Anatomy of a Medicare Audit
A Medicare audit can be stressful for any healthcare provider. A claim may be denied, a payment may be recouped, or a Medicare contractor may determine that documentation does not support services that were billed. For a medical practice, physician, surgery center, or other provider, the financial consequences can become significant quickly.
An unfavorable audit determination, however, does not necessarily end the matter. Original Medicare (Parts A & B) provides a five-level administrative appeals process that allows providers, suppliers, beneficiaries, and other parties with appeal rights to challenge Medicare coverage and payment decisions. Understanding how the process works can help providers respond strategically rather than treating an audit determination as the final word. The Law Offices of Art Kalantar helps California healthcare providers navigate serious healthcare fraud, abuse, and regulatory matters, including Medicare & Medi-Cal audits that can develop into more significant investigations.
Understanding the Medicare Audit and Appeals Process
For Original Medicare Parts A and B, the appeals process begins after an initial claim determination. Medicare Administrative Contractors (MACs) handle the first level, while later levels involve independent contractors, administrative adjudicators, the Medicare Appeals Council, and ultimately the federal courts.
The five levels are:
- Redetermination by the Medicare Administrative Contractor.
- Reconsideration by a Qualified Independent Contractor.
- Review by the Office of Medicare Hearings and Appeals, generally through an Administrative Law Judge hearing.
- Review by the Medicare Appeals Council.
- Judicial review in federal district court.
Each level has its own procedures, deadlines, evidentiary considerations, and requirements. Missing a deadline or failing to present important evidence at the appropriate stage can complicate an appeal.
Level One: Redetermination by the Medicare Administrative Contractor
The first level is called a redetermination. It is a review by personnel of the Medicare Administrative Contractor that made the initial claim determination, but the individual conducting the redetermination must not have been involved in the original determination.
For providers, physicians, and suppliers, the initial decision generally appears on a Remittance Advice. The redetermination request must generally be filed within 120 days after receipt of the initial determination. CMS currently provides Form CMS-20027 for requesting a redetermination.
This first appeal is an opportunity to challenge the factual and payment basis for the initial determination. Supporting documentation can be critical. Depending on the reason for the denial or recoupment, relevant materials may include medical records, orders, physician documentation, coding information, proof of delivery, treatment records, or other evidence establishing that the services were properly provided and billed.
A provider should not assume that the first appeal is merely a formality. The record developed at this stage can affect the issues that remain in dispute as the case moves through the appeals process.
For Medicare Advantage (Part C) providers, the first level is a reconsideration handled directly by the private Insurance Plan.
Level Two: Reconsideration by a Qualified Independent Contractor
If the redetermination does not resolve the dispute, the next level is reconsideration by a Qualified Independent Contractor, commonly called a QIC.
The QIC provides a review separate from the MAC’s initial determination and redetermination. The provider can present evidence and arguments explaining why the Medicare decision should be reversed.
For Original Medicare claims, the reconsideration request generally must be filed within 180 days after receipt of the redetermination decision. CMS identifies Form CMS-20033 for this level of appeal.
The QIC level is particularly important because it provides another opportunity to develop the evidentiary record. A provider should carefully review the reasons given for the initial denial and redetermination and address those issues directly rather than simply repeating a general disagreement.
The QIC generally issues a decision within 60 days after receiving the reconsideration request, subject to applicable extensions and circumstances. If the decision remains unfavorable, the case may proceed to the third level.
For Medicare Advantage claims, level two is an Independent Review Entity (IRE) review, automatically forwarded by the plan if Level 1 is denied.
Level Three: Administrative Law Judge Hearing
The third level is where the process becomes more formal. A provider or other eligible appellant can request review through the Office of Medicare Hearings and Appeals, or OMHA. In appropriate cases, this involves a hearing before an Administrative Law Judge.
An ALJ hearing gives the parties an opportunity to present their positions to a new adjudicator. Depending on the circumstances, the proceeding may involve testimony, legal argument, and examination of the documentary record. CMS explains that an ALJ may also conduct an on-the-record review in circumstances where a hearing is not held.
For calendar year 2026, the amount remaining in controversy must be at least $200 for an Original Medicare Part A or Part B appeal to proceed to this level. The ALJ request must be filed within 60 days after receipt of the QIC’s reconsideration decision.
This stage can be especially significant when the dispute involves complicated medical necessity, coding, documentation, coverage, or reimbursement questions. A provider may have an opportunity to explain the clinical and factual context behind claims that appeared questionable during an automated or paper-based review.
The ALJ process is also different from simply submitting another written disagreement. The presentation of evidence and legal arguments should be carefully planned, particularly when the amount at issue is substantial or the decision could have broader consequences for the provider.
Level Four: Medicare Appeals Council Review
If the ALJ or OMHA decision is unfavorable, the next level is review by the Medicare Appeals Council, sometimes referred to simply as the Appeals Council.
The Council provides another level of administrative review. A request must be submitted within 60 days after receipt of the ALJ or OMHA decision. Unlike the ALJ level, the Council reviews the existing record rather than conducting a completely new evidentiary hearing, although oral argument may be available in appropriate circumstances.
The Appeals Council can examine whether the lower-level decision was supported by the applicable evidence and law. That makes the legal framing of the dispute increasingly important as a case moves beyond the initial contractor reviews.
