Payment Matters: RACs Unleashed: 9th Circuit's Palomar Decision Gives Even More Discretion to Medicare Contractors


In Palomar v. Sebelius, D.C. No. 3:09-cv-00605-BEN-NLS (Sept. 11, 2012), the United States Court of Appeals for the Ninth Circuit held that a decision by a Recovery Audit Contractor (RAC) to reopen a Medicare claim for complex review was not reviewable. Providers already confronting a variety of challenges served up by Medicare contractors, will unfortunately find that the Palomar decision offers fresh cause for concern.

The Palomar case concerned a RAC's determination that services provided to a Medicare beneficiary were not reasonable and necessary. The claim in question was more than one year old, and so could only be reopened for "good cause" under Medicare regulations. All of the reviewing bodies that examined the case concurred with the RAC's determination regarding medical necessity. However, the administrative law judge (ALJ) who reviewed the RAC determination concluded that there was not good cause to reopen the claim, and therefore reversed the RAC. On appeal, the Medicare Appeals Council (MAC) reversed the ALJ and ruled that the Medicare regulation at 42 C.F.R. § 405.980(a)(5) makes a Medicare contractor's decision to reopen a claim unreviewable.

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