On September 11, 2012, the Ninth Circuit held that a provider is not entitled to challenge a Medicare Recovery Audit Contractor’s (RAC’s) determination to reopen a claim during its appeal of a revised determination, even if the RAC is unable to demonstrate good cause for the reopening. (Palomar Medical Center v. Sebelius, 9th Cir., No. 10-56529, Sept. 11, 2012). The court reasoned that 42 C.F.R. § 405.980(a)(5) specifically states that the “contractor’s, QIC’s, ALJ’s, or MAC’s decision on whether to reopen is binding and not subject to appeal.” Additionally, the court pointed to 42 C.F.R. § 405.926(l) to further support its decision that a provider is not entitled to challenge a RAC’s reopening decision. 42 C.F.R. § 405.926(l) provides that “[a] contractor’s, QIC’s, ALJ’s, or MAC’s determination or decision to reopen or not to reopen” is “not [an] initial determination[] and [is] not appealable.” The court agreed with the Secretary’s interpretation that a contractor’s decision to reopen a claim may not “be challenged at any time for any reason,” as the court found this interpretation to be the “most natural reading of the regulations.”

42 C.F.R. § 405.980 provides that a “contractor may reopen and revise its initial determination or redetermination on its own motion . . . [w]ithin 4 years from the date of the initial determination or redetermination for good cause as defined in § 405.986.” A revised initial determination issued after a reopening is appealable. See 42 C.F.R. § 405.984. Palomar contended that while a reopening decision may not be challenged immediately after the reopening, a Medicare provider was entitled to challenge a revised determination based on lack of good cause for the reopening. Although the court held that a Medicare provider could not challenge whether a RAC had “good cause” to reopen in its appeal of the revised determination, the court noted that this was not an easy question because of the following two competing principles: (1) “Congress wanted an effective recovery audit program to reduce Medicare payments with resulting benefits for Medicare beneficiaries and taxpayers, under procedures set by the Secretary,” and (2) “the provider has a legitimate interest in finality of determinations on its revenue for medical services.”

In holding that the issue of good cause is not appealable, the court reasoned “that if good cause for reopening could be raised on appeal after a revised determination, this would result in inefficiency in any case where ‘good cause’ was later rejected, because all of the evidence and proceedings on the merits of medical necessity would be wasted.” Accordingly, the court concluded that “the regulations mean what they say: reopening decisions are final, and final means they cannot be challenged after an audit and revised determination.”

To view the Ninth Circuit decision click here.