Department of Health and Human Services
 

OFFICE OF 

INSPECTOR GENERAL 

EARLY IMPLEMENTATION 


REVIEW OF QUALIFIED 


INDEPENDENT CONTRACTOR 


PROCESSING OF MEDICARE 


APPEALS RECONSIDERATIONS
 

Daniel R. Levinson
 

Inspector General 


July 2008
 

OEI-06-06-00500
 
 

 

 

 

 

 

Office of Inspector General
 http://oig.hhs.gov 

The mission of the Office of Inspector General (OIG), as mandated by Public Law 95-452, as 

amended, is to protect the integrity of the Department of Health and Human Services 

(HHS) programs, as well as the health and welfare of beneficiaries served by those 

programs. This statutory mission is carried out through a nationwide network of audits, 

investigations, and inspections conducted by the following operating components: 

Office of Audit Services 

The Office of Audit Services (OAS) provides auditing services for HHS, either by conducting 

audits with its own audit resources or by overseeing audit work done by others. Audits 

examine the performance of HHS programs and/or its grantees and contractors in carrying 

out their respective responsibilities and are intended to provide independent assessments of 

HHS programs and operations. These assessments help reduce waste, abuse, and 

mismanagement and promote economy and efficiency throughout HHS. 

Office of Evaluation and Inspections 

The Office of Evaluation and Inspections (OEI) conducts national evaluations to provide 

HHS, Congress, and the public with timely, useful, and reliable information on significant 

issues. These evaluations focus on preventing fraud, waste, or abuse and promoting 

economy, efficiency, and effectiveness of departmental programs. To promote impact, OEI 

reports also present practical recommendations for improving program operations. 

Office of Investigations 

The Office of Investigations (OI) conducts criminal, civil, and administrative investigations 

of fraud and misconduct related to HHS programs, operations, and beneficiaries. With 

investigators working in all 50 States and the District of Columbia, OI utilizes its resources 

by actively coordinating with the Department of Justice and other Federal, State, and local 

law enforcement authorities. The investigative efforts of OI often lead to criminal 

convictions, administrative sanctions, and/or civil monetary penalties. 

Office of Counsel to the Inspector General 

The Office of Counsel to the Inspector General (OCIG) provides general legal services to 

OIG, rendering advice and opinions on HHS programs and operations and providing all 

legal support for OIG’s internal operations. OCIG represents OIG in all civil and 

administrative fraud and abuse cases involving HHS programs, including False Claims Act, 

program exclusion, and civil monetary penalty cases. In connection with these cases, OCIG 

also negotiates and monitors corporate integrity agreements. OCIG renders advisory 

opinions, issues compliance program guidance, publishes fraud alerts, and provides other 

guidance to the health care industry concerning the anti-kickback statute and other OIG 

enforcement authorities. 
 

 

 

Δ EXECUTIVE SUMMARY 

OBJECTIVE 

To determine the extent to which Qualified Independent Contractors 

(QIC) followed timeliness, correspondence, and data entry requirements 

for Medicare Part A and Part B claims reconsiderations received from 

May 2005 to July 2006. 

BACKGROUND 

Section 521 of the Medicare, Medicaid, and SCHIP Benefits 

Improvement and Protection Act of 2000, P.L. No. 106-554, requires 

that QICs conduct the second level of Medicare appeals, called 

“reconsiderations,” for Medicare Part A and Part B claims. The Centers 

for Medicare & Medicaid Services (CMS) contracted with two QICs that 

began processing Part A reconsiderations in May 2005 and with two 

QICs that began processing Part B reconsiderations in January 2006. 

For this study, we determined whether QICs processed reconsiderations 

within 60 days, as required, by analyzing information contained in the 

Medicare Appeals System (the “appeals system”) for all reconsideration 

cases through July 2006. We determined whether QICs sent 

correspondence to appellants as required and whether QICs entered 

accurate information in the appeals system by reviewing case files for a 

randomly selected sample of reconsiderations. We also conducted 

structured interviews with CMS, the four QICs, and staff who conduct 

Administrative Law Judge hearings at the third level of Medicare 

appeals. 

FINDINGS 

Part A Qualified Independent Contractors met the 60-day processing 

timeframe; however, Part B contractors did not for 58 percent of 

reconsiderations. One Part B QIC did not process 74 percent of 

reconsiderations within 60 days, and the other Part B QIC did not 

process 40 percent of reconsiderations within 60 days. 

Qualified Independent Contractors did not meet all correspondence 

requirements but did include the appropriate content in 

reconsideration decision letters. Twenty-six percent of case files that 

we reviewed did not have documentation substantiating that QICs sent 

letters acknowledging appeal requests. Twelve percent of case files 

were missing reconsideration letters; however, when present, QICs’ 

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E X E E X E CUTIVE S U MMAR Y 

decision letters included all required content. Forty percent of case files 

did not have documentation substantiating that QICs sent processing 

delay notifications for Part B cases that were decided late. 

Qualified Independent Contractors entered inaccurate information 

into the Medicare Appeals System for 54 percent of 

reconsiderations. Fifty-four percent of reconsiderations contained at 

least one item of inaccurate information in the appeals system for 

appellant type, reconsideration request date, acknowledgment letter 

date, decision date, and/or decision type. 

Factors contributing to deficiencies in timeliness, correspondence, 

and data entry include case transfer delays, unexpected case 

volume, and appeals system challenges. Three of the four QICs 

reported that lags in case file transfers from Affiliated Contractors that 

process claims affected adjudication timeframes and other operational 

activities. Both Part B QICs explained that unexpected case volume 

affected their ability to process cases on time. Additionally, all QICs 

reported that, during the early months of implementation, the appeals 

system was frequently unavailable or slow, did not have the ability to 

generate required correspondence, did not support resource 

management activities, and did not interface with databases that 

contained claims information, which affected timeliness and overall 

workflow. 

