Medicare claims can be denied on a prepayment basis (i.e., before the claim is paid) or on a postpayment basis (i.e., after the claim is paid and the payment is identified as improper). Many appeals originate from claims denied on a prepayment basis, but the same appeal rights exist for either scenario. To conduct a prepayment claim review, CMS contractors conduct several checks to determine whether a claim received from a provider should be paid. These checks include verifying that the provider is enrolled in Medicare, the beneficiary is eligible to receive Medicare benefits, and the service is covered by Medicare. In limited cases, before paying a claim, contractors review the supporting medical documentation for a claim to ensure the service was medically necessary. As a result of these checks or reviews, CMS’s contractors may deny Medicare payment for the claim. Most prepayment reviews are conducted by MACs, which are responsible for processing and paying FFS claims within 16 geographic jurisdictions. To conduct a postpayment review, contractors generally select claims from among those that have already been processed and paid, request and review documentation from providers to support Medicare coverage of the services identified in those claims, and apply Medicare coverage and coding requirements to determine if the claims were paid properly, reviewing, for example, whether the service was medically necessary or provided in the appropriate setting. The majority of the postpayment reviews are conducted by RAs. The Medicare administrative appeals process allows appellants who are dissatisfied with decisions at one level to appeal to the next level. The entities tasked with resolving appeals are referred to as appeals bodies. The statutory time frames for submitting and issuing appeal decisions can vary by level. (See table 1.) When an appeals body cannot render a decision within the applicable statutory time frame at levels 2 through 4, the appellant has the opportunity to escalate the appeal to the next level of appeal. CMS may also refer certain decisions made at Level 3 to Level 4. Each level of appeal follows similar steps. First, the appellant files an appeal and submits supporting documentation. The appeals body then assigns the appeal to an adjudicator who reviews the appeal, including the relevant Medicare policies and documentation. Adjudicators at all four levels generally conduct what are known as de novo reviews, meaning they conduct an independent evaluation of the claim(s) at issue and are not bound by the prior findings and decisions made by other adjudicators. Next, the appeals body issues the appeal decision and notifies the appellant. If the appellant files an appeal at the next appeal level, the documentation associated with the prior appeal is sent to the next appeal level. Appeals must meet certain requirements in order to be reviewed. For example, the appeal must be filed by an appropriate party, such as by the provider who furnished the service to the beneficiary and submitted a claim to Medicare for that service. In addition, the appeal must be filed within the required time frame. To be reviewed at Level 3, an appeal must meet or exceed a minimum dollar amount, known as the amount in controversy. Under certain circumstances, appellants may combine claims to meet the amount in controversy requirement, which is $150 in calendar year 2016. Some differences exist in the criteria appeals bodies use to make their decisions. While all levels are bound by statutes, regulations, national coverage determinations, and CMS rulings, only Level 1 is subject to local coverage determinations (LCD) and CMS program guidance, such as program memoranda and manual instructions. In comparison, Levels 2 through 4 are required to give substantial deference to LCDs and other CMS program guidance if they are applicable to a particular appeal. However, unlike Level 1, Levels 2 through 4 may exercise discretion to decline to follow LCDs and CMS program guidance when issuing an appeal decision, and must explain in the decision the basis for doing so. Levels 1 and 2 can also accept and consider new evidence submitted by appellants to support their appeals. For example, to pay claims related to certain durable medical equipment, prosthetics, orthotics, and supplies (DMEPOS), CMS requires providers to submit a certificate of medical necessity. If this document was not submitted with the original claim, the provider may submit it as part of the appeal. At Levels 3 and 4, new evidence can generally be accepted only with “good cause.” Unlike Levels 1, 2, and 4, which decide appeals generally by reviewing the documentation upon which the initial denial was based as well as any supporting documentation the appellant submitted with the appeal, Level 3 Administrative Law Judges (ALJ) conduct hearings during which appellants are permitted to explain their positions, present evidence, and submit into the record a written statement of the facts and law material to the issue. All four appeals bodies may issue appeal decisions that do not address the merits of the case: Dismiss: The appellant withdraws the request for an appeal or the appeals body determines that the