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GCI Federal, Inc. Issues Suit against HHS Regarding New RAC Contracts

In December of 2013, the Centers for Medicare & Medicaid Services (CMS) issued a Request for Quotes for new Recovery Auditor (RAC) contracts. The new contracts include significant changes to payment terms. Whereas the current contracts allow payment to RACs after the first level of appeal has been exhausted (120 days), the new contracts do not allow payment until after the second level of appeal has been exhausted (120 – over 400 days).

In opposition of the modification on payment terms, CGI Federal, Inc., the Region B Recovery Auditor, submitted pre-award protests to the federal Government Accountability Office (GAO) asking for a change to the new payment terms. The GAO denied the protests on April 23, 2014.

On May 1, 2014, CGI elevated its case to the Court of Federal Claims. The suit requested the Court to order an injunction against the US Department of Health and Human Services’ (HHS) implementation of the new RAC contracts and remove the delay in compensation. GCI argues that the new payment terms are inconsistent with customary commercial practices and unfairly restrict competition for the contract, rendering it “commercially impracticable” for CGI to submit a quote.

The first hearing is scheduled for June 6, 2014. The judge will grant an injunction if he or she determines that irreparable harm would be done if the contracts are awarded. If the judge does not grant injunctive relief, CGI may still proceed with its case. The A/B contract awards were expected in May or June, but could be delayed as a result of the suit.

For more information, or for questions regarding Recovery Audit Contractor (RAC) audits and appeals, please contact Abby Pendleton, Esq. or Jessica Gustafson, Esq. at (248) 996 – 8510 or via email at apendleton@thehlp.com or jgustafson@thehlp.com.

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