RECOMMENDATION 

During our review, the Part A QICs had been processing 

reconsiderations for 15 months and the Part B QICs for 7 months. We 

found that, during this timeframe, QICs had challenges meeting 

timeliness, correspondence, and data entry requirements. CMS made 

several changes to improve the reconsiderations process, including 

facilitating some improvements in the appeals system, restructuring the 

Part B workload into three jurisdictions, and recompeting the contracts 

among all QICs. However, given QICs’ deficiencies cited in this report 

and the potential impact of these deficiencies on the overall Medicare 

appeals process, we recommend that CMS: 

Take further action to ensure that QICs meet timeliness, 

correspondence, and data entry requirements. CMS currently 

employs several mechanisms to monitor QICs, which include weekly 

reviews of the appeals system data and annual site visit reviews. CMS 

may consider several options for augmenting these mechanisms to 

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EXECUTIVE SUMMARY 

ensure that QICs meet Federal requirements for processing 

reconsiderations. For example, CMS could add metrics, such as error 

rates, to its annual reviews to further assess the extent to which QICs 

meet correspondence and data entry requirements. In addition, to 

better ensure that appeals system data are accurate, CMS could 

validate these data during annual reviews. CMS could also evaluate 

the costs and feasibility of enabling the appeals system to extract 

information from databases that contain claims data, thereby reducing 

the need for manual data entry. Lastly, CMS could monitor the length 

of time that it takes Affiliated Contractors to transfer paper case files to 

QICs, to better ensure that QICs have a reasonable number of days to 

adjudicate reconsiderations. 

AGENCY COMMENTS AND OFFICE OF INSPECTOR GENERAL 

RESPONSE 

CMS concurred with our recommendation to take further action to 

ensure that QICs meet timeliness, correspondence, and data entry 

requirements and outlined efforts it has planned or has already taken to 

address it. These efforts include awarding a contract to a private entity 

that will conduct its own performance evaluation to determine QICs’ 

adherence to Federal requirements; enabling the appeals system to 

interface with databases that contain claims data; and including 

financial incentives in its contracts with the new Medicare 

Administrative Contractors to forward case files to the QICs within 

4 days for 85 percent of cases. 

CMS also noted that, subsequent to the time period covered by our 

review, March 2005– July 2006, it had made several changes to the 

second level of Medicare appeals, which culminated in the award of 

three new Part B QIC contracts. CMS reported that all three 

Part B QICs completed over 98 percent of reconsiderations on a timely 

basis during October–March 2008. CMS provided a table that outlines 

timeliness information for all three Part B QICs during this period. 

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Δ INTRODUCTION TABLE OF CONTENTS 

EXECUTIVE SUMMARY ..................................... i 
 

INTRODUCTION ........................................... 1 
 

FINDINGS ................................................ 10 
 

Part A QICs met timeliness requirements; Part B QICs 

did not ............................................... 10 
 

QICs did not meet correspondence requirements ............. 11 
 

QICs entered inaccurate data into the appeals system......... 12 
 

Various factors contributed to processing deficiencies ......... 14 
 

RECOMMENDATION ...................................... 16 
 

Agency Comments and Office of Inspector General Response . . . 16 

APPENDIXES ............................................. 19 
 

A: Point Estimates and Confidence Intervals ................ 19

 B: Agency Comments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 
 

ACKNOWLEDGMENTS .................................... 26 
 
 

 

 

 

 

Δ INTRODUCTION 

OBJECTIVE 

To determine the extent to which Qualified Independent Contractors 

(QIC) followed timeliness, correspondence, and data entry requirements 

for Medicare Part A and Part B claims reconsiderations received from 

May 2005 to July 2006. 

BACKGROUND 

Medicare beneficiaries, providers, and suppliers of health care services 

can appeal certain decisions related to their Medicare claims. 

Currently, the Medicare administrative appeals process includes four 

levels. This study focuses on the second level, QIC reconsiderations. 

Section 521 of the Medicare, Medicaid and SCHIP Benefits 

Improvement and Protection Act of 2000 (BIPA), P.L. No. 106-554, 

made significant changes to the Medicare claims appeal process.1 

Among other things, it required that QICs conduct the second level of 

Medicare appeals, called “reconsiderations,” for Medicare Part A and 

Part B claims.2 The revised appeals process had a phased 

implementation, which took place in fiscal years (FY) 2005 and 2006. 

The Centers for Medicare & Medicaid Services (CMS), the agency that 

oversees QIC operations, obligated about $40 million for QIC activities 

during this timeframe.3 Given the changes required by the BIPA, the 

Office of Inspector General (OIG) sought to determine whether QICs 

met processing requirements in the early phase of implementation from 

May 2005 to July 2006. 

Medicare Administrative Appeal Process 

Medicare Part A provides coverage for institutional care, such as 

inpatient hospital care, skilled nursing facility care, home health 

services, and hospice care. Medicare Part B provides coverage for the 

cost of noncustodial care, such as physician services, outpatient hospital 

services, and medical equipment and supplies. Under Medicare Parts A 

and B, a beneficiary can obtain health care services from any provider 

1 The BIPA was later modified by sections 931, 933, 939, and 940 of the Medicare 

Prescription Drug, Improvement, and Modernization Act of 2003 (MMA), P.L. No. 108-173.
 

2 42 U.S.C. § 1395ff(c)(1) (as amended by BIPA, § 521(a)).
 

3 Budget estimates for FYs 2005 and 2006 provided to OIG by CMS.
 

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INTROD 
 U C T I O N 

that is qualified and chooses to participate in the Medicare program.4 

Generally, to receive payment for the provision of health care services, 

the provider or beneficiary can submit a claim for payment to the 

appropriate Affiliated Contractor.5 For this report, the term “Affiliated 

Contractor” includes fiscal intermediaries (for all Part A claims and 

certain Part B claims) or carriers (for most claims under Part B). If the 

Affiliated Contractor determines that the claim for medical care is not 

covered under Medicare because it is invalid or incomplete or otherwise 

appears to be improper, it denies the claim.6 When the Affiliated 

Contractor denies a claim, it notifies the provider or beneficiary of the 

denial and offers the opportunity to appeal the denial.7 

There are four distinct administrative levels of appeal; 

• Level One: Affiliated Contractor redeterminations, 

• Level Two: QIC reconsiderations, 

• Level Three: Administrative Law Judge hearings, and 

• Level Four: Medicare Appeals Council hearings. 

If these administrative appeal levels have been exhausted, appellants 

may bring their cases to a Federal district court. 

Qualified Independent Contractors 

CMS awarded four QIC contracts to conduct Parts A and B 

reconsiderations for FYs 2005 and 2006. 

Part A QICs. On May 1, 2005, two QICs, First Coast Service Options 

(FCSO) and Maximus, began processing Part A reconsiderations. 