A provider should also pay attention to the precise instructions contained in the decision being appealed. Medicare appeals involve specific procedural requirements, and the appropriate next step can depend on the type of decision issued.
Level Five: Judicial Review in Federal District Court
The fifth and final level is judicial review in federal district court.
At this point, the dispute leaves the administrative appeals system and enters the federal court system. Judicial review is subject to specific requirements, including an amount-in-controversy threshold.
For 2026, the amount in controversy for federal district court review of an Original Medicare appeal is $1,960. Medicare explains that multiple claims may sometimes be combined to meet the threshold. A request for judicial review generally must be filed within 60 days after receipt of the Medicare Appeals Council decision.
Federal court review is not simply another opportunity to restart the Medicare appeal. The court reviews the administrative decision under the applicable judicial standards, such as decisions that were “arbitrary and capricious,” lacked substantive evidence, or were contrary to law. Consequently, the way the administrative record was developed during the earlier stages can become extremely important.
Deadlines Matter at Every Level
One of the most important practical lessons of the Medicare appeals process is that deadlines matter.
The time allowed to appeal becomes shorter as a case moves through the process. For example, a provider has 120 days to request a Level One redetermination, while the request for a Level Three ALJ hearing must be made within 60 days after receipt of the QIC’s reconsideration decision. Level Four and Level Five appeals also carry 60-day deadlines.
A provider should therefore review the appeal rights and deadline stated in each Medicare decision promptly after receiving it.
There may also be circumstances in which an appeal can be escalated because an adjudicator has not issued a decision within the applicable timeframe. CMS recognizes escalation procedures at certain stages of the appeals process.
Building the Record for an Appeal
A Medicare appeal is ultimately an evidence-driven process. The strength of an appeal can depend on whether the provider can establish what happened, why the services were provided, and why the claims complied with Medicare requirements.
Relevant evidence may include medical records, physician orders, treatment notes, operative reports, coding information, billing records, contracts, correspondence, and other documentation supporting the claims.
Providers should also consider the reason for the audit finding. A denial based on medical necessity may require a different response from a denial based on missing documentation or coding. Similarly, an allegation involving a pattern of billing may require a different defense from an isolated claim error.
The goal is not simply to provide more documents. The evidence should address the specific factual and legal basis for the Medicare determination.
When a Medicare Audit Becomes Something More Serious
Not every Medicare audit is a fraud investigation. Medicare contractors routinely review claims for payment accuracy, medical necessity, coverage, and documentation.
The situation can become substantially more serious when investigators begin alleging intentional conduct, false statements, improper financial relationships, medically unnecessary services, systematic upcoding, kickbacks, or other potentially fraudulent activity.
A provider should pay close attention to the language used in correspondence and requests for information. An audit that begins as a payment dispute can sometimes generate information that is referred for additional administrative, civil, or criminal investigation.
When potential fraud allegations emerge, the provider should consider obtaining legal counsel before making substantive statements or producing materials beyond what is required. The defense strategy for a routine reimbursement dispute may be very different from the strategy appropriate for an investigation involving potential criminal liability.
Frequently Asked Questions
How many levels of Medicare appeals are there?
Original Medicare Parts A and B have five levels of appeal: redetermination, reconsideration, an OMHA proceeding generally involving an ALJ, Medicare Appeals Council review, and judicial review in federal district court. Medicare Advantage (Part C) and Medicare Part D also feature a 5-level appeals hierarchy, but while the last three levels converge into the same federal review bodies, the entry points and first two levels are structurally different.
How long do I have to appeal a Medicare audit?
The deadline depends on the level of appeal. For example, a Level One redetermination must be requested within 120 days, while a Level Three ALJ appeal must be requested within 60 days after receipt of the QIC reconsideration decision.
What happens at a Medicare ALJ hearing?
An Administrative Law Judge reviews the dispute at the third level of the appeals process. Depending on the circumstances, the proceeding may involve a hearing or an on-the-record review, with the parties presenting evidence and arguments concerning the Medicare determination.
Can a healthcare provider appeal a Medicare audit decision?
Yes. Eligible providers, suppliers, beneficiaries, and other parties may have appeal rights after an initial Medicare determination. A provider can generally proceed through successive levels when the requirements for each stage are satisfied.
Can a Medicare audit lead to a fraud investigation?
Yes. Although many Medicare audits concern ordinary payment, coverage, coding, or documentation issues, information uncovered during an audit can potentially lead to further scrutiny when the government suspects intentional or systematic misconduct. The nature of the government’s allegations and evidence is critical to determining the appropriate response.
Protecting Your Practice During a Medicare Audit
A Medicare audit does not mean that a provider has committed fraud, and an unfavorable determination does not necessarily end the dispute. The Medicare appeals system provides multiple opportunities to challenge payment and coverage decisions, but each stage has its own requirements and deadlines.
The Law Offices of Art Kalantar represents California healthcare providers facing Medicare investigations, healthcare fraud allegations, and related criminal and regulatory matters. If your practice has received an unfavorable Medicare determination or an audit has raised concerns about potential fraud or abuse, contact the firm promptly to discuss your options and protect your rights throughout the process.
