Hospital lawsuit against RAC goes before district court

A California-based health system has objected to a magistrate judge's finding that the hospital does not have the right to challenge a Medicare auditor's review.

Under federal regulations, a Medicare recovery audit contractor must have good cause for reopening claims that are more than a year old, according to Arnall Golden Gregory LLP, an Atlanta-based law firm that represents health care professionals and facilities in Medicare payment disputes with the government. RACs comb through past Medicare claims from hospitals, physicians and others to identify instances in which the government paid too much or approved claims inappropriately. See correction

Palomar Medical Center, which is based in Escondido, Calif., filed suit against the Dept. of Health and Human Services last year in the U.S. District Court of the Southern District of California. The move followed several rounds of administrative appeals of a RAC decision to reopen a Medicare claim 20 months after the initial payment. But a magistrate judge recommended in a new report that HHS is correct in determining that a decision to reopen a claim is not subject to appeal, regardless of whether a good reason is given for the audit.

Palomar on May 26 filed an objection to that report. Palomar Medical Center v. Sebelius is now pending before the district court, which will consider the hospital's motion for summary judgment.

The Centers for Medicare & Medicaid Services launched the national RAC program in two stages, with operations starting in 24 states on March 1, 2009, and in the remaining states after August 2009. The Obama administration announced earlier this year that it wanted to expand the scope of the RACs, but physician organizations have expressed concerns about the bureaucratic hassles that can arise for practices when auditors probe them for alleged overpayments.

The Government Accountability Office published a report in March concluding that CMS had not established an adequate process to address payment system problems uncovered by the contractors. CMS had said RACs were established not only to return overpayments to the government, but to highlight common billing errors and other widespread Medicare payment issues that need fixing.