A new wave of Recovery Audit Contractors (RACs) and Unified Program Integrity Contractors (UPICs) have swept across the nation, empowered to root out fraud in Medicare and Medicaid.
While safeguarding taxpayer dollars is a legitimate and necessary objective, the federal government’s increasing reliance on private contractors, operating under vague standards and paid by the volume of their findings, has created a system that often punishes legitimate providers without due process. The consequences can be swift, severe, and deeply troubling, from a constitutional standpoint.
At the core of this issue is the ability of contractors and the Centers for Medicare & Medicaid Services (CMS) to suspend Medicare reimbursements based solely on “credible allegations of fraud.” This authority stems from 42 CFR 455.23, which allows CMS to halt payments while an investigation is pending.
Critically, no indictment, civil complaint, or even probable cause is required – just an unverified allegation that a contractor deems credible. As Dr. Hirsch has mentioned, there is little oversight now.
This standard is dangerously low. For healthcare providers, these payments are not hypothetical; they are the financial engine of daily operations. When reimbursements are abruptly suspended, the result is often operational collapse. Clinics close. Employees are laid off. Patients, often elderly or vulnerable, lose access to care.
And it all happens without a hearing, without discovery, and without a chance to refute the claims before the damage is done.
Medicare reimbursements for services already rendered are not gifts from the government – they are earned property interests. The Fifth Amendment prohibits the government from depriving any person of “life, liberty, or property, without due process of law.”
Yet the CMS prepayment review and suspension practices frequently sidestep these protections.
Courts are split. Some have affirmed that providers have a constitutionally protected property interest in earned reimbursements. In Physicians Hosp. v. Sebelius, 691 F.3d 649 (5th Cir. 2012), the Fifth Circuit recognized that providers are entitled to those payments unless CMS follows due process procedures. Likewise, in ABC Home Health Servs., Inc. v. Burwell, the court found that suspending payments without a prior hearing could amount to a due process violation.
But not all courts agree. The D.C. Circuit, in Bannum, Inc. v. Brown, held that the government may suspend payments without a pre-deprivation hearing if fraud is alleged, reasoning that the public interest in fraud prevention outweighs the provider’s interest in continued payments. Similarly, in Franciscan Skemp Healthcare, Inc. v. Becerra (2023), a district court upheld the CMS ability to suspend payments without indictment or conviction.
This patchwork of legal interpretations has created a system wherein constitutional rights vary by ZIP code. In circuits where courts recognize the need for due process, providers have a fighting chance. Elsewhere, the CMS actions are effectively insulated from judicial scrutiny.
For many providers – especially small clinics, rural health centers, hospices, and home health agencies – the results can be catastrophic. Entire practices are brought down by untested, undisclosed allegations. Staff are left jobless. Communities lose access to care. And all of this occurs without any opportunity for the provider to be heard before the suspension takes effect.
The current system is not merely flawed; it is structured to punish providers first and sort the facts out later. By authorizing suspensions based on vague, unproven allegations and incentivizing aggressive tactics through contractor payment models, the Patient Protection and Affordable Care Act’s (PPACA’s) enforcement mechanism has become a blunt instrument.
The U.S. Supreme Court’s decision in Mathews v. Eldridge, 424 U.S. 319 (1976), offers a framework for evaluating due process: consider the private interest affected, the risk of erroneous deprivation, and the administrative burden of providing additional process. Under this standard, CMS’s current approach fails. The private interest – continued care and economic survival – is significant. The risk of error is high.
And the burden of offering a prompt, fair hearing is minimal.
Fraud must be confronted and prosecuted, but not at the expense of constitutional principles. The government’s reliance on profit-driven contractors and vague standards has created a law enforcement regime that prioritizes expediency over fairness.
This erosion of due process undermines both public trust and the legitimacy of fraud prevention efforts.
It is time for Congress to act and for the courts to bring clarity and uniformity to this fractured landscape. Until then, healthcare providers must continue to push back – through litigation, advocacy, and an unwavering defense of their constitutional rights.
