FAIR DME Appeals Act

This Act may be cited as the “Fee Awards for Incorrect Reviews DME Appeals Act” or the “FAIR DME Appeals Act”.

(a) In general.— Section 1869 of the Social Security Act (42 U.S.C. 1395ff) is amended by adding at the end the following new subsection:

“(j) Payment of certain legal fees for certain durable medical equipment suppliers incorrectly denied payment.—

(1) In general.—

(A) Payment of fees.— Notwithstanding section 504 of title 5, United States Code and section 2412 of title 28, United States Code (commonly known as the “Equal Access to Justice Act”), subject to the succeeding subparagraphs of this paragraph, in the event a supplier of durable medical equipment wins a favorable final appeal of an initial determination (and at the time of such initial determination, such supplier was a small business concern, as defined in section 3 of the Small Business Act (15 U.S.C. 632)) by a covered contractor arising from or relating to the claims administration process involving durable medical equipment under this title, such appeal was heard by the Office of Medicare Hearings and Appeals, and the administrative law judge hearing such appeal determines that such initial determination was clearly erroneous, was not supported by substantial evidence, or failed to follow applicable provisions of law, regulation, or instruction issued by the Secretary in effect at the time of the initial determination, such contractor (regardless of whether such contractor is a named party in the appeal) shall pay the reasonable attorney fees (as applicable) and litigation costs of such supplier resulting from the appeal of the initial determination—

(i) at each stage of the appeal up to and including the hearing before the Office of Medicare Hearings and Appeals; and

(ii) including any stage of the appeal at which such supplier did not receive a favorable decision.

(B) Splitting of fees.— If, during the claims administrative process under this title, a covered contractor affirmed an initial determination that resulted in a favorable final appeal described in subparagraph (A), such covered contractor and the covered contractor who made the initial determination shall evenly split the reasonable attorney fees and litigation costs described in such subparagraph.

(C) Application.— A supplier of durable medical equipment seeking the payment of reasonable attorney fees and litigation costs under subparagraph (A) shall, by not later than 30 days after the date the favorable final appeal was issued—

(i) submit an application for such fees and costs with evidence of such fees and costs to the administrative law judge who heard such appeal; and

(ii) serve such application on each covered contractor that made the initial determination or affirmed such initial determination.

(D) Contractor response.— A covered contractor shall have 30 days after the date on which such contractor is served an application under clause (ii) of subparagraph (C) to submit a response to the administrative law judge described in clause (i) of such subparagraph.

(E) Determination.—

(i) In general.— Not later than 60 days after the end of the 30-day period described in subparagraph (D), an administrative law judge described in subparagraph (C)(i) shall issue a determination as to the amount (if any) of reasonable attorney fees and litigation costs that shall be awarded to a supplier of durable medical equipment pursuant to subparagraph (A). In making such determination, the administrative law judge shall—

(I) consider evidence submitted in the application described in subparagraph (C)(i) and any response submitted under subparagraph (D);

(II) with respect to reasonable attorney fees, use the lodestar method; and

(III) if more than 1 covered contractor was served under subparagraph (C)(ii), specify the amount owed by each covered contractor.

(ii) Non-appealable decision.— Any determination made pursuant to clause (i) shall not be appealable.

(2) Ineligibility of certain payments.— Paragraph (1) shall not apply to a favorable final appeal of an initial determination by a covered contractor won by a supplier of durable medical equipment when the initial unfavorable determination resulted from—

(A) such supplier failing to provide any required documentation;

(B) such supplier failing to comply with any billing or submission requirement; or

(C) a covered contractor—

(i) applying current law or guidance issued by the Secretary in effect at the time the initial determination was made, and such law or guidance had changed at the time of the favorable final appeal; or

(ii) applying a local coverage determination in effect at the time of the initial determination.

(3) Clawback.— If, after any reasonable attorney fees or litigation costs have been awarded to a supplier of durable medical equipment under this subsection, a court or other adjudicator determines that such supplier obtained a favorable final appeal through fraud, misrepresentation, or bad-faith conduct, such supplier shall be required to return such fees or costs to each covered contractor who was required to pay such fees or costs to such supplier.

(4) Definitions.— In this subsection:

(A) Covered contractor.— The term covered contractor means—

(i) an eligible entity with a contract under section 1893;

(ii) a qualified independent contractor (as defined in subsection (c)(2)); or

(iii) a medicare administrative contractor (as defined in section 1874A(a)(3)).

(B) Favorable.— The term favorable means, with respect to an appeal of a decision arising from or relating to the claims administration process under this title, a decision that is decided in the appellant’s favor with respect to every issue related to coverage and payment rules or the application of eligibility, entitlement, or premium rules.

(C) Final appeal.— The term final appeal means the last stage of review available within the claims administration process under this title in which—

(i) the only appeal available is a review by the Medicare Appeals Council; and

(ii) an administrative law judge enters a binding determination of the rights or obligations of the parties.

(D) Litigation costs.— The term litigation costs means, with respect to a favorable final appeal by a supplier of durable medical equipment, out-of-pocket expenses (not including reasonable attorney fees) incurred in the course of litigation that are traditionally taxable or recoverable by a prevailing party under statute, rule, or contract.

(E) Reasonable attorney fees.— The term reasonable attorney fees means, with respect to a favorable final appeal by a supplier of durable medical equipment, compensation for the reasonable time expended by an attorney or paralegal on legal work necessary to litigation.”.

(b) Medicare administrative contractors.— Section 1874A(d)(4) of the Social Security Act (42 U.S.C. 1395kk–1(d)(4)) is amended—

(1) in subparagraph (A), by striking “(B) and (D)” and inserting “(B), (C), and (D)”; and

(2) in subparagraph (C)—

(A) by striking “Indemnification.—Indemnification” and inserting

“(i) In general.— Subject to clause (ii), indemnification”; and

(B) by adding at the end the following new clause:

“(ii) No indemnification for legal fees.— No reasonable attorney fees or litigation costs awarded to a supplier of durable medical equipment under section 1869(j) shall be subject to indemnification by the Secretary under subparagraph (A).”.

(c) Unified program integrity contractors.— Section 1893(e) of the Social Security Act (42 U.S.C. 1395ddd(e)) is amended—

(1) by striking “Liability.—The Secretary” and inserting

“(1) In general.— Subject to paragraph (2), the Secretary”; and

(2) by adding at the end the following new paragraph:

“(2) Payment of certain legal fees.— Any regulation promulgated by the Secretary under paragraph (1) shall not include any limitation of a contractor's liability for any reasonable attorney fees or litigation costs awarded to a supplier of durable medical equipment under section 1869(j).”.

(d) Qualified independent contractors.— Section 1869(c)(5) of the Social Security Act (42 U.S.C. 1395ff(c)(5)) is amended—

(1) by striking “liability.—No qualified” and inserting

“(A) In general.— Subject to subparagraph (B), no qualified”; and

(2) by inserting at the end the following new subparagraph:

“(B) Payment of certain legal fees.— Subparagraph (A) shall not apply to any reasonable attorney fees or litigation costs awarded to a supplier of durable medical equipment under subsection (j).”.

(e) Implementation.— Not later than 2 years after the date of enactment of this Act, the Secretary shall promulgate regulations to carry out the amendments made by this section.

(f) Effective date.— The amendments made by this section shall apply to contracts entered into on or after January 1 of the year following the year in which the Secretary promulgates the regulations described in subsection (e).