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U.S. Court of Appeals Keeps the CMS RAC Program in Limbo

By Ronald W. Chapman

Bad news for the CMS “recovery audit contractor” (RAC) program started in 2008, but potentially good news for health care providers. The RAC program was started in 2008 with the intent of unleashing independent audits of health care providers in hopes of recovering billions of fraud and overpayments. CMS signed contracts with four federal contractors: CGI Federal, Connolly, HealthDataInsights and Performant Recovery.

The contractors are authorized to perform independent audits and receive a specific performance fee and a contingent fee when the funds are collected. Typically the funds are collected from providers within 41 days after demand is made. The trouble started when CMS renewed the contracts in 2014. In lieu of going through the more formal request-for-proposal (RFP) format of federal contracting, CMS decided to go through the commercial bidding process (RFQ) and change the payment terms. CMS’ new terms authorized payment to the RAC auditor after the provider completed the second level of a five level appeal process. This delays payments to RAC auditors by as much as a year.

CGI objected and filed a federal lawsuit in the U. S. Court of Claims. CGI argued CMS’ current policy changes, including the moratorium on auditing hospital short stays (23 hours or less), is costing taxpayers billions in unrecovered overpayments. CGI also argued CMS could not change the payment method unless they issued an RFP and restarted the more formal process. The U.S. Court of Appeals for the Federal Circuit on March 10, 2015 agreed with CGI and held “we conclude the FAR part 12’s proscription against terms inconsistent with customary commercial practice applies to the 2014 RFQ and therefore that the FRQs violate that proscription.” The Appellate court sent the case back to the federal court of claims to implement the decision.

As a result of the challenge and court decision, the RAC program is in limbo. This may be good news for providers. The practical effect of the uncertainty is that 2014 saw the lowest dollar volume of recovery payments since the program started.

If you are involved in a RAC audit, are considering a voluntary self-audit, received a letter from a RAC auditor, Office of Inspector General (OIG) or Center for Medicare Services (CMS), you should contact competent legal counsel. Chapman Law Group is available to discuss these issues and assist you in preparing a proper defense.

Chapman Law Group (CLG) is a professional health care law litigation firm, with offices in Michigan and Florida. For over 25 years CLG has defended the rights of health care professionals, providers and corporations involved in the delivery of health care at all levels. We believe the dedicated men and women who provide health care deserve an exceptional defense when their integrity and actions are called into question.

Ronald W. Chapman is the founder and shareholder of CLG. For 30 years Ron has focused his practice in the defense of health care providers of all levels including correctional law, civil rights law, medical malpractice defense, and health care administrative law at the state and federal level in Michigan and Florida.