RAC contract provision would violate federal law, appeals court rules

The Centers for Medicare & Medicaid Services’ proposed new contracts for Medicare recovery audit contractors violate contracting requirements under the Federal Acquisition Regulations, the U.S Court of Appeals for the Federal Circuit ruled this week. That’s because the contracts would prohibit RACs from charging CMS a contingency fee for the reviewed claims they deny until the provider’s appeal of the denials are decided at the second level of the administrative appeals process, a provision the court deemed inconsistent with FAR requirements limiting terms to those consistent with customary commercial practices. The court remanded the case to the Court of Federal Claims for proceedings consistent with its decision, and CMS may be required to rebid the new RAC contracts without the provision. RACs currently receive contingency fees for claims denied on review about 41 days after CMS sends a demand letter to the provider. Paying the fee after second-level appeals would delay it to 120-420 days after the demand letter.