The American Hospital Association (AHA) and four hospitals have filed suit against the Department of Health and Human Services, seeking to end what the plaintiffs call an “unlawful government practice.”
In the complaint, AHA and the hospitals claim that Medicare has refused to pay hospitals for hundreds of millions of dollars’ worth of care, despite that care being reasonable and medically necessary within the meaning of the Medicare Act. The plaintiffs allege that Recovery Audit Contractors (RACs) are partly to blame for this because of their practice of second-guessing treatment decisions. Specifically, RACs target the “provision of service on an inpatient basis when, according to the RACs, only outpatient treatment was necessary.”
Despite being overturned 75 percent of the time, CMS follows RAC findings and requires hospitals to repay an entire Part A payment upon a RAC determination that the inpatient care should have been provided as outpatient care under Part B. Furthermore, CMS takes the position that Part B payment is not permitted after a Part A payment denial. In the end, this can result in millions of dollars in uncompensated care. For example, Michigan-based plaintiff Munson Medical Center has repaid $6.485 million as a result of RAC payment denials since 2007.
The plaintiffs claim CMS’s payment denial policy violates the Administrative Procedure Act because it is arbitrary and capricious. They are asking the court to declare it invalid and reimburse hospitals that have been denied in the past.
Providers and advocacy groups aren’t the only parties taking issue with the RAC program. Four Congressman recently introduced The Medicare Audit Improvement Act, a piece of bipartisan legislation that would limit the power of RACs and impose certain guidelines of their operations.
The bill – H.R. 6575 – would guarantee a measure of protection for providers that undergo investigation for Medicare fraud by: 1) limiting the number of document requests and RAC can make; 2) penalizing RACs for not conforming to stricter guidelines; 3) requiring greater transparency in the audit process; and 4) requiring third-party validation of a payment denial based on medical necessity.Back to news