Cgi Fed. Inc. v. United States
| Decision Date | 22 August 2014 |
| Docket Number | No. 14-355C,14-355C |
| Parties | CGI FEDERAL INC., Plaintiff, v. THE UNITED STATES, Defendant. |
| Court | U.S. Claims Court |
Pre-award Bid Protest; 28 U.S.C. § 1491(b)(1); Jurisdiction; Standing; Prospective Bidder; Direct Economic Interest In Award; Centers for Medicare and Medicaid Services ("CMS"); Federal Acquisition Regulation ("FAR") Part 12; FAR Subpart 8.4; Federal Acquisition Streamlining Act ("FASA"); Customary Commercial Practice; Payment Term; Unduly Restrictive of Competition.
Scott M. McCaleb, Wiley Rein LLP, 1776 K Street, NW, Washington, D.C. 20006, for Plaintiff. Daniel P. Graham, W. Barron A. Avery, Christine Reynolds, Gary S. Ward, Wiley Rein LLP, 1776 K Street, NW, Washington, D.C. 20006, Of Counsel.
Stuart F. Delery, Robert F. Kirschman, Jr., Kirk Manhardt, and William P. Rayel, U.S. Department of Justice, Civil Division, Commercial Litigation Branch, Ben Franklin Station, Washington, D.C. 20044, for Defendant. Jeffri Pierre, Department of Health and Human Services, Office of General Counsel, Of Counsel. Jennifer L. Howard, General Services Administration, Office of General Counsel, Of Counsel.
This pre-award bid protest comes before the Court on Defendant's motion to dismiss for lack of standing, Plaintiff's motion for injunctive relief, and the parties' cross-motions for judgment on the Administrative Record ("AR"). Plaintiff, CGI Federal Inc. ("CGI"), challenges the payment terms of three Requests for Quotation ("RFQ") issued by the United States Department of Health and Human Services, Centers for Medicare and Medicaid Services("CMS") for services of Recovery Audit Contractors ("RACs") under the General Services Administration's ("GSA") Federal Supply Schedule ("FSS").2
Plaintiff argues that CMS violated the Federal Acquisition Streamlining Act ("FASA") and Part 12 of the Federal Acquisition Regulation ("FAR") by including payment terms in the RFQs that are inconsistent with customary commercial practice. Plaintiff further claims that the payment terms are unduly restrictive of competition. Accordingly, CGI asks this Court to enjoin award of the contracts under these RFQs, order CMS to revise the existing payment terms, and provide all prospective bidders an opportunity to submit bids under the revised RFQs.
Defendant argues that the requirements of FASA and FAR Part 12 do not apply to FAR Subpart 8.4 FSS procurements, and that the payment terms do not unduly restrict competition, pointing to other RACs that bid on the contested RFQs. Finally, Defendant submits that CMS reasonably exercised its discretion even if the payment terms restrict competition.
For the reasons that follow, the Court finds that Plaintiff has standing, but denies the protest.
CMS administers the Medicare Fee-for-Services ("FFS") program and, through a network of contractors, processes more than one billion claims each year submitted by more than one million providers. AR Tab 20f at 533.4 To insure that paid claims accord with Medicare guidelines, CMS uses Recovery Audit Contractors to identify improper payments and highlight any common billing errors, trends, or other Medicare payment issues. Id. After a pilot program, CMS competitively awarded contracts in 2008 to four RACs—one for each geographical region of the country—including CGI, but performance was delayed due to a bid protest. AR Tab 20f at 533; AR Tab 95 at 8608-10.5
The RAC program has successfully assisted CMS in recouping improper Medicare payments. In the 2011 fiscal year alone, RACs identified 887,291 improper payments, resulting in corrections totaling $939.3 million. AR Tab 20f at 533. "After taking into consideration all fees, costs, and appeals, the Medicare FFS Recovery Audit Program returned $488.2 million to the Medicare Trust Fund" in 2011. Id. That same year, providers appealed 6.7% of identified overpayments, but less than half of that 6.7% were successful at some level of the appeal process. Id. at 567.
