Administrative law judge reviews appeals at the highest level

Appealing Denials through the Medicare Claims Appeals Process Works

Though it took time and effort, an administrative law judge ruled in favor of a client hospital and overturned a Medicare claim denial for a total knee replacement surgery. The hospital can now fully recover the cost of that surgery, with interest.

The case dates back to 2015 when a traditional Medicare patient underwent a total knee replacement. The inpatient services were denied by two separate Recovery Audit Contractors (RAC).The two RACs reviewed the case and denied the hospital payment for the inpatient procedure. However, the hospital felt strongly that the inpatient admission was appropriate, both RACs were wrong, and took the case through the appeals process, ending up in front of an administrative law judge who ruled in the hospital’s favor.

The decision stated the evidence and arguments in the case “supports that the inpatient hospital admission … was appropriate and payable.” At the time of the procedure, CMS rules (guided by its Inpatient Only List) said a knee replacement had to be an inpatient procedure. The hospital followed those guidelines, and the surgery was performed as an inpatient hospital stay. Both RACs independently denied the inpatient stay saying it was not appropriate because patient did not spend two midnights in the hospital, citing the two-midnight rule, which says that a patient’s stay must cross two midnights to be considered an inpatient stay. The RACs ignored the exception to the two-midnight rule for those patients admitted to the hospital for a procedure that is on the CMS Inpatient Only List.

The RACs said that the patient did not cross two midnights and therefore the hospitalization should not be paid as inpatient. However, the judge disagreed stating, “because the total knee arthroplasty was on the inpatient only list in 2015 the two-midnight rule regarding inpatient admission does not apply.”

The hospital believed it had a strong case and took the time and effort to go through the appeals process and it paid off. Though this case took an extended amount of time, indications are that future cases will not find such a backlog that existed in the past. Earlier this year CMS allotted The Office of Medicare Hearings and Appeals (OMHA) enough new funding to hire 70 additional administrative law judges. It is estimated that OMHA will now be able to hear roughly 300,000 appeals a year.1

To read more about the Medicare Claims Appeals Process, tips for preparing for an appeal hearing and strategies for avoiding the entire process completely, visit

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  1. Emanuel, Knicole C.,Esq. “The ALJ Backlog Dissolves – and SMRC Audits Escalate” RAC Monitor April 14, 2021,
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