D.C. Circuit Finds District Court Abused Discretion by Implementing a 4 Year Deadline to Clear Backlogged Administrative Appeals

On August 11, 2017, the D.C. Circuit issued its decision on the District Court’s order in American Hospital Association v. Price in a 2-1 decision, holding that the District Court abused its discretion by ordering the Secretary to clear a backlog of administrative appeals for denied Medicare claims within four years. Notably, as of June 2, 2017, there was a backlog of 607,402 appeals awaiting review at the third level of review where claims are reviewed de novo by an administrative law judge (“ALJ”). The D.C. Circuit reasoned that, even though the District Court was not mandating a particular reform, the Health and Human Services (“HHS”) Secretary would still need to adopt some reform to meet the court- mandated 4-year timetable to reduce the appeals backlog. Specifically, the District Court’s order specified that claims pending at the ALJ level should be reduced by 30% by December 31, 2017; 60% by December 31, 2018; 90% by December 31, 2019; and 100% by December 31, 2020.

According to the D. C. Circuit, the District Court failed to seriously consider the HHS Secretary’s argument that it would be impossible to meet the 4-year timetable within the parameters of the Medicare statute. The HHS Secretary asserted that the court-ordered targets would be impossible to meet without settling unsubstantiated claims en masse, requiring the Centers for Medicare & Medicaid services issue payments on appeal claims regardless of the merit. The government also noted that the timetable could potentially be counterproductive and exacerbate the ALJ backlog, by incentivizing claimants to file meritless appeals in order to await a settlement option.

As a result, the D.C. Circuit remanded the case to the District Court to evaluate the Secretary’s ability to carry the burden of demonstrating the impossibility of the 4-year timetable. If on remand the Secretary fails to carry this burden, the District Court may choose to reissue the mandamus order without modification. For providers who were anticipating possible settlement options in light of the District Court’s original order, the D.C. Circuit’s decision indicates that the resolution of the ALJ appeals backlog is likely to be an ongoing issue for the near future.

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