Appeals court invalidates CMS contract with RACs

It may be back to square one in the Centers for Medicare & Medicaid Services' (CMS) bid to create new pacts with recovery audit contractors (RACs).

The U.S. Court of Federal Appeals has invalidated the current proposed contract with RACs, primarily due to their violation of U.S. acquisition regulations.

The violation is based on a provision in the contract that would not allow RACs to collect contingency fees for their work until a clawback that has been appealed by a hospital reaches the second of a five-stage appeals process. The court ruled that that provision violates customary commercial practices.

Under the original pact, RACs are allowed to collect their fees about six weeks after CMS sends a demand letter to a provider to refund a claim that's been rejected on review. Under the proposed scenario, the RACs would have to wait at least 120 days, and as long as 420 days or about 14 months.

CGI Federal, a RAC contractor, sued last year to block that provision and has since prevailed on appeal.

Although RACs have been successful in clawing back billions of dollars a year in inappropriate Medicare billings from hospitals, the program has been beset by woes in recent years. Many members of the hospital community have complained that the process for denying claims is overly cumbersome. The appeals process regarding a denied claim can now take years to adjudicate in federal administrative court.

As a result of the court decision, CMS may have to renegotiate the contracts with RACs with that particular provision omitted, according to AHA News Now.

To learn more:
- here's the ruling (.pdf)
- read the AHA News Now article

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