RAC Court Ruling Deals Blow to CMS

A US Court of Appeals ruling earlier this month that invalidates a provision of Medicare’s 2014 Recovery Audit Program contracts is the latest setback for federal officials who administer the program.

The 2014 contracts were slated to be awarded last year, but a series of challenges from Recovery Audit Contractors (RACs) has delayed the rollout of the new contracts. In the meantime, the Centers for Medicare & Medicaid Services has temporarily extended the original round of RAC contracts awarded in 2008.

“It’s the ongoing saga of the RAC contracts,” says Melissa Jackson, senior associate director of policy at the Chicago-based American Hospital Association.

In April 2014, one of the inaugural RAC contractors, Fairfax, VA-based CGI Federal Inc., filed a lawsuit against the government in the US Court of Federal Claims. CGI asserted a payment provision of the 2014 Recovery Audit Program contracts violates federal law.

CGI objected to a change in the timing of payment for contingency fees that RAC contractors receive when audits of healthcare providers reveal over payments from Medicare. Specifically, the original Recovery Audit Program contracts require Medicare to pay RAC contingency fees after the first level of appeal, which takes about 120 days. The 2014 Recovery Audit Program contracts set the timing of RAC contingency fee payment after the second level of appeal, which can take more than 400 days.

In August 2014, the US Court of Federal Claims ruled in favor of the government, and CGI appealed the case to the US Court of Appeals for the Federal Circuit.

On March 10, the US Court of Appeals reversed the lower court’s decision. The appellate court decided that the change in payment terms violates federal contract law; specifically, the 2014 Recovery Audit Program contracts ran afoul of a prohibition against terms inconsistent with customary commercial practices. The case was remanded to the US Court of Federal Claims.

This week, CGI and CMS offered brief comments on the Court of Appeals ruling.

“We are pleased at the court’s decision to recognize our position against the new payment terms proposed for Medicare recovery auditors. [The appellate court’s] ruling encourages private sector participation in a vital government initiative to identify and recover improper payments for the Medicare program,” said Linda Odorisio, vice president for global communications at CGI.

A CMS spokesman provided the following comment: “CMS is reviewing the court’s decision related to Recovery Audit contingency fees, but cannot comment at this time on the decision or next steps in this process.”

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Photo courtesy of: Health Leaders Media

Originally published on: Health Leaders Media