Part B QICs. On January 1, 2006, Quality2Administrators began 

processing Part B reconsiderations out of two separate locations 

(hereafter referred to as the Q2A East and the Q2A West). The Q2A 

East was responsible for Part B reconsiderations for 26 States, the 

District of Columbia, and 2 U.S. territories. The Q2A West was 

responsible for Part B reconsiderations for the other 24 States and 

4 42 U.S.C. § 1395a.
 

5 MMA (P.L. No. 108-173 § 911(d)) requires that Medicare Administrative Contractors 

(MAC) gradually assume the work currently performed by Affiliated Contractors, including 

fiscal intermediaries, carriers, and durable medical equipment regional carriers. CMS 

began replacing Affiliated Contractors in October 2005 and is expected to complete the 

transition by October 1, 2011 (42 CFR § 421.400).
 

6 Social Security Act § 1869.
 

7 42 CFR § 405.921(a)(2). 

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INTRODUCTION 

3 U.S. territories, as well as reconsiderations for durable medical 

equipment, prosthetics, and supplies claims.8 

Separate from the reconsideration contracts, CMS also awarded a 

contract to the Q2A to provide administrative services in support of 

QICs. Hereafter, we refer to this contractor as the administrative QIC. 

Processing Requirements 

Timeliness requirements. Pursuant to section 1869(c)(3)(C)(i) of the 

Social Security Act, QICs are required to render reconsideration 

decisions within 60 calendar days from the dates that they receive 

timely filed reconsideration requests and send written notices of the 

decisions to the appellants.9 10 

Correspondence requirements. In addition, pursuant to Federal 

regulations and/or QIC’s Umbrella Statement of Work, QICs are 

required to send appellants the following correspondence: 

• Acknowledgment Letters: Within 14 calendar days of the receipt 

of a request, QICs must send the appellant written 

acknowledgment of the appeal.11 The acknowledgment letter 

must inform the appellant that the appeal has been received and 

provide instructions for obtaining further information.12 

• Reconsideration Decision Letters: Within 60 days from the date of 

receipt of a reconsideration request, QICs must send a written 

letter notifying the appellant of the reconsideration decision.13 

8 For FY 2007, however, CMS restructured the Part B workload into three jurisdictions and 

recompeted the contracts among all QICs. The Q2A South (formerly Q2A East) began 

handling Part B reconsiderations for 16 States and 2 U.S. territories; FCSO began 

processing Part B reconsiderations for 34 States, 3 U.S. territories, and the District of 

Columbia; and Rivertrust Solutions began processing all durable medical equipment 

reconsiderations. 

9 This report does not address expedited appeal reconsiderations, which have different 

processing timeline requirements (Social Security Act § 1869(c)(3)(C)(iii)(I)). 

10 Under 42 CFR §§ 405.970(b)(1) and (3), decision deadlines may be extended if the QIC 

grants an appellant’s request for an extension of the 180-day filing deadline and/or if a 

party to the reconsideration submits additional evidence after the request for 

reconsideration is filed. 

11 CMS, “Qualified Independent Contractor Umbrella Statement of Work,” section III.A.2, 

September 1, 2005. 

12 Ibid. 

13 Pursuant to 42 CFR § 405.970(c)(1), QICs must send appellants one of three documents 

within 60 days: a decision letter, a dismissal notice, or an option to escalate their case to 

the next level. Our evaluation looked at whether QICs sent appellants any one of these 

documents within 60 days. 

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INTRODUCTION 

This letter must contain a statement indicating whether the 

decision is favorable or partially favorable, i.e., when a QIC 

overturns prior appeal decisions, or unfavorable, i.e., when a QIC 

upholds prior appeal decisions. Other content requirements for 

this kind of notification include a summary of the facts in the 

case; an explanation of how pertinent laws, regulations, coverage 

rules, and CMS policies apply to the facts of the case; and 

information concerning the appellant’s right to an Administrative 

Law Judge hearing.14 If QIC decides to dismiss the appellant’s 

request for reconsideration, it must send a letter notifying the 

appellant of the dismissal within 60 days from the date of receipt 

of the reconsideration request.15 

• Written Notification of Processing Delay and the Right to 

Escalate: If QIC fails to reach a decision within 60 days, it must 

send a written notice of the delay that offers the appellant the 

option to escalate the case to the Administrative Law Judge 

hearing level (these notifications must be sent within 60 days of 

receiving a reconsideration request).16 To trigger the escalation, 

the appellant must respond with a written request.17 However, 

for those cases in which the appellant does not request escalation, 

Federal regulations do not set forth additional processing timeline 

requirements. 

Data entry requirements and the Medicare Appeals System. According to 

QIC’s Umbrella Statement of Work, CMS requires QICs to enter and 

track information regarding the disposition of each reconsideration in 

the Medicare Appeals System (the “appeals system”).18 The appeals 

system was originally designed to store and facilitate the transfer of 

case-specific data across the four levels of administrative appeal.19 In 

September 2003, CMS contracted with CGI Federal to develop and 

14 42 CFR § 405.976(b). 

15 42 CFR § 405.970(c)(3).
 

16 42 CFR § 405.970(c)(2).
 

17 If the appellant requests escalation, then, within 5 days, the QIC must either finish
 

processing the reconsideration or escalate the case to the Administrative Law Judge 

hearing level (42 CFR § 405.970(d–e)).
 

18 CMS, “Qualified Independent Contractor Umbrella Statement of Work,” Section II.A., 

September 2005. 

19 Department of Health and Human Services (HHS), “Report to Congress: Plan for the 

Transfer of Responsibility for Medicare Appeals,” March 2004. 

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INTROD U C T I O N 

maintain the appeals system. Currently, Level Two and Level Three 

use the appeals system.20 

The appeals system contains many data fields, which CMS requires 

QICs to populate with accurate information from reconsiderations.21 

Administrative Law Judge staff can view QIC-entered reconsideration 

data in the appeals system for cases that progress to that hearing level. 

CMS Oversight 

According to CMS, it uses the following mechanisms to monitor and 

assess QIC performance:22 

Weekly reviews of Appeals System data. CMS analyzes information 

contained in the appeals system on a weekly basis to determine whether 

QICs are processing reconsiderations within 60 days and to ensure that 

QICs are sending required correspondence, such as acknowledgment 

and decision letters, to appellants. 

