3 Hospitals, AHA Sue HHS Over RAC Appeals
By Christine Kern, contributing writer
One facility can't afford to replace the roof over their surgery department or buy new beds for their intensive-care unit because so much money is tied up in Medicare RAC appeals.
Yet another suit has been brought against the HHS. This time, three hospital systems and the American Hospital Association (AHA) have joined together in a federal lawsuit against HHS asking a judge to force the agency to meet its statutory requirement to decide Medicare-payment appeals within 90 days instead of the current average of 16 months.
Administrators at Baxter Regional Hospital in Mountain Home, AR, say that so much money is tied up in endless Medicare RAC appeals that they can't afford to replace the roof over their surgery department or buy new beds for their intensive-care unit. Baxter joined two other hospital-care providers and the American Hospital Association in the suit – AHA v. Sebelius – filed in U.S. District Court in Washington. The other plaintiffs are seven-hospital Covenant Health, Knoxville, TN; and 139-bed Rutland (VA) Medical Center.
Baxter, a 209-bed hospital in northern Arkansas, has been left in dire financial straits as a result of the Medicare payments. It says in the lawsuit that it has $4.6 million in claims tied up in various stages of the appeals process. The not-for-profit hospital's tax forms say the organization had $2.3 million left in the bank in 2012 after paying all of its expenses. Baxter got about 47 percent of its total revenue from Medicare that year.
“The delays in the appeals process have had a crippling effect on Baxter's cash flow,” according to the lawsuit. “Funds tied up in appeals are funds that cannot be used to meet Baxter's essential needs.”
Some hospitals could wait up to five years to get decisions on routine payments because of a massive backlog in the appeals process that has been created by the aggressive post-payment review program known as recovery auditing. That's due in part to HHS' administrative law judges announcing a two-year moratorium on docketing new Medicare appeals for hospitals.
There has been much frustration from the medical community and legislators over the new RAC appeals process and its inability to process claims efficiently. The four recovery auditing companies argue that they have saved the Medicare trust fund billions of dollars through audits since they started working nationwide in 2010.
Hospitals challenge the work of the RACs, however, complaining that the companies are retroactively overturning physicians' medical decisions, particularly in cases where patients are admitted for expensive inpatient care and auditors deny payment because those cases should have been in cheaper outpatient settings. The controversial “Two-Midnight Rule” has caused some of this chaos.
Hospitals argue that the auditors see those denials as particularly lucrative because they get to keep between 9 percent and 12 percent of the reclaimed Medicare money, thus creating incentive for auditors to deny claims.
Although the auditing program has resulted in a gigantic spike in appeals that has delayed timely decisions, hospitals continue to appeal because they say they win 72 percent of the cases that make it to HHS' administrative courts.
In 2009, before the national launch of the RAC program, HHS' administrative courts received 35,831 appeals of Medicare payment decisions. For 2013, that number jumped to 384,651, according to statistics from HHS.
“Part of our argument is that these delays are creating significant financial difficulties for facilities,” AHA Assistant General Counsel Lawrence Hughes said is quoted as saying by Modern Healthcare.