CMS Still Off the RAC: Litigation Forces More Delays in Awarding New Recovery Auditor Contracts

by Mike Gentine, Fotheringill & Wade, LLC

Medicare’s contracts with its most infamous post-payment review arm – the Recovery Audit Contractors – expired earlier this year, and CMS intended to award new contracts promptly to keep the work flowing. However, two current RACs – HealthDataInsights and CGI Federal – asked the Government Accountability Office to force CMS to re-structure the proposed contracts because of what the RACs contended were commercially unfeasible terms (namely, the new contracts could delay payments to RACs substantially).

The GAO denied the protests, giving its blessing to CMS’ proposals, but CGI kept up the fight, filing suit in the Court of Federal Claims in April. After months of motions and arguments – during which time CMS pledged not to award the contracts – the court ruled against CGI (the case is under seal, so we do not have access to the court’s opinion, only its order). That loss did not stop CGI.

CGI will appeal the court’s decision to the Court of Appeals for the Federal Circuit (one step short of the Supreme Court), and the Federal Circuit’s docket suggests there will not be a final decision there until Summer of 2015, at the earliest. Moreover, CGI successfully persuaded the claims court to issue an injunction forbidding CMS from awarding the contracts until the appeals court makes its ruling.

What does the delay in getting new RACs mean for healthcare providers?

Because of the previous delays, CMS had already extended, in limited fashion, the contracts and the work of the current RACs. CMS is almost certain to do so again, and perhaps with a broader scope given how far away the new contracts likely are. The bad news for providers is that the extended contracts will not feature any of the RAC program improvements CMS has proposed. The other bad news is that, even with the moratorium on inpatient status reviews keeping those claims out of RACs’ hands for another six months, “there will be plenty of claims for contractors to audit,” as the government pointed out in its attempt to block CGI’s request for an injunction.

Particularly with no definite end date on the calendar, CMS’ future extension(s) of the current RAC contracts will likely still be limited to designated issue areas, rather than the more sweeping approach hospitals are all too familiar with. But the show will go on, and, once the new contracts are finally awarded, the eventual contractors – whose bids will have been sitting for two years or more – may try to make up for lost time. So, even if the contract delays and the moratorium mean RAC is a shadow of its former self right now, hospitals should not be lulled into a false sense of security. Providers should keep in place the resources necessary to ensure compliance and timely appeals for inappropriately denied claims.