Doctors can’t challenge Medicare audits, appeals court rules

The decision prevents physicians from fighting recovery audit contractors over the reopening of old Medicare claims.

By — Posted Sept. 10, 2012

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Health professionals cannot challenge auditors’ decisions to review Medicare claims that are more than a year old, the 9th U.S. Circuit Court of Appeals has ruled. Federal rules do not allow an administrative or judicial remedy through which doctors can fight the reopening of such cases, the court said.

The ruling is harmful to physicians, who must accept audits without being afforded the opportunity to question the reasoning behind reopening old claims, said Long X. Do, legal counsel for the California Medical Assn. The CMA joined a friend-of-the-court brief in support of Palomar Medical Center, the plaintiff in the case.

“Any audit is going to be very disruptive to a physician’s practice,” Do said. “The longer the audit goes back, the more burdensome it is on physicians. & The court has upheld the ability of the auditor to [reopen claims] without being subject to physicians’ challenges.”

The case involves a 2009 lawsuit brought by Escondido, Calif.-based Palomar Medical Center against the Dept. of Health and Human Services. Palomar challenged auditors’ reopening of a claim 20 months after initial payment. After a review, recovery audit contractors determined Palomar was overpaid for the claim because the medical services were determined to be “not reasonable and necessary,” according to court documents.

Palomar went through several rounds of administrative appeals to fight the determination and to argue that auditors never had the right to reopen the claim. Under Medicare regulations, recovery audit contractors can review a claim for any reason if it is less than a year old. If the claim is more than a year old and less than four years old, the auditors must have good cause to reopen the claim. After four years, there must be clear evidence of fraud to revisit the claim.

An administrative law judge found that Palomar was overpaid for the medical services, but the judge said the RAC had not demonstrated good cause to examine the claim. However, HHS argued the reopening of a claim deemed to have good cause was not subject to appeal. The administrative law decision was overturned by a Centers for Medicare & Medicaid Services administrator. CMS said Medicare regulations prevent medical professionals from challenging an audit’s good-cause determination.

Palomar appealed, saying health professionals should be able to fight the reopening of a claim either by administrative action or in court. A district court ruled for HHS in 2010, and Palomar again appealed.

The Litigation Center of the American Medical Association and the State Medical Societies, along with the CMA and eight other state medical societies, issued two briefs in support of Palomar. Physicians should be protected from arbitrary and unreasonable efforts to recover payments for services provided long before initiation of the recovery action, the briefs said. The AMA and others have criticized the actions of RACs hired by Medicare to find past overpayments, saying the auditors act as “bounty hunters” that cause administrative headaches for practices even if the reviews don’t uncover any evidence of overpayment.

In its Aug. 22 decision, the appeals court said the issue was difficult to resolve because of competing principles. On the one hand, Congress sought to establish an effective recovery audit program to reduce Medicare overpayments, the court said. On the other hand, medical professionals have a legitimate interest in the finality of claim determinations.

“However, in view of the goals of the RAC program, and the secretary’s regulations stating that decisions to reopen are ‘final’ and ‘not appealable,’ we hold that the issue of good cause for reopening cannot be raised after an audit’s conclusion and the revision of a paid claim for medical services,” the judges said.

At this article’s deadline, Palomar had not made a decision about whether to appeal the ruling to the U.S. Supreme Court.

Doctors may need Congress to step in

The appeals decision is the latest in an ongoing battle between physicians and CMS over determining reasonable standards for Medicare audits. The AMA and other physician organizations recently voiced opposition to new requirements on doctors related to potential Medicare overpayments. According to the rules, physicians would be required to retain up to 10 years of medical records to review if they determine at a later date that they had received excess pay. Practices also would be required to return any identified overpayments within 60 days of discovery.

More than 100 organizations, including the AMA, sent an April 16 letter to acting CMS Administrator Marilyn Tavenner, calling on the agency to make necessary changes before that proposal is finalized. The letter called the proposed requirements “impossible, unworkable and unattainable.”

Dick Semerdjian, an attorney for Palomar, said the 9th Circuit ruling is a disappointing development for all health professionals who provide Medicare services.

“Medical providers are in a tough position because now they lack the ability to appeal the reopening” of a claim, he said. “That’s going to affect not just medical centers, but all medical providers.”

At this article’s deadline, CMS and HHS had not returned messages seeking comment on the ruling.

Semerdjian said a possible next step is asking lawmakers to amend the rules on Medicare claims audits. “It’s time to go to Congress and see if the law can be modified, wherein there would be a due process provision to allow a medical provider to appeal and contest the reopening” of a claim, he said.

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Case at a glance

Can doctors challenge auditors reopening Medicare claims that are more than a year old?

The 9th U.S. Circuit Court of Appeals says no. Federal rules do not allow an administrative or judicial remedy for doctors to fight such decisions, the court said.

Impact: The ruling means that physicians cannot challenge Medicare audits, regardless of whether the doctors believe auditors have demonstrated good cause.

Palomar Medical Center v. Kathleen Sebelius, Secretary of Health and Human Services, 9th U.S. Circuit Court of Appeals, Aug. 22

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