Tuesday, March 17, 2015

Appeals Court Holds Proposed RAC Contract Provision Violates Law

Dan Ciolek and Dianne De La Mare

The US Court of Appeals for the Federal Circuit has held that the Centers for Medicare & Medicaid Services’ (CMS) proposed contract provision prohibiting RACs from charging CMS a contingency fee for the claims they deny until the provider’s appeal of the denial has been decided at the 2nd level of the administrative appeals process, violates contracting requirements under the Federal Acquisition Regulations (FAR).

The Appeals Court sent the case back to the lower Court of Federal Claims, and CMS may be required to rebid the new RAC contracts without that specific provision.  CMS started to award new RAC contracts in 2014. Since the RAC program first started in 2008, CMS has paid RAC contingency fees for claims denied on review about 41 days after CMS sends a demand letter to the provider. The new proposed contracts had a provision that proposed that RACs would be paid after a provider’s challenge passed the 2nd level of appeal in the 5-level Medicare appeals process.

According to the RACs, paying the fee after the 2nd level of appeal would cause a significant financial hardship to the RAC and increase RAC payments from approximately 41 days to 120-420 days. One of the RACs (CGI) filed a protest against the new payment terms.

Now, because the Appeals Court has agreed with CGI’s protest, the future of Medicare’s RAC program continues to be caught up in uncertainty.

However, because the current RAC contracts were extended through the end of 2015, the recently resumed Part B therapy manual medical review (MMR) program continues, unless modified by Congressional action.

 To see a copy of the Appeals Court decision go to http://www.cafc.uscourts.gov/images/stories/opinions-orders/14-5143.Opinion.3-6-2015.1.PDF.

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