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A federal appeals court last week ruled that the Centers for Medicare & Medicaid Services violated federal contracting regulations when it stretched out payment terms for recovery audit contractors.

CGI Federal Inc. took issue last year with CMS delaying RAC payments for up to 420 days on appealed claims, according to Bloomberg News Services.

The firm, one of the original RAC firms when the program began in 2008, complained that the agency’s request for quotes on five new RAC contracts required contractors to wait until after providers passed the second level of administrative appeals (between 120 and 420 days after an overpayment notice) before invoicing CMS for a contingency payment.

The U.S. Court of Appeals for the Federal Circuit on March 10 held that CMS’s decision to extend payment terms was inconsistent with “customary commercial practice” and was in violation of “FAR” rules (or Federal Acquisition Regulations).