Annual onsite reviews. Each fiscal year, CMS representatives visit QICs 

to determine compliance with program requirements and to assess 

overall QIC performance. During what are typically 5-day visits, CMS 

reviews paper case files for a random sample of reconsiderations to 

determine whether: acknowledgment letters were sent on time; decision 

letters were sent on time; decision letters contained required content, 

such as decision explanations and directions for filing further appeals; 

and case files contained complete information. CMS also reviews QIC 

decisions during the course of annual performance reviews. Findings 

from these evaluations are compiled in a written report. 

Quality assurance program. In addition to these mechanisms, CMS 

requires each QIC to have an internal quality assurance program, to 

include regular case reviews and an overall self-assessment. On an 

annual basis, QICs submit to CMS written reports summarizing 

self-assessment results. 

Related Work 

In January 2002, prior to the full implementation of the BIPA, OIG 

released a report that analyzed the potential impact of the BIPA on the 

OEI-06-06-00500 

20 Staff from CMS’s Medicare Enrollment and Appeals Group reported that, as of 

December 2006, there were no current plans to implement the Medicare appeals system 

(the appeals system) at the remaining appeals levels. 

21 CMS, “List of Required/Non Required Medicare Appeals System Fields,” November 2005. 

22 OIG interview with staff from CMS’s Medicare Enrollment and Appeals Group, 

December 2006. 

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 INTRODUCTION 

Medicare administrative appeals process.23 OIG found, among other 

things, that the former process for Administrative Law Judge appeals 

was backlogged and overwhelmed. The report recommended a 

modernization of the appeals process. OIG also recommended that HHS 

develop a training program for all reviewers at all levels of appeals to 

ensure common knowledge, understanding, and information about the 

appeals process. HHS concurred with these recommendations. 

In a report released in October 2004, the Government Accountability 

Office (GAO) evaluated HHS’s and the Social Security 

Administration’s (SSA) plan to transfer Administrative Law Judge 

hearings to HHS.24 25 GAO found that the plan generally fulfilled all of 

the elements mandated by the MMA, such as a timetable, cost 

projections, and information about the development of a case-tracking 

system. However, the plan omitted important information, such as 

specific transition milestones and contingency arrangements. GAO 

recommended that HHS and SSA address these deficiencies. In its 

response, HHS generally agreed with GAO’s recommendations. 

In addition, OIG is currently reviewing the use of telephone, video, and 

in-person conferences to conduct Medicare Administrative Law Judge 

hearings. 

METHODOLOGY 

This study examines QICs’ performance in processing reconsiderations. 

Specifically, we determined whether QICs: 

•	 adjudicated reconsiderations within 60 days from the date of 

appeal requests by reviewing appeals system data for all 

reconsiderations opened from May 2005 to July 2006 for Medicare 

Part A cases and from January to July 2006 for Medicare Part B 

cases;26 

23 OIG, “Medicare Administrative Appeals: The Potential Impact of BIPA,” 

OEI-04-01-00290, January 2002. 

24 Section 931 of the MMA required the transfer of the Medicare Administrative Law Judge 

hearing process from SSA to HHS.
 

25 GAO, “Medicare: Incomplete Plan to Transfer Appeals Work Load from SSA to HHS 

Threatens Services to Appellants,” GAO-05-45 (Washington, DC: October 4, 2004). 

26 We used July 2006 as a cutoff to ensure that (1) QICs had at least 60 days to process a 

given reconsideration and (2) the administrative QIC, which houses reconsideration case 

files after disposition, had sufficient time to collect and submit requested case files. 

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INTRODUCTION 

•	 provided required case correspondence to appellants, based on our 

analysis of a random sample of reconsiderations adjudicated 

during the study period; and 

•	 entered accurate reconsideration information into the appeals 

system for five key data elements, based on our analysis of a 

random sample of reconsiderations adjudicated during the study 

period. 

Analysis of Appeals System Data 

Through CMS and the administrative QIC, we obtained data from the 

appeals system for all reconsideration requests initiated from 

May 2005 to July 2006. We analyzed these data to determine the: 

•	 timeliness of QICs’ processing of reconsiderations; 

•	 characteristics associated with late reconsiderations, i.e., the 

number of days that the reconsiderations were late and the 

number of days associated with case file transfers from the 

Affiliated Contractors that handle redetermination appeals at 

Level One; 

•	 number of reconsideration requests received by each QIC; and 

•	 number of claims associated with reconsiderations. 

Case File Reviews 

From appeals system data, we identified all reconsiderations that were 

labeled as “closed” by the four QICs during the study period.27 From 

this population, we selected a random sample of 110 cases from each 

QIC, for a total of 440 cases. We then contacted the administrative 

27 We defined “closed cases” as reconsideration cases in our specified sample timeframe that 

have dismissed, favorable, partially favorable, or unfavorable decision findings in the 

appeals system. 

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INTRODUCTION 

QIC and requested the corresponding case files for each sample case. 

We received a total of 423 case files.28 29 

We reviewed case file documentation to confirm whether QICs 

processed reconsiderations on time by determining the number of days 

between the date of receipt of the reconsideration request and the date 

of the reconsideration decision letter. We also reviewed case files to 

determine whether documents showed that required correspondence, 

i.e., acknowledgment and decision letters and written notifications of 

processing delay (where appropriate), were sent on time. We labeled 

correspondence as “missing” if the case file did not contain supporting 

documentation. 

We also compared the information contained in the case files with data 

contained in the appeals system to determine the accuracy of data 

entered for five key elements. We considered appeals system data to be 

inaccurate when it differed from information contained in the case files. 

Specifically, we examined whether the appeals system accurately 

reflected the: 

• appellant type; 

• date of receipt of the reconsideration request; 

• date of acknowledgment letter; 

• date of decision letter; and 

• reconsideration decision, e.g., dismissed, favorable, partially 

favorable, or unfavorable. 

Confidence intervals for estimates contained in this report are listed 

in Appendix A. 

