(CN) - Courts must intervene if lawmakers and regulators do not fix a "systemic failure" with the Medicare reimbursement appeals process, the D.C. Circuit ruled.
The American Hospital Association brought the underlying challenge Washington, saying its members are strapped for cash because the waiting period to appeal denials of Medicare reimbursement claims takes at least five years.
Federal law mandates resolution of such appeals within one year, but the Department of Health and Human Services has been unable to keep up because of its obligations under the Medicare Recovery Audit System.
Recovery audit contactors (RACs) have recovered billions of dollars in fraudulent payouts, but the process is a lengthy one. Hospitals note that contract auditors are motivated to maximize fund-recovery efforts since they take a cut of any funds they recover.
Though a federal judge found that lack of jurisdiction tied the court's hands, the D.C. Circuit handed the hospitals a reversal Tuesday.
The ruling notes that writs of mandamus - as the hospitals seek here to make HHS Secretary Sylvia Burwell act within statutory timeframes - are "extraordinary and intrusive."
Courts cannot overlook the possibility that a writ will infringe "on the authority and discretion of the executive branch," Judge David Tatel wrote for a three-member panel.
"The backlog and delays have their origin in the political branches, and ideally the political branches should resolve them," he added.
That ideal is outweighed, however, by the real impact delays are having on "health and human welfare," the ruling states.
Hospitals that intervened in the case told the court that the funding logjam has left them unable to replace aging equipment or to make proper facility repairs, forcing them to patch a roof over a surgical department rather than replacing it.
"True, Congress seems to approve of the way the secretary has implemented the program, and the agency is entitled to some leeway to resolve the tension between competing priorities," Tatel wrote. "If it fails to do so, however, and if Congress fails to act, either by providing the secretary sufficient resources to comply with the clear statutory deadlines it has already enacted or by relieving her of the obligation to do so, these deadlines dictate that the secretary will have to curtail the RAC program or find some other way to meet them. Federal agencies must obey the law, and congressionally imposed mandates and prohibitions trump discretionary decisions."
Tatel emphasized that the appeals logjam has only worsened in the year-plus since the lower court deferred to Congress.
Indeed the Office of Medicare Hearings and Appeals (OMHA) receives as many appeals as it can process in a full year every two months, according to the ruling.
"This number will almost certainly continue to grow as the backlog worsens," Tatel wrote.
Though additional funding and reforms Burwell put in place have doubled the number of appeals Medicare judges can resolve every year, Tatel said the secretary and OMHA still "find themselves in an untenable position."
On remand, the lower court must consider whether the progress Burwell and Congress have made justify not issuing the writ.
Tatel recommended giving the political branches a reasonable period of time to make some headway - "say, the close of the next full appropriations cycle."
Adam Levin, an attorney for the hospitals with Hogan Lovells, has not returned a call seeking comment.