the initial determination is unfavorable, in whole or in part, to the party thereto, but only for the purpose of correcting a clerical error on which that determination was based. Third party payer error does not constitute clerical error. See §405.986(c).

(4)      A party may request that a contractor reopen an initial determination for the purpose of reporting and returning an overpayment under §401.305 of this chapter.

While we have listed 42 C.F.R. 405.980(c), it is important that we look at the regulation in its entirety as no one single provision should be read in isolation: Medicare regulation 42 CFR 405.980(a) states the following:

(a)       General rules. (1) A reopening is a remedial action taken to change a binding determination or decision that resulted in either an overpayment or underpayment, even though the binding determination or decision may have been correct at the time it was made based on the evidence of record. That action may be taken by:

(i)      A contractor to revise the initial determination or redetermination;

(ii)     A QIC to revise the reconsideration;

(iii)    An ALJ or attorney adjudicator to revise his or her decision; or

(iv)    The Council to revise the ALJ or attorney adjudicator decision, or its review decision.

(2)      If a contractor issues a denial of a claim because it did not receive requested documentation during medical review and the party subsequently requests a redetermination, the contractor must process the request as a reopening.

(3)      Notwithstanding paragraph (a)(4) of this section, a contractor must process clerical errors (which includes minor errors and omissions) as reopenings, instead of as redeterminations as specified in §405.940. If the contractor receives a request for reopening and disagrees that the issue is a clerical error, the contractor must dismiss the reopening request and advise the party of any appeal rights, provided the timeframe to request an appeal on the original denial has not expired. For purposes of this section, clerical error includes human or mechanical errors on the part of the party or the contractor such as:

(i)      Mathematical or computational mistakes;

(ii)     Inaccurate data entry; or

(iii)    Denials of claims as duplicates.

(4)      When a party has filed a valid request for an appeal of an initial determination, redetermination, reconsideration, ALJ or attorney adjudicator decision, or Council review, no adjudicator has jurisdiction to reopen an issue on a claim that is under appeal until all appeal rights for that issue are exhausted. Once the appeal rights for the issue have been exhausted, the contractor, QIC, ALJ or attorney adjudicator, or Council may reopen as set forth in this section.

Let us break this down into the unrelated diagnosis code situation listed above:

A clerical error is a mechanical error on part of the grouper such as inaccurate data entry resulting in an unfavorable decision. Does a system that Medicare admits includes non-related dates of services result in an unfavorable decision?

42 C.F.R. 405.980(a)(4) states that if a valid appeal is filed within the usual timeframes (i.e. 120 days from date of the demand), there is no jurisdiction to review a reopen request.  However, once the appeal rights have been exhausted, Medicare may reopen as set forth in this section – 42 C.F.R. 405.980.

If a party goes directly to a reopen request, there is no valid request for appeal of an initial determination for Medicare to review and a party’s right to request a redetermination are exhausted. Moreover, if a party exhausts their appeal rights through the ALJ process, a reopen request still may be appropriate as Medicare’s collections may be invalid based upon the quality of their decision.  

The reopen process a valid administrative tool that requires Medicare to demonstrate its collection is materially binding. This means collections that are clearly unrelated to the claim or if new documentation is provided, must be evaluated by Medicare under the reopen process.

While form and content are requirements under the federal regulations for a final agency decision, the Medicare Secondary Payer Act requires Medicare to do more – that the charges are in fact reasonably expected to be paid from the primary plan and that there is a demonstration of responsibility. 

While it is the author’s acknowledgement that Medicare may grant a reopen request, there are certain limitations to Medicare’s discretion (i.e. they are not allowed to ignore the merits of the reopen request and arbitrarily, capriciously or not in accordance with law allowed to deny a reopen request). This is partly because Medicare regulation 42 C.F.R. 405.982(b) states:

(b)      Reopenings initiated at the request of a party. The contractor, QIC, ALJ or attorney adjudicator, or the Council must mail its revised determination or decision to the parties to that determination or decision at their last known address. In the case of a full or partial reversal resulting in issuance of a payment to a provider or supplier, a revised electronic or paper remittance advice notice must be issued by the Medicare contractor. An adverse revised determination or decision must state the rationale and basis for the reopening and revision and any right to appeal.