28 The administrative QIC was unable to locate 2 files for FCSO, 1 file for Maximus, 10 files 

for Q2A East, and 3 files for Q2A West. The administrative QIC reported that QICs do not 

develop case files under two circumstances: (1) if the QIC establishes that the appeal is 

outside of its jurisdiction, it records the disposition as “misrouted” in the appeals system 

and forwards the request and associated materials to the QIC with jurisdiction; and (2) if a 

MAC redetermination appeal has not been conducted, the QIC records the disposition as 

“dismissed” in the appeals system. In both circumstances, the QIC develops an appeals 

system record, but no case file. 

29 One of FCSO’s cases was an expedited appeal, which OIG did not include in the 

423 cases it reviewed. OIG had asked the administrative QIC to exclude all Part A 

expedited cases. According to the administrative QIC, the expedited case was not labeled 

appropriately in the appeals system, which explains its inclusion in our universe of cases. 

Our review does not include Part A expedited reconsiderations because adjudication 

procedures differ from those of standard Part A and Part B cases. 

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INTROD U C T I O N 

Structured Interviews With QIC Staff 

We conducted structured interviews with QIC staff at FCSO, Maximus, 

and Q2A East. During these interviews, we spoke with managers, 

adjudication staff, and staff responsible for entering information into 

the appeals system. We also conducted a structured interview with 

management staff at Q2A West. We asked about the four QICs’ 

protocols for adjudicating reconsiderations and challenges that they 

experienced with the reconsideration process. 

Structured Interviews With Administrative Law Judge Staff 

We conducted structured interviews with Administrative Law Judge 

teams in each of the four hearing offices within HHS’s Office of 

Medicare Hearings and Appeals.30 Each Administrative Law Judge 

team included the primary docket clerk, one attorney, and one 

Administrative Law Judge. We asked Administrative Law Judge teams 

about their experiences in working with QICs, particularly as they 

related to the accuracy of the appeals system data entered by QICs. 

Structured Interviews With CMS Staff 

We conducted structured interviews with representatives from CMS’s 

Medicare Enrollment and Appeals Group. We asked about the 

mechanisms that CMS uses to ensure QIC adherence to program 

requirements. 

Quality Standards 

This study was conducted in accordance with the “Quality Standards for 

Inspections” issued by the President’s Council on Integrity and 

Efficiency and the Executive Council on Integrity and Efficiency. 

OEI-06-06-00500 

30 The Office of Medicare Hearings and Appeals is responsible for overseeing the 

Administrative Law Judge hearing level process. During a hearing, an Administrative Law 

Judge conducts a new (“de novo”) review of an appellant’s case and issues a decision based 

on the facts and the law. The Chief Administrative Law Judge leads the agency, which 

consists of four hearings offices, located in Arlington, Virginia; Cleveland, Ohio; Irvine, 

California; and Miami, Florida. 

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Δ FINDINGS 

Part A Qualified Independent Contractors met 

the 60-day processing timeframe; however, 

Part B contractors did not for 58 percent of 

reconsiderations 

Based on our analysis of the 

appeals system data for all 

reconsiderations received from 

May 2005 to July 2006, both Part A 

QICs processed virtually all 

reconsiderations within 60 days, as required (see Table 1).31 However, 

Part B QICs did not meet timeframes for 58 percent of reconsiderations. 

Specifically, Q2A West did not process 74 percent of reconsiderations 

within 60 days and Q2A East did not process 40 percent of 

reconsiderations within 60 days. Of these late decisions, Q2A West’s 

reconsiderations averaged 56 days late and Q2A East’s averaged 

21 days late. Our review of paper case files associated with a random 

sample of reconsiderations corroborated timeliness findings from our 

appeals system analysis. 

Table 1: Timeliness of Medicare Reconsideration Appeals Processed by 

Qualified Independent Contractors 

Part A QICs 

N=28,035 

Part B QICs 

N=77,973 

Cases Not Meeting 60-Day Timeframes < 1% 58% 

FCSO 

N=9,195 

Maximus 

N=18,840 

Q2A East 

N=36,842 

Q2A West 

N=41,131 

Cases Not Meeting 60-Day Timeframes < 1% < 1% 40% 74% 

Cases Open More Than 90 Days 0% 0% 12% 39% 

Average No. of Days Late 0 0 21 56 

Source: OIG analysis of Medicare Appeals System data: Part A, May 2005–July 2006 and Part B, 

January–July 2006. 

To address the Part B QICs’ performance issues, CMS took two key 

actions. It placed both Part B QICs on improvement plans. For 

FY 2007, CMS also restructured the Part B workload into three 

jurisdictions and recompeted the contracts among all QICs. Although 

Q2A West was not awarded a contract to conduct new appeals, CMS did 

extend its existing contract to handle approximately 

31 In our timeliness calculations, we took into account reconsideration extensions permitted 

under 42 CFR § 405.970(b). 

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F I NDING S 

26,000 reconsiderations that were pending decisions. According to CMS 

officials, these reconsiderations were all completed by September 2007. 

Qualified Independent Contractors did not 

meet all correspondence requirements but 

did include the appropriate content in 

reconsideration decision letters 

Case correspondence, such as 

acknowledgment letters, late 

notices, and decision letters, serve 

as important case updates and 

notifications of appeal rights. 

Documents contained in case files do not substantiate that the four 

QICs sent all required correspondence, and some correspondence was 

not sent within required timeframes. QICs did, however, include all 

required content in decision letters. 

Acknowledgment letters. Twenty-six percent of QIC case files we 

reviewed were missing letters acknowledging appellants’ 

reconsideration requests, and 20 percent of case files showed that these 

letters were sent after 14 days from the dates of receipt of the 

reconsideration requests. (See Table 2 on the next page.) The 

percentage of case files missing acknowledgment letters ranged from a 

low of 16 percent for Q2A West to a high of 37 percent for Maximus. 

Additionally, three QICs sent acknowledgment letters after required 

timeframes, ranging from a low of 8 percent of reconsiderations for 

Q2A East to a high of 37 percent for Q2A West. 

Reconsideration decision letters. Twelve percent of QIC case files were 

missing reconsideration decision letters, ranging from a low of 7 percent 

of reconsiderations for Q2A East to a high of 16 percent for Maximus. 

However, when present, QICs’ decision letters contained all required 

content, including the reconsideration decision; a summary of the facts 

in the case; an explanation of how pertinent laws, regulations, coverage 

rules, and CMS policies apply to the facts of the case; and the 

appellant’s right to an Administrative Law Judge hearing. 

