What’s Wrong with the RAC’s Contingent Fees? – Part 2

In Part 1 of this post, I provided a brief history of the evolution of the Medicare and Medicaid RAC programs and highlighted provider concerns with the contingent fee part of the program. In this post, I will discuss why I believe that the contingent fee process developed by CMS does not comply with the Fifth Amendment to the United States Constitution and why, if this argument is presented in a proper case, there is a significant possibility that a Federal Court will issue an injunction stopping the program and order the return of the money paid to CMS in response to RAC demands.

The Fifth Amendment to the United States Constitution

Among other protections afforded by the Fifth Amendment to the United States Constitution is the guarantee that the Federal Government may not deprive any person of life, liberty, or property, without due process of law. A basic tenet of due process is conceptualized in the Latin phrase “nemo iudex in causa sua” which translates to “no one should be a judge in his own cause.”

The United States Supreme Court has considered on a number of occasions the circumstances under which the receipt of money by a judge or other decision maker violates due process. It has held that a litigant’s right to due process is violated when the mayor of a town receives a portion of the fines he imposes while acting as a judge. It has also held that a litigant’s right to due process is violated where fines imposed by a mayor while acting as a judge represent a significant portion of his town’s revenue, even though the mayor did not directly receive any part of the fine. In a recent decision, the Court held that due process required a justice of the West Virginia Supreme Court to not participate in an appeal involving a company in which the company and its CEO had contributed significant amounts of money to the justice’s campaign for election to the court. This quotation from the Supreme Court’s opinion in Tumey v. Ohio succinctly sums up why money perverts due process:

Every procedure which would offer a possible temptation to the average man as a judge to forget the burden of proof required to convict the defendant, or which might lead him not to hold the balance nice, clear, and true between the State and the accused denies the latter due process of law.

Why the Contingent Fee Arrangement between CMS and the RACs Violates Due Process

The structure of the program created by CMS gives to the RACs the sole and unreviewable authority to create, from a previously paid claim, a provider overpayment and the right to demand payment from the provider. It is through these actions, taken solely by the RACs, that the RACs create their income. If they want to make more money, they create more overpayments; if they want to make less, they find fewer overpayments. In my opinion, this direct link between the RAC’s income and its decision as to whether a specific claim was improperly billed might lead them not to hold “the balance nice, clear, and true between the State [CMS] and the accused [provider]” as the Tumey Court noted and why the RAC program denies the latter due process of law.

The RACs will certainly argue that their overpayment decisions are not influenced by their contingent fee arrangement with CMS. CMS will presumably argue that the administrative appeal process will correct any mistakes the RACs might make and that the contingent fee arrangement was required by Congress.

The Supreme Court has made clear that wrongdoing is not required to violate due process, but simply the temptation to act improperly. I believe most judges would conclude that 10% of $3 billion, the amount collected since the start of the RAC demonstration project, is sufficient temptation to find a proper claim improper. The Supreme Court has also held that the right to an entirely new trial on appeal, a right not afforded in the administrative appeal process, does not remedy the due process violation. Finally, in addition to directing that the RACs be paid a contingent fee, Congress permitted CMS to retain as much of the recovered money as it wished for the program management account. I suggest that some of that money might be used to comply with the Constitutional mandate of due process by providing for an independent, non-contingent review between the RAC’s claim review determination and a demand that a provider repay thousands of dollars.

Please contact us if you would like further information about how the right to due process might affect the ongoing RAC program or for assistance in helping to resolve other issues with any of the legion of CMS auditors that inhabit the Medicare-Medicaid Audit World.