Christopher Cheney | March 24, 2015
An appellate court ruling is a setback for federal officials in their effort to award a new round of contracts for Medicare’s Recovery Audit Program.
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.”
Reading the RAC Tea Leaves
Susan L. Smith, JD, a legal analyst at New York-based Wolters Kluwer Law & Business, says the US Court of Appeals ruling is a victory for CGI.
“Because the new payment terms are included in CMS’s proposed RAC contracts, it is likely that CMS will be required to rebid the contracts without those terms. Furthermore, CMS may be required to consider CGI in its renegotiations because the appellate court determined that CGI was a prospective bidder at the time it filed its complaint in the Court of Federal Claims,” Smith said this week.
Jackson also views this month’s court ruling as a win for CGI, but she says it is hard to predict how CMS will react to the decision. “If CGI had lost this appeal, they would have been out of contention for future contracts. How CMS moves forward depends on how the lower court handles it,” she said.
The timing of RAC contingency fee payments has little bearing on healthcare providers, Jackson says, noting that the level of the fees is more problematic. “We are continuing to press for fundamental reform of the RAC program and its financial incentives. We really don’t have an opinion on when the RACs get paid. We have an issue with RAC fees that range from 9.5% to 12% [of the Medicare payments recovered through RACs]. That’s really what’s driving their bad behavior.”
In addition to alleging overly zealous RAC clawbacks of Medicare payments, the AHA is critical of CMS’s efforts to keep hospitals informed about developments in the Recovery Audit Program, Jackson says.
“For hospitals, it’s really an issue of transparency. We want to have CMS clearly communicate how the new RAC contracts are going to work. We want a period of time so hospitals can ‘onboard’ with their new RACs. Hospitals have not been entirely aware of when the audits have started,” she said, noting a two-month hiatus in RAC auditing last summer while CMS struggled to come to grips with the CGI court case. “It’s been hard to have consistent and clear information coming from CMS.”
Source: Health Leaders Media
http://www.healthleadersmedia.com/page-2/HEP-314610/RAC-Court-Ruling-Deals-Blow-to-CMS