Each RAC reviews the Medicare FFS claim payments processed in its region to identify improper payments.6 CMS pays the RACs on a contingency fee basis calculated as a percentage of the improper payment. AR Tab 20f at 537. When a RAC identifies an improper payment, CMS, through a contractor, sends the provider a demand letter that in the case of an overpayment requests repayment in a specific amount. Id. at 538. The demand letter also contains the rationale provided by the RAC "includ[ing] references utilized in reviewing the medical documents, and . . . educat[ing] providers about how to avoid similar payment errors in future Medicare billing practices." Id.7 CMS' recoupment of an overpayment typically commences within 41 days of the demand letter. Id. at 539.
If a provider disagrees with the RAC's determination that CMS overpaid the provider, the provider can appeal. There are five levels of appeal. See id. at 539.
After receiving a demand letter that identified an overpayment, regardless of the amount in controversy, a provider can appeal by seeking a redetermination as to the propriety of the identified payment. Id. at 539-40; see also 42 C.F.R §§ 405.940-42. This "first level appeal" must be requested, in writing, within 120 days of receiving the demand letter. 42 C.F.R §§ 405.942(a), 405.944(b). The provider must explain the basis for its disagreement with the determination and may submit any relevant evidence. Id. at § 405.946(a). A written decision will be rendered within 60 days of receipt of the provider's request for a redetermination and must inform the provider of its right to appeal and the procedures for seeking a redetermination. Id. at §§ 405.950(a), 405.956(b)(5).
If a provider disagrees with the redetermination, it can appeal to a qualified independent contractor ("QIC") within 180 days of its receipt of the redetermination letter. AR Tab 20f at 539; 42 C.F.R § 405.962(a). In CMS parlance, this level of appeal is referred to as "reconsideration," "the QIC level," and "the second level" interchangeably. The QIC reviews the evidence and findings upon which the initial determination and the redetermination were based, as well as any additional evidence a provider submits or that the QIC obtains independently. 42 C.F.R. § 405.968(a)(1). QICs must process the provider's appeal within 60 days. Id. at § 405.970(a).
If the provider is dissatisfied with the QIC's reconsideration, or if the QIC did not timely process the provider's request, the provider may request a hearing with an Administrative Law Judge ("ALJ") if the claim meets the amount-in-controversy threshold.8 Id. at §§ 405.1000(a), 405.1006. The provider must file within 60 calendar days of receipt of the notice of the QIC's reconsideration. Id. at § 405.1002(a)(1). "The ALJ conducts a de novo review and issues a decision based on the hearing record." Id. at § 405.1000(d). The ALJ must issue a decision, dismissal order, or remand to the QIC, within 90 days if the provider appealed the QIC's decision or within 180 days if the provider requested an ALJ hearing because the QIC failed to issue a decision within the prescribed time period. Id. at § 405.1016.
The provider may appeal the ALJ's decision to the Medicare Appeals Council. Id. at § 405.1102(a)(1). The MAC conducts a de novo review and must issue a final decision, dismissal order, or remand, within 90 calendar days of receipt of the provider's request. Id. at § 405.1100(c)-(d).
If the provider remains dissatisfied and the amount in controversy is at least $1,3009 it may file an appeal of the MAC's decision within 60 days to a United States District Court. Id. at §§ 405.1006(c)(1), 405.1130. The District Court is not subject to a time limit to make this final, binding, decision.
The original RAC contracts, signed in late 2008, contained the following payment terms:
All payments shall be paid only on a contingency fee basis. The contingency fees shall be paid once the recovery audit contractor collects the Medicare overpayment. The recovery audit contractor shall not receive any payments for the identification of the underpayments or overpayments. If, during the period of performance of this contract, the RAC determination is overturned at any level of appeal the recovery audit contractor shall repay Medicare the contingency payment for that recovery.
AR Tab 95 at 8608-10.10 Under these terms, RACs typically invoiced CMS at the time of collection of the overpayment, at least 41 days after the demand later. AR Tab 20c at 473-74.
On February 28, 2013, CMS issued an RFQ pursuant to GSA's Financial and Business Solutions ("FABS") Schedule seeking to award five task orders to Recovery Audit Contractors— four for Medicare/Medicaid in different regions and one relating to durable medical equipment ("DME") and Home Health/Hospice Recovery. AR Tab 47 at 1542-1735. This RFQ contained identical payment terms to the original RAC contracts. Id. at 1645-46; AR Tab 95 at 8610.
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