WASHINGTON, D.C. – The awarding of new Recovery Auditor (RAC) contracts likely will be delayed by at least a year following a ruling issued Tuesday by the U.S. Court of Federal Claims.

The Court granted a request from CGI Federal to stay the awards of new RAC contracts in RAC regions 1, 2, and 4, the regions subject to litigation recently brought by CGI against the Centers for Medicare & Medicaid Services (CMS) and the U.S. Department of Health and Human Services (HHS), while appeals in the case remain pending.

“Basically, if you had hope that the new RAC contracts were going to be awarded in the near term since the government prevailed in its litigation with CGI Federal, the stay granted by the judge in this case until the appeals process has been exhausted effectively puts the subject matter of when the new RAC contracts will be awarded to rest for a year – at least in our opinion,” wrote Emily Evans, a Monitor Monday legislative analyst and a partner at Obsidian Research, in a report to clients. “Moreover, it means that the incumbent RACs will be able to generate modest RAC revenue between now and the end of (their) contract(s).”

RAC regions 3 and 5 were not part of the recent litigation, but Evans rated it “highly unlikely” that CMS would award contracts there while the other three regions remain in legal limbo.

“Given the fact that the judge in the case could force CMS to go through the re-procurement process again as part of a resolution to the litigation, and the fact that it is likely to take up to a year or longer for the next step in the litigation to play itself out, it would be foolhardy for CMS to award a RAC contract for Regions 3 and 5 only to potentially have the courts mandate changes to the RAC program, thus opening up Regions 3 and 5 then to potential litigation,” she wrote.

Given that CMS signed contract extensions with the existing RAC contractors last week, covering a limited scope of audits through August 2016, Evans added that Obsidian believes that CMS will proceed by reconfiguring the RAC program and clearing the formidable backlog of appeals at the Administrative Law Judge (ALJ) level before moving forward with a new contract process under a revised request for quotations (RFQ).

“One thing we have learned with certainty throughout this process is that the timeline for awards is at best uncertain. We are of the belief that we won’t see the litigation involving CGI Federal and CMS resolved for at least a year, possibly longer,” Evans wrote of the potential timing of such actions. “We don’t think that a new RFQ, if that is how CMS elects to proceed, could be issued until sometime in late 2015 at the earliest.

Bottom line, there isn’t likely to be a new RAC contract awarded until very late 2015 and new RAC audits won’t start until sometime in 2016 at the earliest in our opinion.”

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Mark Spivey is a national correspondent for RACmonitor.com.

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