Written notification of processing delay and the right to escalate. For late 

Part B reconsiderations, 40 percent of case files were missing 

documentation substantiating that the Part B QICs sent notifications of 

processing delays to appellants by the 60th day following the receipt of 

their reconsideration requests, as required. Another 37 percent of case 

files for late Part B reconsiderations show that these notifications were 

sent after 60 days. Such notifications serve to make appellants aware of 

their right to escalate their cases to the Administrative Law Judge 

hearing level. 

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FINDINGS 

Table 2: Missing or Untimely Correspondence for Medicare Recon

Processed by Qualified Independent Contractors 

sideration Appeals 

Overall Part A QICs Part B QICs 

FCSO Maximus Q2A East Q2A West 

Acknowledgment Letters

 Missing Documentation 

 Letters Sent After Required Timeframe 

Reconsideration Decision Letters 

 Missing Documentation 

Written Notification of Processing 

Delay and the Right to Escalate

 Missing Documentation 

 Notifications Sent After Required 

Timeframe 

26% 

20% 

12% 

40% 

37% 

26% 

0% 

10% 

N/A 

N/A 

37% 

16% 

16% 

N/A* 

N/A 

33% 

8% 

7% 

46% 

23% 

16% 

37% 

14% 

37% 

43% 

Source: OIG review of 423 Medicare reconsideration appeals case files: Part A, May 2005–July 2006 and Part B,
 

January–July 2006. 

*Maximus was missing documentation substantiating that it sent written notifications of processing delay to appellants for its two late
 

decisions. However, because so few decisions were decided late, we were unable to report statistics for missing notifications of 

processing delays with a reasonable level of confidence. 

Qualified Independent Contractors entered 

inaccurate information into the Medicare 

Appeals System for 54 percent of 

reconsiderations 

We reviewed a sample of paper case 

files to verify the accuracy of 

information entered into the 

appeals system by each QIC. We 

found that, for the five items we 

reviewed, QICs entered inaccurate information in the appeals system 

for 54 percent of reconsiderations.32 (See Table 3 on the next page.) 

The five items we reviewed were: appellant type; date of receipt of the 

reconsideration request; acknowledgment letter date; decision date; and 

32 As stated previously, we analyzed appeals system data to determine whether QICs 

processed reconsiderations within 60 days. Although we found that QICs entered 

inaccurate information in the appeals system for the five items identified in this report, we 

were able to corroborate our findings regarding timeliness through the review of paper case 

files associated with a random sample of reconsiderations. 

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FINDINGS 

decision type, i.e., dismissed, partially favorable, favorable, or 

unfavorable. 

Table 3: Percentage of Inaccuracies in Medicare Appeals System Data for 

Reconsideration Appeals Processed by Qualified Independent Contractors 

Information Reviewed Overall FCSO Maximus Q2A East Q2A West 

Percentage of Cases With Any 

Incorrect Information 54% 15% 43% 60% 62% 

Appellant Type, e.g., Beneficiary, 

Provider 

Reconsideration Request Date 

Acknowledgment Letter Date 

Decision Date 

Decision, e.g., Dismissed, 

Favorable, Partially Favorable, 

Unfavorable 

11% 

3% 

18% 

33% 

3% 

5% 

2% 

0% 

8% 

1% 

14% 

5% 

28% 

6% 

4% 

6% 

4% 

7% 

49% 

1% 

16% 

1% 

27% 

38% 

4% 

Source: OIG review of 423 reconsideration case files: Part A, May 2005–July 2006 and Part B, 

January–July 2006. 

Specifically, we found that 11 percent of reconsiderations had the 

incorrect appellant types,33 3 percent had incorrect reconsideration 

request dates, 18 percent had incorrect acknowledgment letter dates, 

33 percent had incorrect decision dates, and 3 percent had the incorrect 

decision type. 

Administrative Law Judge teams reported that reconsideration 

information entered by QICs is often inaccurate or missing. 

Specifically, Administrative Law Judges cited incorrect health 

insurance claim numbers, missing dates of service, inaccurate claims 

information, and incorrect appellant types. Administrative Law Judges 

reported that they rely entirely on paper case files to conduct hearings, 

in part because they presume that the data contained in the appeals 

system are unreliable. 

33 The appellant-type designation is important because it may affect adjudication 

procedures. For example, QICs have special requirements for the content and the 

complexity of the language used in decision letters sent to beneficiary appellants. 

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FINDINGS 

Factors contributing to deficiencies in 

timeliness, correspondence, and data entry 

include case transfer delays, unexpected case 

volume, and appeals system challenges 

Based on data obtained through 

structured interviews with QICs 

and our analysis of appeals system 

data, we identified three factors 

that contributed to processing 

deficiencies. These include delays in case file transfers from the 

Affiliated Contractors to QICs, a large and unexpected Part B 

reconsideration case volume, and functionality challenges with the 

appeals system. As discussed below, CMS took steps to address some of 

these issues. 

Case transfer delays 

Three of the four QICs reported that lags in case file transfers from 

Affiliated Contractors at Level One affected reconsideration 

adjudication timeframes and their ability to complete other activities, 

such as entering data into the appeals system and reviewing case 

information to reach decisions. According to appeals system data, QICs 

received redetermination paper case files an average of 14 days after 

QICs’ requests. These case file transfers occur within QICs’ 60-day 

adjudication timeframe, meaning that delays in case transfers reduce 

the amount of time that QICs have to process reconsiderations. Indeed, 

appeals system data show that for 15 percent of late reconsideration 

decisions, QICs received case files after 30 days from the date of the 

request, leaving only 30 days to process reconsiderations. 

Part B case volume 

Part B QIC officials cited unexpected case volume as the primary reason 

for their inability to process cases on time. Our analysis confirmed that 

as of July 2007, Part B QICs had received about 20 percent more cases 

than the assumptions identified in their contracts with CMS.34 35 

Beyond timeliness effects, Part B QIC officials also reported that case 

volume prompted them to reassign quality review staff to process 

34 Case volume estimates were based on Q2A East and Q2A West Business Proposals, dated 

December 8, 2005. 

