If you could light a torch to a Molotov Cocktail and a bunch of newspapers, you could not make a bigger explosion in my head than a recent Decision from a Medicare administrative law judge (“ALJ”). The extrapolation was upheld, despite an expert statistician citing its shortcomings, based on a CMS Ruling, which is neither law nor precedent. The Decision reminded me of the new Firestarter movie because everything is up in flames. Drew Barrymore would be proud.

I find it very lazy of the government to rely on sampling and extrapolations, especially in light that no witness testifies to its accuracy.

Because this ALJ relied so heavily on CMS Rulings, I wanted to do a little detective work as to whether CMS Rulings are binding or even law. First, I logged onto Westlaw to search for “CMS Ruling” in any case in any jurisdiction in America. Nothing. Not one case ever mentioned “CMS Ruling.” Ever. (Nor did my law school).

What Is a CMS Ruling?

A CMS Ruling is defined as, “decisions of the Administrator that serve as precedent final opinions and orders and statements of policy and interpretation. They provide clarification and interpretation of complex or ambiguous provisions of the law or regulations relating to Medicare, Medicaid, Utilization and Quality Control Peer Review, private health insurance, and related matters.”

But Are CMS Rulings Law?

No. CMS Rulings are not law. CMS Rulings are not binding on district court judges because district court judges are not part of HHS or CMS. However, the Medicare ALJs are considered part of HHS and CMS; thus the CMS Rulings are binding on Medicare ALJs.

This creates a dichotomy between the “real law” and agency rules. When you read CMS Ruling 86-1, it reads as if there two parties with oppositive views, both presented their arguments, and the Administrator makes a ruling. But the Administrator is not a Judge, but the Ruling reads like a court case. CMS Rulings are not binding on:

1. The Supreme Court
2. Appellate Courts
3. The real world outside of CMS
4. District Courts
5. The Department of Transportation
6. Civil Jurisprudence
7. The Department of Education
8. Etc. – You get the point.

So why are Medicare providers held subject to penalties based on CMS Rulings, when after the providers appeal their case to district court, that “rule” that was subjected against them (saying they owe $7 million) is rendered moot? Can we say – not fair, equitable, Constitutional, and flies in the face of due process?

The future does not look bright for providers going forward in defending overzealous, erroneous, and misplaced audits. These audits aren’t even backed up by witnesses – seriously, at the ALJ Medicare appeals, there is no statistician testifying to verify the results. Yet some of the ALJs are still upholding these audits.

In the “court case,” which resulted in CMS Ruling 86-1, the provider argued that:

1. There is no legal authority in the Medicare statute or regulations for HCFA or its intermediaries to determine overpayments by projecting the findings of a sample of specific claims onto a universe of unspecified beneficiaries and claims.
2. Section 1879 of the Social Security Act, 42 U.S.C. 1395pp, contemplates that medical necessity and custodial care coverage determinations will be made only by means of a case-by-case review.
3. When sampling is used, providers are not able to bill individual beneficiaries not in the sample group for the services determined to be noncovered.
4. Use of a sampling procedure violates the rights of providers to appeal adverse determinations.
5. The use of sampling and extrapolation to determine overpayments deprives the provider of due process.

The CMS Ruling 86-1 was decided by Mr. Henry R. Desmarais, Acting Administrator, Health Care Financing Administration in 1986.

Think it should be upheld?