Hospitals sue government over private Medicare audits

WASHINGTON (Reuters) - A coalition of hospitals sued the U.S. government on Thursday, claiming that private auditors hired to crack down on improper Medicare payments are denying hospitals hundreds of millions of dollars in legal payments for necessary care.

The lawsuit alleges auditors known as Recovery Audit Contractors (RAC) forced hospitals to repay Medicare for the cost of in-patient services by determining months and sometimes years after the fact that beneficiaries should have been treated as out-patients instead of being admitted.

The plaintiffs -- the American Hospital Association and four institutions from Missouri, Michigan and Pennsylvania -- say auditors in many cases do not deny the care is necessary but the government still refuses to reimburse hospitals under the Medicare program for out-patient service.

Filed in U.S. District Court in Washington, the suit charges the U.S. Centers for Medicare and Medicaid Services with violating the law that governs the popular Medicare program for the elderly and disabled as well as other statutes.

A spokesman for U.S. Centers for Medicare and Medicaid Services said it is administration policy not to comment on pending litigation.

The RAC audit program, established under the Bush administration to curtail improper Medicare payments, has collected $1.86 billion in overpayments from October 2009 to March 2012, according to the court filing.

(Reporting by David Morgan; editing by Andrew Hay)