35 Representatives from CMS and the Part B QICs reported that underestimated case 

volume may be explained, in part, by CMS’s assumption that provider appellants would 

aggregate approximately five claims under one appeal. If multiple claims were aggregated 

under one appeal, QICs could gain efficiencies by producing fewer letters and entering less 

overall data into the appeals system. However, according to appeals system data, Part B 

reconsiderations involved an average of only 1.3 claims rather than the estimated five 

claims. CMS officials indicated that case volume assumptions were based on historical 

information from the former hearing officer level of appeals, which handled the second level 

of Part B administrative appeals prior to the implementation of BIPA. 

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FINDINGS 

incoming reconsideration requests and to adjudicate cases, and 

prevented support staff from entering required data into the appeals 

system. CMS officials reported that case volume estimates were 

adjusted for FY 2007. 

Medicare appeals system challenges 

All QICs reported that challenges related to the appeals system affected 

timeliness and overall workflow during the initial months of operation. 

Specifically, the appeals system was frequently unavailable or slow, did 

not have the ability to generate appellant correspondence, and/or did 

not support resource management activities. Further, the appeals 

system did not interface with databases that contained claims 

information. Consequently, QIC staff needed to manually enter 

claim-specific information, which was prone to human error. According 

to all four QICs, these appeals system issues prompted them to develop 

ancillary systems to generate letters, support workflow management, 

and gather claims data. CMS worked with CGI Federal to address 

these issues. However, as of December 2007, the appeals system was 

still not capable of interfacing with Medicare claims systems, which 

each of QICs report as essential to ensure that claim-level information 

is valid for a given reconsideration. 

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FINDINGS 

 

 

Δ RECOMMENDATION RECOMMENDATION 

During our review, the Part A QICs had been processing 

reconsiderations for 15 months and the Part B QICs for 7 months. We 

found that, during this time, two QICs were not processing the majority 

of their Part B reconsiderations within 60 days, case files did not 

substantiate that QICs sent correspondence to appellants for all 

reconsiderations, and data entered by QICs in the appeals system were 

inaccurate. CMS made several changes to improve the reconsiderations 

process, including facilitating some improvements in the appeals 

system, restructuring the Part B workload into three jurisdictions, and 

recompeting the contracts among all QICs. Although these actions may 

have improved some areas of reconsiderations processing, given the 

deficiencies cited in this report and the potential impact of these 

deficiencies on the overall Medicare appeals process, we recommend 

that CMS: 

Take Further Action To Ensure That QICs Meet Timeliness, 

Correspondence, and Data Entry Requirements 

CMS currently employs several mechanisms to monitor QICs, which 

include weekly reviews of the appeals system data and annual site visit 

reviews. CMS may consider several options for augmenting these 

mechanisms to ensure that QICs meet Federal requirements for 

processing reconsiderations. For example, CMS could add metrics, such 

as error rates, to its annual reviews to further assess the extent to 

which QICs meet correspondence and data entry requirements. In 

addition, to better ensure that appeals system data are accurate, CMS 

could validate these data during annual reviews. CMS could also 

evaluate the costs and feasibility of enabling the appeals system to 

extract information from databases that contain claims data, thereby 

reducing the need for manual data entry. Lastly, CMS could monitor 

the length of time that it takes Affiliated Contractors to transfer paper 

case files to QICs, to better ensure that QICs have a reasonable number 

of days to adjudicate reconsiderations. 

AGENCY COMMENTS AND OFFICE OF INSPECTOR GENERAL 

RESPONSE 

CMS concurred with our recommendation to take further action to 

ensure that QICs meet timeliness, correspondence, and data entry 

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RECOMMENDATION 

requirements and outlined efforts it has planned or has already taken to 

address it. 

In response to our suggestion to consider adding metrics to its annual 

performance evaluations, CMS responded that, during annual 

evaluations of each QIC, it reviews a sample of case files to determine a 

percentage of “inaccurate decisions.” The percentage of inaccurate 

decisions found during the review is then used to determine whether the 

QIC is eligible for a portion of the contract award fee. However, we 

noted that performance evaluation review reports supplied by CMS did 

not contain errors specific to correspondence and data entry 

requirements. Given the extent to which we found problems in these 

areas, we continue to recommend that CMS may consider adding 

metrics to gauge QICs’ performance related to correspondence and 

appeals system data entry. Further, CMS reported that it augmented 

its review of QICs by awarding a contract to a private entity that will 

conduct its own performance evaluation to determine QICs’ adherence 

to Federal requirements. To better ensure that appeals system data are 

accurate, the contractor will also validate the accuracy of appeals 

system data for the cases it selects, according to CMS. 

In response to our suggestion that CMS work toward enabling the 

appeals system to extract information from databases that contain 

claims data, CMS reported that it has developed such an interface. This 

system change is scheduled to be implemented in July 2008. 

In response to our suggestion that CMS monitor the length of time it 

takes affiliated contractors to transfer paper case files to QICs, CMS 

stated that it is reviewing weekly and/or monthly reports on transfer 

timeliness, and uses this information as part of the affiliated 

contractors’ annual performance evaluation. CMS reported that, as of 

May 2008, most affiliated contractors were meeting established 

timeliness standards for forwarding case files. Looking forward, CMS 

indicated that it included financial incentives in its contracts with the 

new MACs to forward case files to QICs within 4 days for 85 percent of 

cases. 

Finally, CMS noted that, subsequent to the time period covered by our 

review, March 2005–July 2006, it has made several changes to the 

second level of Medicare appeals, which culminated in the award of 

three new Part B QIC contracts. CMS reported that all three Part B 

QICs completed over 98 percent of reconsiderations on a timely basis 

during October 2007–March 2008. Although OIG has not independently 

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RECOMMENDATION 

verified the supporting data, we have included a table that CMS 

provided, which outlines timeliness information for all three Part B 

QICs as part of the agency’s comments. 

The full text of CMS’s comments is provided in Appendix B. 

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Δ APPENDIX~A 

Point Estimates and Confidence Intervals 

Table 1: Missing or Untimely Correspondence for Medicare Reconsideration Appeals 

Processed by Qualified Independent Contractors 

Estimate Description N Estimate 

95-Percent 

Confidence Interval 

Overall Percentage of Case Files Missing 

Acknowledgment Letters 423 26.3% 21.8–30.8% 

Overall Percentage of Acknowledgment Letters Sent 

Late 423 20.0% 15.7–24.2% 

Overall Percentage of Case Files Missing Decision 

Letters 423 11.7% 8.3–15.0% 

Overall Percentage of Case Files Missing Written 

Notifications of Processing Delays 115 39.7% 30.7–48.9% 

Overall Percentage of Written Notifications of 

Processing Delays Sent Late 115 37.0% 28.0–45.5% 

Source: Office of Inspector General (OIG) review of 423 reconsideration case files: Part A, May 2005–July 2006 and Part B, January–July 2006. 

