A San Diego health system has filed a complaint in federal court, challenging procedures used by Medicares recovery audit contractors to reopen claims.
The controversial audit program pays incentive fees to third-party auditors of Medicare reimbursement. The suit, which was filed by two-hospital Palomar Pomerado Health against HHS, alleges that RAC contractor PRG-Schultz International unlawfully reopened a claim by Palomar during the CMS RAC demonstration project without showing good cause for the reopening as required by Medicare regulations.
Medicare regulations require that RAC contractors show good cause for reopening and reviewing claims between one and four years after payment. Atlanta-based PRG-Schultz, which administered RAC audits for California during the demonstration project, had a reputation for denying a large portion of the Medicare inpatient rehabilitation claims it reviewed in the state.
The lawsuit also alleges that the Medicare Appeals Council was incorrect in its 2008 ruling that administrative law judges do not have jurisdiction to decide whether a claim was reopened lawfully. The complaint was filed in U.S. District Court in San Diego with the support of the Fund for Access to Inpatient Rehabilitation or FAIR Fund, a legal defense fund made up primarily of inpatient rehabilitation hospitals and units.
The CMS is in the process of implementing a permanent RAC program, in which PRG-Schultz is a subcontractor.