appellant or appeal did not meet certain procedural requirements; for example, the appellant did not file the request within the required time frame. Remand: An action that can be taken at Level 2, 3, or 4 which vacates a lower level appeal decision, or a portion of the decision, and returns the case, or a portion of the case, to that level for a new decision. Appeal decisions for Levels 1 through 3 include the following categories for decisions issued on the merits based upon a consideration of the facts of the appeal: Fully reverse: The appeals body fully reverses a prior decision denying coverage and all of the claim(s) in dispute are paid. Partially reverse: The appeals body partially reverses a prior decision denying coverage, and those parts of the claim(s) in dispute are paid. Not reverse: The appeals body upholds a prior decision denying coverage, and payment of the claim(s) in dispute is denied. Level 4 uses different categories for decisions issued on the merits. In addition to dismissing or remanding a Level 3 decision, Level 4 appeal decisions can affirm, reverse, or modify a Level 3 decision. Additional information about Level 4 appeal categories is discussed in appendix I. To help manage the Medicare appeals process and track appeal decisions, the appeals bodies use various data systems. (See table 2.) In 2005, CMS implemented MAS, which at the time was intended to support Levels 1 through 4. However, currently, three data systems are used to collect appeals data across the four levels of the Medicare appeals process. The total number of Medicare appeals filed and the number of appeal decisions that were issued after statutory time frames at Levels 1 through 4 increased from fiscal years 2010 through 2014, with the largest rate of increase at Level 3. Reversal rates also decreased during this time for most levels of appeals. Between fiscal years 2010 and 2014, the number of filed appeals at all levels of Medicare’s appeals process increased significantly, with the rate of increase varying across levels. For example, during this period, the number of Level 1 appeals, which represented the vast majority of all appeals, increased from 2.6 million to 4.2 million—an increase of 62 percent—which was the slowest rate of increase among the four levels. While Level 3 handled fewer appeals overall, it experienced the largest rate of increase in appeals from 41,733 to 432,534 appeals—936 percent—during this period. (See table 3.) For most levels, the largest annual growth over the 5-year period occurred between fiscal years 2012 and 2013, and between fiscal years 2013 and 2014 the rate of growth slowed at all levels. For all appeal levels, appeals of claim denials for Medicare Part A (Part A) services showed the most dramatic increase. Among the four levels, Level 3 experienced both the largest increase in appeals overall, as well as the largest increase in Part A appeals, which increased over 2,000 percent between fiscal years 2010 and 2014. (See fig. 1.) Appeals of denied DMEPOS claims also grew substantially during this time at all levels. For example, DMEPOS-related appeals increased the most at Level 3 at over 1,000 percent. HHS attributed the increases in appeals overall to several factors. For example, HHS fiscal year 2016 budget justification materials noted that CMS’s increased focus in recent years on expanding new program integrity activities to ensure proper payment has resulted in more denied claims and, therefore, more appeals. Specifically, appeals resulting from RA claim denials began entering the appeals process in fiscal year 2011 after Congress enacted legislation that expanded the RA program from a demonstration operating in six states to a permanent national program, which CMS implemented in fiscal year 2009. In expanding nationally, the RA program added a new set of contractors with the specific purpose of reviewing postpayment claims to identify improper payments. In addition to the large volume of postpayment reviews conducted by the RAs, there was also an increase in overall claim denials from fiscal years 2011 to 2014, according to HHS’s June 2015 Process Improvement and Backlog Reduction Plan. The number of overall claim denials during this time period for Part A and B claims increased 12.5 and about 9 percent, respectively. For all levels, we found that appeals related to RA denials were a larger contributor to the increase in Part A appeals compared to Part A appeals not related to RAs. For example, at Level 3, RA-related appeals of Part A services grew from 1 percent (140 appeals) of filed Part A appeals in fiscal year 2010 to 78 percent (216,271 appeals) in fiscal year 2014. HHS also attributed the increase in appeals to a greater propensity among providers to appeal denied claims. From fiscal year 2010 to fiscal year 2014, the proportion of appeals filed by providers increased at Levels 2 through 4. The proportion of appeals filed by state Medicaid agencies also increased at Levels 2 and 4, while the proportion of appeals filed by beneficiaries at Levels 2 through 4 declined. According to HHS agency officials, a small number of providers and state Medicaid agencies were responsible for a large share of the appeals.