The American Hospital Association and four health systems are suing the federal government for allegedly refusing to pay for "hundreds of millions of dollars for necessary care" in Medicare claims that were flagged by private contract auditors.
The suit, filed Thursday in U.S. District Court in Washington, D.C., claims that the Centers for Medicare & Medicaid Services has violated the Medicare Act by declining to reimburse the audited claims of hospitals, even though the claims were ultimately acknowledged by CMS to be reasonable and medically necessary.
AHA President and CEO Rich Umbdenstock said in an interview Thursday that the suit was prompted by "member frustration with the policy and with the hit they take after these medically necessary services have been provided."
"We pointed this out to CMS and have been in conversation with them, but we were not able to get a resolution," Umbdenstock said.
At the center of the conflict are the private recovery audit contractors that comb hospital records months and years after care is delivered to flag questionable payments. RACs, which are paid a percentage of the money they recover from hospitals and other providers, often retroactively determine that procedures billed as inpatient hospital care under Medicare Part A should instead have been delivered as an outpatient procedure under Medicare Part B.