The U.S. Court of Federal Claims blocked the Centers for Medicare and Medicaid Services (CMS) from awarding new Recovery Audit Contractor (RAC) contracts pending a court appeal filed on August 22, 2014, by CGI Federal (CGI), one of the prospective bidders for the contracts.
CGI – a current RAC with a not-so-sterling record as such, and also the contractor behind the epic FAIL known as healthcare.gov – protested the terms set forth in three of the new RAC contract bids. CGI’s protest contends that CMS violated federal procurement law by delaying payments to the RACs beyond fair and usual practices. According to CGI, the new RAC contracts will make RACs wait up to 10 times longer for payments than under the current contracts. The Court found that the delay was a total of just 80 days longer, however (120 days instead of 40 days under the original contracts), and disagreed with CGI on that, which (to this writer) appears to be the major point of contention.
The court order by Judge Mary Ellen Coster Williams prevents CMS from awarding three of the five RAC contracts until the appeal has been resolved. Meanwhile, it is considered unlikely that CMS will award any contracts for the other RAC contracts while the others are in dispute. This action by the court, however, is considered to be fairly unusual, considering that the court ruled in CMS’ favor on the merits of the case, and the Federal Circuit is not very likely to overturn the decision.
The Court said CGI failed to demonstrate that the agency’s inclusion of payment terms inconsistent with customary commercial practice was arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law.
CGI attempted to argue that “the public will suffer irreparable harm” if CMS proceeds with the award of, or performance under the new contracts, as written. At the same time, they argued that CMS would suffer no harm if the stay was granted while CGI’s appeal was being considered. By granting the stay, the Court apparently allows that such a delay will at least not harm the public.
Where’s the Beef?
The original RAC program allowed the RACs to get paid after recoupment, which could happen prior to any appeal process beginning, much less be adjudicated.
However, on June 25, 2013, the CMS tried to modify the existing RAC contracts, adding terms requiring RACs to wait to invoice until the denied claims went through the second level of appeal, which is a review by the Qualified Independent Contractor (QIC). CMS also required the RACs to create a reserve fund, to be used to repay CMS any contingency fees related to denials overturned on appeal. Evidently, CMS never created a process in the original RAC contracts to handle such scenarios occurring after the RAC contracts expired. This was suddenly a big deal, since there are over 300,000 appeals in the queue, and nothing in place to insure that CMS could get back the fees already paid out to RACs for denials that might be overturned, years later.
The four original RACs all balked at the new terms, although all agreed to some changes after negotiations with CMS. Apparently, the modifications finally at least included some means to insure that the RACs would pay back any fees related to denials later overturned by appeal, even beyond the expiration of the RAC contracts.initially rejected the proposed changes, but ultimately entered into contract modifications after negotiations.
New proposed contracts were sent out for bid by CMS in January 2014, including virtually the same terms previously proposed by CMS last June: the RACs could not invoice until the denials survived the QIC level of appeal, which would be 80 days longer than RACs had to wait under the previous contracts.
Before bidding closed, CGI and HDI filed pre-award bid protests at the Government Accountability Office (GAO). The GAO soon denied the bid protests, noting that the main basis of the protests, a 120 day wait instead of 40 days, was not significant reason to halt the bidding.
Evidently, the Court is of the same opinion.