AHA's fight over RAC backlog gets new life from appeals court

A federal appeals court has revived a lawsuit brought by the American Hospital Association, which centers on the controversial Recovery Audit Contractor program.

The RAC program's mission is to correct improper Medicare payments by identifying and collecting over- and-underpayments. Healthcare providers have the option of appealing recovery auditors' findings, and HHS' Office of Medicare Hearings and Appeals administers hearings concerning denied Medicare claims. Claim denials that reach the third level (of five possible levels) of the appeals process are brought before administrative law judges (ALJs), who issue decisions regarding coverage determinations.

Due to a backlog in RAC appeals, OMHA announced a temporary suspension of most new requests for ALJ hearings concerning payment denials in December 2013. In May 2014, the AHA, Baxter Regional Medical Center in Mountain Home, Ark., Knoxville, Tenn.-based Covenant Health and Rutland (Vt.) Regional Medical Center filed suit concerning the backlog. They brought the matter to compel HHS to meet the statutory deadlines for ALJ review of Medicare claim denials.

The AHA and hospitals' legal claims were dismissed in 2014, but the U.S. Court of Appeals for the District of Columbia reversed the dismissal on Tuesday.

The appeals court remanded the case to the lower court, and instructed the court to "consider the problem as it now stands — worse, not better." As of February 2015, the decisions ALJs were releasing had been pending on average 572 days.

The AHA is pleased with the outcome of the appeal. "Today's decision confirms that the agency [HHS] has a clear duty to comply with the congressionally mandated deadlines…," said Melinda Hatton, AHA senior vice president and general counsel. "And, it refutes attempts by the agency to excuse compliance because of the Recovery Audit Contractor program, noting that congressional mandates trump discretionary decisions."

More articles on healthcare industry lawsuits:

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Federal appeals court: Hospitals can be 'rural' and 'urban' at the same time

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