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CMS Changes Course on Rebilling RAC-Denied Claims

John Commins, for HealthLeaders Media, March 15, 2013

The federal government announced this week that it will change its contentious policy of flatly denying any reimbursements to hospitals that provide medically necessary care determined by auditors to have been delivered inappropriately in an inpatient setting.

The interim rule (PDF) is seen as a major victory for hospitals, which had claimed that the existing rule prevented them from collecting hundreds of millions of dollars in reimbursements. The American Hospital Association and four health systems claimed, in a suit filed last November, that the Centers for Medicare & Medicaid Services had 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.

"CMS has conceded that its current policy of refusing to reimburse hospitals for reasonable and necessary care when the only dispute is which setting, not whether care should have been delivered, is contrary to the law," AHA President/CEO Rich Umbdenstock said in prepared remarks. "That is a central issue in our lawsuit." 

Hospitals have long complained about the process that allows private recovery audit contractors to comb hospital records months and years after care is delivered to flag questionable payments.

Recovery Audit Contractors (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.

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