HHS reorganization raises questions for claims appeals process

Modern Healthcare – Wednesday, April 2, 2025
By Bridget Early 

The Health and Human Services Department is restructuring agencies that enforce regulation, handle claims disputes, and investigate potential civil rights violations as part of a department-wide reorganization.

A new assistant secretary for enforcement will oversee three parts of HHS — the Departmental Appeals Board, the Office of Medicare Hearings and Appeals and the Office of Civil Rights — as part of a sweeping overhaul announced last week. The new role raises questions about how HHS plans to handle billions of dollars in claims disputes and appeals resolutions, as well as how the offices will operate within the new structure. Healthcare attorneys are also watching for how HHS handles the operational elements of the reorganization, including staffing decisions and the chain of command at the affected offices.

HHS did not respond to a request for comment.

HHS’ overall reorganization, which includes thousands of layoffs, is drawing attention from Congress. The Senate Health, Education Labor and Pensions Committee asked HHS Secretary Robert F. Kennedy Jr. to discuss his plans with lawmakers at an April 10 hearing. Committee Chair Bill Cassidy (R-La.) said the hearing would give Kennedy a chance to explain the goals and structures behind the planned department reorganization.

Here’s what to know about how the new assistant secretary for enforcement fits into Kennedy’s overhaul of HHS.

How is HHS planning to restructure oversight and enforcement?

Kennedy announced the assistant secretary for enforcement will oversee three of the department’s existing branches, the Departmental Appeals Board, the Office of Medicare Hearings and Appeals and the Office of Civil Rights.

The new role is meant to combat waste, fraud and abuse, according to a March 27 fact sheet. HHS has not said whether the three offices will be combined into a new department, or whether each office will separately report to the new assistant secretary.

The HHS Office of Inspector General will not report to the assistant secretary for enforcement.

What areas will the new assistant secretary oversee?

The Office of Civil Rights has historically operated as both a regulator and an enforcer. The department is responsible for investigating potential violations of nondiscrimination or health privacy laws, including Section 1557 of the Affordable Care Act and the Health Insurance Portability and Accountability Act, or HIPAA.

The Office of Medicare Hearings and Appeals handles coverage and payments disputes from Medicare enrollees and providers. For instance, Medicare outpatient claims and Part D disputes are handled by the office after claim decisions have been reviewed by a qualified independent contractor.

The Departmental Appeals Board is responsible for managing coverage and payment disputes between the federal government and other players in the healthcare industry, such as providers, state payers and beneficiaries. It also helps mediate civil monetary penalties.

The Office of Medicare Hearings and Appeals and the Departmental Appeals Board have served as the third and fourth levels of a five-layer appeals process. Each level has been distinct and conducted independent reviews.

How might HHS’ oversight practices change?

Industry experts are watching to see how the new assistant secretary sets up staff and lays out new priorities.

Stakeholders are on the lookout for a potential new chain of command that could shed light on the department’s strategy. That includes who will fill key roles under the assistant secretary, especially if there are currently similar positions among the three offices, said Jeff Davis, health policy director at McDermott+ Consulting.

Some experts are also concerned having the agencies report to a political appointee could undercut their independence while handling billions of dollars’ worth of appealed claims and program disputes. Positions at the agencies have previously been filled by nonpolitical career staffers.

That makes the industry nervous, since disputes regarding massive programs, such as the Disproportionate Share Hospital formula and the 340B drug pricing program, would be adjudicated under this assistant secretary’s jurisdiction, one lobbyist said.

Medicare Conditions of Participation enforcement would also fall under this assistant secretary.

What are experts watching for around appeals?

Multiple healthcare attorneys said changes to the appeals process could slow down the speed with which providers can bring lawsuits against the federal government.

Complainants looking to make a case in court are required to exhaust all administrative solutions — and go through the entire dispute resolution process with HHS — before they have grounds to file a lawsuit.

If the departments responsible for handling claims disputes and other appeals are consolidated, the entire process could stagnate, potentially bringing back caseload backlogs that previously took years to resolve while also making it harder to file timely lawsuits.

What might the reorganization mean for the Office of Civil Rights?

The biggest question for the Office of Civil Rights is whether it will have enough staff to capably conduct investigations and bring enforcement actions when there’s a violation, said Robert Wanerman, an attorney and expert on regulatory policy with Epstein Becker Green.

Wanerman said he’s also watching to see how decisions from Office of Civil Rights hold up if they are appealed.

Attorneys are also looking to see whether the Office of Civil Rights will continue to exercise its regulatory authority on issues like health privacy and nondiscrimination, or whether the office will function solely as an oversight body.

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