WASHINGTON (CN) - Federal auditors are illegally "clawing back" hundreds of millions of Medicare dollars over minor patient treatment decisions, and getting a cut based on how much they can take back, the American Hospital Association claims in court.
Joining as plaintiffs with the American Hospital Association (AHA), which represents nearly 5,000 hospitals, are three individual hospitals and Trinity Health Corp., a Catholic chain that owns 35 hospitals and manages 12 more.
They sued Health and Human Services Secretary Kathleen Sebelius in Federal Court, claiming the arbitrary clawbacks violate federal law.
The hospitals say the Centers for Medicare & Medicaid Services hire Recovery Audit Contractors, (RACs), and give them free range to "overrule physicians' expert medical judgments long after the fact, determining that particular Medicare patients - patients whom they have never even seen - should not have been admitted to the hospital to receive inpatient care."
These auditors deny "hundreds of millions of dollars" in Medicare treatments, the hospitals say, and are paid a percentage of what they can grab.
"In the first quarter of 2012 alone, information provided to the AHA by hospitals shows that they were forced to repay $236 million for medically necessary items and services that RACS deemed should have been provided on an outpatient, rather than an inpatient, basis," the AHA says.
The hospitals claim the auditors make their arbitrary decisions months and sometimes years after the decision to admit the patent has been made.
"Prolonged uncertainty about whether Medicare will ultimately pay for the services previously provided wreaks havoc on hospital financial planning, including the ability to assess capital and staffing needs," the complaint states. "Both the uncertainty and the actual loss of Medicare funds ultimately may adversely affect patient care."
The AHA claims that Recovery Audit Contractors collected $1.86 billion in alleged overpayments from October 2009 through March 2012.
"Because RACs are paid on a contingent basis, they established their claim-review strategies to focus on high-dollar improper payments. One such high-dollar item is inpatient hospital care, which, depending on the care provided, can cost tens of thousands of dollars per patient," the AHA says.
The hospitals say the auditors keep 9 to 12.5 percent of the Medicare funds they can take back.
The hospitals say they can, and often do, successfully appeal an auditor's decision, but the appeals process costs hospitals hundreds of thousands of dollars per year.
Plaintiffs include Missouri Baptist Sullivan Hospital, Munson Medical Center in Michigan, and Lancaster General Hospital in Pennsylvania.
They claim the arbitrary denial of Medicare funds violates the Medicare Act and the Administrative Procedure Act.
They seek an order vacating the CMS' payment denial policy and reimbursements for the money wrongfully taken from them.
They are represented by Sheree Kanner, with Hogan Lovells.
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