• Federal District Court Adopts Magistrate’s Ruling that RAC Properly Reopened Initial Determination
  • August 31, 2010 | Author: J. Austin A. Broussard
  • Law Firm: King & Spalding LLP - Atlanta Office
  • On August 16, 2010, the United States District Court for the Middle District of Florida adopted the report of a magistrate judge which found that Recovery Audit Contractor (RAC) HealthDataInsights (HDI) properly reopened and determined that Medicare overpaid Mease Hospital $1,645 in 2003 for a claim that was not medically necessary.  Mease argued that the process for reopening the payment determination was administratively faulty and that it violated the Fifth Amendment’s Due Process Clause.

    As part of the Medicare Prescription Drug, Improvement, and Modernization Act’s RAC Demonstration Program, HDI performed an automated review of Mease’s Medicare claims and requested records regarding treatment of the beneficiary at issue.  After review, HDI issued a revised determination finding that the inpatient services rendered by Mease were not medically necessary and therefore improperly billed to Medicare.

    Regulations promulgated by the Secretary of the Department of Health and Human Services (HHS) allow government contractors like RACs to reopen and revise initial determinations of payments.  See 42 U.S.C. § 1395ff(b)(1)(G); 42 C.F.R. § 405.980.  According to the regulations, a contractor may reopen an initial determination or redetermination on its own motion within one year for any reason and within four years for “good cause.”  42 C.F.R. § 405.980(b)(1)-(2).  These regulations also indicate that the “decision on whether to reopen is binding and not subject to appeal.”  Id. at § 405.980(a)(5).

    After appealing HDI’s determination that Medicare payment was improper through the Qualified Independent Contractor (QIC), Administrative Law Judge (ALJ), and Medicare Appeals Council (MAC) levels of appeal, Mease argued before a magistrate judge serving the Middle District of Florida that HDI did not have good cause to reopen the original determination, federal law did not prohibit administrative review of whether HDI had good cause, and that the Secretary’s interpretation prohibiting administrative review with respect to the good cause issue was improper and entitled to no deference.  Additionally, Mease argued that the reopening of the original payment determination violated its due process rights under the Fifth Amendment.  The magistrate’s report, which the Middle District of Florida adopted, found against Mease on each of these points.

    The court found that the regulations clearly indicated that the decision to reopen was not subject to review during the administrative appeal process and that the Secretary had consistently offered this interpretation throughout the promulgation of the regulations; therefore, the Secretary’s interpretation was due substantial deference.  The court also rejected Mease’s argument in the alternative that the Secretary’s refusal to review whether HDI had good cause to reopen and revise the initial determination deprived Mease of constitutional due process.  Because Mease could not demonstrate a property interest in the payment to which it was admittedly not entitled under Medicare rules, the court did not find that the Secretary’s interpretation of the regulations was unconstitutional.

    In its conclusion, the court emphasized that the regulations do not prohibit a provider like Mease from pursuing administrative or judicial review for unfavorable substantive decisions, even though providers may not challenge the ministerial decision to reopen, including the underlying finding of good cause.