Can You Challenge a Contractor’s Decision to Reopen a Claim?

A regulation states you may not appeal a decision by a contractor.

During a recent Monitor Monday broadcast, a listener questioned whether it is permissible to challenge the decision to reopen a claim during an audit. The listener’s question is an astute one that hearkens back to a troubling case we first reported when it came out back in 2012. 

In Palomar Medical Center v. Sebelius, the U.S. Ninth Circuit Court of Appeals concluded that a hospital could not challenge the contractor’s decision to reopen claims.  The issue is language in 42 CFR § 405.980, That regulation establishes three different limits on when a Medicare claim may be reopened. 

A contractor can reopen within a year of the initial determination for any reason, after one year until 48 months for good cause and after 48 months for fraud or similar fault. (This regulation forms the foundation for my advice that voluntary refunds need only go back 48 months unless you believe that there is “fraud or similar fault.” While the 60-day rule includes a six-year look-back, the 60-day rule only applies when there is an overpayment. If the government is not entitled to reopen the claims, there is no overpayment, and therefore no duty to refund.)

The regulation seems straightforward, and one would assume that if a contractor ignored the plain language, they would face rebuke from a court. But there is a sentence in the regulation that says you may not appeal a decision by a contractor, including a Qualified Independent Contractor (QIC), Administrative Law Judge (ALJ) or Medicare Administrative Contractor (MAC) on whether to reopen a claim and that the decision to reopen is “final.” The Court relied upon that language to conclude the hospital could not argue that the contractor lacked good cause and was prohibited from reopening the claim. 

In essence, the Court concluded that while a contractor must have the good cause, courts can’t review the contractor’s decision to ensure they exercise their judgment reasonably.  The decision concluded the courts lack authority to supervise the contractor’s decisions. That decision really bothered me when I read it in 2012 and it still bothers me today.

The idea that an agency can have a standard it must follow, but the courts lack authority to review the agency’s conduct is an affront to due process. The bottom line is that our listener is correct that an attempt to challenge a contractor’s decision to reopen claims may be rejected by the Court. 

But that doesn’t mean you should skip the appeals process.

The Palomar result seems terribly unfair. The good news is that there is a reason to think other courts may rule differently. As the U.S. Supreme Court revisits various administrative law principles it appears to be increasingly skeptical of past decisions that give considerable deference to agency decisions.

We should consistently challenge the idea that an agency, or, in this case, an agency contractor, can make decisions without any possibility of judicial review.

Programming Note:
Listen to healthcare attorney David Glaser every Monday on Monitor Monday, 10-10:30 a.m. ET.


David M. Glaser, Esq.

David M. Glaser is a shareholder in Fredrikson & Byron's Health Law Group. David assists clinics, hospitals, and other health care entities negotiate the maze of healthcare regulations, providing advice about risk management, reimbursement, and business planning issues. He has considerable experience in healthcare regulation and litigation, including compliance, criminal and civil fraud investigations, and reimbursement disputes. David's goal is to explain the government's enforcement position, and to analyze whether this position is supported by the law or represents government overreaching. David is a member of the RACmonitor editorial board and is a popular guest on Monitor Mondays.

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