Court of appeals sides with CMS in reimbursement case

After struggling over a case involving a rehabilitation claim, a U.S. Court of Appeals has decided in favor of the Centers for Medicare & Medicaid Services’ recovery audit contractor program. The court ruled in September providers cannot challenge a RAC payment decision that is made several years later. 

Palomar Medical Center, based in Escondido, CA, provided inpatient rehabilitation services to a Medicare patient after he had a right total hip arthroplasty in 2005. Palomar was paid $7,993 for rehabilitation services given to the 79-year-old patient. 

Two years later, the RAC selected the Palomar claim for complex review and asked the center to provide the documentation to support the medical necessity of the patient’s stay. Palomar was never suspected of wrongdoing, but the RAC determined that Medicare should not cover the cost of the rehabilitation because services were done in the hospital rather than a less-expensive setting.

Palomar eventually filed suit against the Department of Health and Human Services, saying the RAC should not have reopened the claim without showing good cause. It argued a provider should be able to challenge the timeliness of a reopened claim. 

But the court ruled that reopening decisions are final. 

The American Medical Association was among the groups that filed an amicus brief on behalf of Palomar. Others have raised concerns over the authority of RACs and Zone Program Integrity Contractors, and the ability to challenge a payment.  

“The policy is not just for RACs,” noted Palomar attorney Ronald S. Connelly. “It applies to all contractors, including ZPICs.”

In its Sept. 11 decision, the U.S. Court of Appeals for the Ninth Circuit upheld the U.S. District Court for the Southern District of California’s earlier decision. While the court said it “was not unsympathetic” to Palomar, it said Congress “set the stage here by establishing the RAC program aimed at recouping excessive Medicare payments.” n