Palomar Medical Center v. Sebelius involves a claim paid more than one year before it was reopened during a RAC audit. After losing the first two appeals, the hospital convinced an ALJ that the RAC had not shown it had good cause to reopen the claim. However, when the Medicare Appeals Counsel (MAC) reviewed the ALJ’s decision, it concluded, based on its interpretation of the relevant regulations, that the ALJ had no authority to review the RAC’s decision to reopen the claim.
The relevant regulations, which are not easy to make sense of, appear in Title 42 of the Code of Federal Regulations (CFR). 42 CFR § 405.980(b) provides that:
A contractor may reopen an initial determination or redetermination on its own motion–
- (1) Within 1 year from the date of the initial determination or redetermination for any reason.
- (2) Within 4 years from the date of the initial determination or redetermination for good cause as defined in §405.986.
- (3) At any time if there exists reliable evidence as defined in §405.902 that the initial determination was procured by fraud or similar fault as defined in § 405.902
According to 42 CFR § 405.986(a), “good cause” is established when:
- (1) There is new and material evidence that–
-    (i) Was not available or known at the time of the determination or decision; and
-    (ii) May result in a different conclusion; or
- (2) The evidence that was considered in making the determination or decision clearly shows on its face that an obvious error was made at the time of the determination or decision.
42 CFR § 405.980(a)(5) provides that:
- The contractor’s, QIC’s, ALJ’s, or MAC’s decision on whether to reopen is binding and not subject to appeal.