Good and Bad News Stems from Federal Appeal Decision Centering on Reasonable Belief of Warranted Care

A recent decision from the 6th Circuit Court of Appeals produced both some excellent and some depressing news.  

Let’s start with the positive.

Over the years, we’ve explained the protections offered by the “without fault” provision of the Social Security Act. Both Sections 1870 and 1879 of the Act have provisions requiring the waiver of an overpayment, with 1879 applying if the organization providing a service reasonably believes that the service will be covered. Well, in one case, In Home Health, LLC v. Kennedy, the 6th Circuit ruled on July 27 that “if a provider reasonably – albeit incorrectly – interpreted the Medicare notices and standards as covering a patient’s claim, then the safe harbor saves them from liability.” While I have generally used the term “safe harbor” only to refer to provisions in the federal antikickback regulations, not 1879, I understand why the Court likes the phrase. 

The statement that a reasonable but incorrect belief in coverage requires waiver of an overpayment is remarkably helpful. The Court of Appeals is saying that even if a healthcare organization is wrong when it concludes that a particular service is covered, if its thought process was reasonable, the government isn’t allowed to recoup money.

The clarity of that sentence will be very useful in appeals, and a reminder that before making any refund, consider whether you are without fault under 1870 – and whether you had reason to believe that services were necessary under 1879.

But the decision isn’t all good news.

The case involves an appeal by a hospice. In an audit, the Medicare Administrative Contractor (MAC) concluded that many of the patients did not satisfy the definition of “terminal illness” found in a local coverage determination (LCD). As we’ve discussed before, I don’t think LCDs are generally binding. It doesn’t appear that the hospice challenged the validity of the LCD, so this decision doesn’t really address that important question.

But the Court did focus on the standard of review when an appeals court is looking at an administrative law judge’s (ALJ’s) decision. If you’re ever in a situation in which you want to appeal an ALJ’s decision in district court, you’ll want to fully understand just how limited that review will be. The court will give considerable deference to the ALJ. 

As the court explains (with a variety of citations and internal quotes omitted), “we must affirm the underlying decision unless we determine that substantial evidence did not support it. Substantial evidence ‘falls somewhere between more than a scintilla but less than a preponderance.’ It ‘does not mean a large or considerable amount of evidence, but rather such relevant evidence as a reasonable mind might accept as adequate to support a conclusion.’ Reviewing for substantial evidence precludes us from reweighing conflicting evidence, making credibility determinations, or substituting our judgment for the ALJ’s reasoned determination.” 

Despite all the excitement about how Loper Bright would limit deference to the government, a lot of deference remains. When there is any evidence supporting the ALJ, the court will yield to it.

Prevailing in an appeal is rarely a cakewalk.