Table 2: Estimate of Missing or Untimely Correspondence by Part A Qualified Independent 

Contractors 

Estimate Description 

First Coast 

N=107 

Maximus 

N=109 

Estimate 

95-Percent 

Confidence 

Interval Estimate 

95-Percent 

Confidence 

Interval 

Missing Acknowledgment Letters 26.2% 17.8–34.6% 36.7% 27.5–45.9% 

Acknowledgment Letters Sent After 14 Days N/A N/A 15.6% 8.7–22.5% 

Missing Decision Letters 10.3% 4.5–16.1% 15.6% 8.7–22.5% 

Source: OIG analysis of 423 Medicare reconsideration appeals case files: Part A, May 2005–July 2006. 

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APPENDIX~A 

Table 3: Estimate of Missing or Untimely Correspondence by Part B Qualified Independent 

Contractors 

Q2A East 

N=100 

Q2A West 

N=107 

Estimate Description Estimate 

95-Percent 

Confidence 

Interval Estimate 

95-Percent 

Confidence 

Interval 

Missing Acknowledgment Letters 33.0% 23.6–42.4% 15.9% 8.9–22.9% 

Acknowledgment Letters Sent After 14 Days 8.0% 2.7–13.3% 36.5% 27.4–45.6% 

Missing Decision Letters 7.0% 

N=39 

1.9–12.1% 14.0% 

N=76 

7.3–20.7% 

Missing Documentation of Notifications of Processing 

Delay 

Notifications of Processing Delay Sent After Required 

Timeframe 

46.2% 

23.1% 

30.6–61.8% 

9.9–36.3% 

36.8% 

43.4% 

25.9–47.7% 

32.3–54.5 

Source: OIG analysis of 423 Medicare reconsideration appeals case files: Part B, January–July 2006. 

Table 4: Estimate of Inaccuracies in Medicare Appeals System Data for 

Reconsideration Appeals Processed by Qualified Independent Contractors 

N=423 

Estimate Description Estimate 

95-Percent 

Confidence Interval 

Overall Percentage of Cases With Any Incorrect 

Information 53.6% 48.4–58.8% 

Overall Appellant Type Inaccuracies 11.2% 7.8–14.6% 

Overall Reconsideration Request Date Inaccuracies 2.7% 1.0–4.4% 

Overall Acknowledgment Letter Date Inaccuracies 18.1% 14.1–22.2% 

Overall Decision Date Inaccuracies 33.0% 28.1–38.1% 

Overall Decision Inaccuracies, e.g., Dismissed, 

Favorable, Partially Favorable, Unfavorable 2.6% 0.9–4.3% 

Source: OIG review of 423 reconsideration case files: Part A, May 2005–July 2006 and Part B, January–July 2006. 

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, Part Qualified 

 

APPENDIX~A 

Table 5: Estimate of Inaccuracies in Medicare Appeals System Data for 

Reconsideration Appeals Processed by Part A Qualified Independent Contractors 

First Coast 

N=107 

Maximus 

N=109 

Estimate Description Estimate 

95-Percent 

Confidence 

Interval Estimate 

95-Percent 

Confidence 

Interval 

Percentage of Cases With Any Incorrect Information 15.0% 8.1–21.8% 43.1% 33.7–52.5% 

Appellant Type, e.g., Beneficiary, Provider 4.7% 0.6–8.7% 13.8% 7.2–20.3% 

Reconsideration Request Date 1.9% 0.23–6.59%* 4.6% 0.6–8.6% 

Acknowledgment Letter Date Inaccuracies N/A N/A 27.5% 19.0–36.0% 

Decision Date Inaccuracies 7.5% 2.4–12.5% 5.5% 1.2–9.8% 

Decision Inaccuracies, e.g., Dismissed, Favorable, 

Partially Favorable, Unfavorable 0.9% 0.02–5.10%* 3.7% 0.1–7.2% 

Source: OIG review of 423 reconsideration appeals case files: Part A, May 2005–July 2006. 

*Confidence interval calculated with an exact method based on the binomial distribution. 

Table 6: Estimate of Inaccuracies in Medicare Appeals System Data for 

Reconsideration Appeals Processed by Part B Qualified Independent Contractors 

Q2A East 

N=100 

Q2A West 

N=107 

Estimate Description 

Estimate 

95-Percent 

Confidence 

Interval Estimate 

95-Percent 

Confidence 

Interval 

Percentage of Cases With Any Incorrect Information 60.0% 50.2–69.8% 61.7% 52.3–71.0% 

Appellant-Type Inaccuracies 6.0% 1.3–10.7% 15.9% 8.9–22.9% 

Reconsideration Request Date Inaccuracies 4.0% 0.1–7.9% 0.9% 0.0002–0.051%* 

Acknowledgment Letter Date Inaccuracies 7.0% 1.9–12.1% 27.1% 18.6–35.7% 

Decision Date Inaccuracies 49.0% 39.0–59.0% 38.3% 29.0–47.7% 

Decision Inaccuracies, e.g., Dismissed, Favorable, 

Partially Favorable, Unfavorable 1.0% 0.02–5.45%* 3.7% 0.1–7.4% 

Source: OIG review of 423 reconsideration case files: Part B, January–July 2006. 

*Confidence interval calculated with an exact method based on the binomial distribution. 

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Agency Comments 

Δ APPENDIX~B 
 

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APPENDIX~B 
 

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APPENDIX~B 
 

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APPENDIX~B 
 

 

Δ ACKNOWLEDGMENTS 

This report was prepared under the direction of Kevin K. Golladay, 

Regional Inspector General for Evaluation and Inspections in the Dallas 

regional office, and A. Blaine Collins, Deputy Regional Inspector 

General. 

Christi Macrina served as the team leader for this study. Other 

principal Office of Evaluation and Inspections staff from the Dallas 

regional office who contributed to the report include Susan C. Bowman 

and Anthony Guerrero-Soto; central office staff who contributed include 

Barbara Tedesco, Kevin Farber, and Scott Manley. 

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