Further, the Supreme Court agrees Medicare must follow its rules, as stated in Wilson v. Commissioner of Social Security, 378 F.3d. 541 (6th Cir. 2004):

The Supreme Court has long recognized that a federal agency is obliged to abide by the regulations it promulgates. See Vitarelli v. Seaton, 359 U.S. 535, 545, 79 S.Ct. 968, 3 L.Ed.2d 1012 (1959); Service v. Dulles, 354 U.S. 363, 372, 77 S.Ct. 1152, 1 L.Ed.2d 1403 (1957); Accardi v. Shaughnessy, 347 U.S. 260, 267, 74 S.Ct. 499, 98 L.Ed. 681 (1954). An agency’s failure to follow its own regulations “tends to cause unjust discrimination and deny adequate notice” and consequently may result in a violation of an individual’s constitutional right to due process. Where a prescribed procedure is intended to protect the interests of a party before the agency, “even though generous beyond the requirements that bind such agency, that procedure must be scrupulously observed.” Vitarelli, 359 U.S. at 547, 79 S.Ct. 968 (Frankfurter, J., concurring); see also Note, Violations by Agencies of Their Own Regulations, 87 Harv. L.Rev. 629, 630 (1974) (observing that agency violations of regulations promulgated to provide parties with procedural safeguards generally have been invalidated by courts).

In further support of the reopen request and Medicare’s requirement to provide due process, Medicare regulation 42 C.F.R. 405.984 states and provides additional appeal rights:

Effect of a revised determination or decision.

(a)       Initial determinations. The revision of an initial determination is binding upon all parties unless a party files a written request for a redetermination that is accepted and processed in accordance with §405.940 through §405.958.

(b)      Redeterminations. The revision of a redetermination is binding upon all parties unless a party files a written request for a QIC reconsideration that is accepted and processed in accordance with §405.960 through §405.978.

(c)       Reconsiderations. The revision of a reconsideration is binding upon all parties unless a party files a written request for an ALJ hearing that is accepted and processed in accordance with §405.1000 through §405.1063.

(d)      ALJ or attorney adjudicator decisions. The revision of an ALJ or attorney adjudicator decision is binding upon all parties unless a party files a written request for a Council review that is accepted and processed in accordance with §405.1100 through §405.1130.

(e)      Council review. The revision of a Council review is binding upon all parties unless a party files a civil action in which a Federal district court accepts jurisdiction and issues a decision.

(f)       Appeal of only the portion of the determination or decision revised by the reopening. Only the portion of the initial determination, redetermination, reconsideration, or hearing decision revised by the reopening may be subsequently appealed.

(g) Effect of a revised determination or decision. A revised determination or decision is binding unless it is appealed or otherwise reopened.

Clerical Error, Good Cause and For Many Reasons:

It is important to repeat is that 42 C.F.R. 405.980(c) states the following:

(c)       Time frame and requirements for reopening initial determinations and redeterminations requested by a party.

(1)      A party may request that a contractor reopen its initial determination or redetermination within 1 year from the date of the initial determination or redetermination for any reason.

(2)      A party may request that a contractor reopen its initial determination or redetermination within 4 years from the date of the initial determination or redetermination for good cause in accordance with §405.986.

(3)      A party may request that a contractor reopen its initial determination at any time if the initial determination is unfavorable, in whole or in part, to the party thereto, but only for the purpose of correcting a clerical error on which that determination was based. Third party payer error does not constitute clerical error. See §405.986(c).

Medicare’s regulation has defined clerical error under 42 C.F.R. 405.980(a)(3) as a mechanical or human error on the part of the party or the contractor such as:

(i)        Mathematical or computational mistakes;

(ii)       Inaccurate data entry; or

(iii)      Denials of claims as duplicates.

Medicare’s regulations have also defined good cause in reopen cases as, 42 C.F.R. 405.986:

There is new and material evidence that:

(i)        Was not available or known at the time of the determination or decision; and

(ii)       May result in a different conclusion; or

(2)      The evidence that was considered in making the determination or decision clearly shows on its face that an obvious error was made at the time of the determination or decision.

The “good cause” identified in the reopen regulation listed above is separate and distinct than “good cause” defined under requests for extension. See 42 C.F.R. 405.942.

In reviewing the federal regulation 42 CFR 405.980 in its entirety, it is hard to understand that clerical or administrative error is the only argument for a party to request a reopen. This is partly because regulations are not to be read as duplicative or superfluous.  This means good cause and for any reason are not strictly for clerical or administrative errors.

There is no guarantee Medicare will admit to its mistakes during the administrative appeal process. This is partly a basis for the regulations to include a “for any reason” and “good cause” options. Moreover, Medicare is required to provide due process and proper evaluation of each party’s request. This is regardless of whether it is a reopen or redetermination request. A carte blanch denial or nonsensical response demonstrates Medicare’s failure to follow its rules. 

What the industry is truly asking from Medicare is a fair and proper review based upon the regulations Medicare is supposed to follow. This includes Medicare recognizing its system or process is not perfect and both the usual administrative appeal process and the reopen request are a check against its imperfections.

As we receive updates, we will keep you posted.