CMS Implements Final Regulations in Continuing Quest to Combat Fraud and Abuse

The Centers for Medicare and Medicaid (CMS) has published final regulations implementing certain provisions of the Affordable Care Act (ACA) meant to provide the federal agency with additional methods of combating fraud, abuse and waste in federal health care programs. These new regulations have the potential to affect all providers that participate in the Medicare and Medicaid programs. This article summarizes several provisions of the new regulations found at 76 FR 5862 (Feb. 2, 2011).

Provider Screenings Under Medicare, Medicaid and CHIP

Section 6401(a) of the ACA directed the Department of Health and Human Services, in conjunction with the Office of the Inspector General (OIG), to establish screening procedures for providers and suppliers under Medicare, Medicaid and the Children's Health Insurance Program (CHIP) utilizing a system to categorize the risk of fraud, abuse and waste. Although some of these screening measures are currently in use by CMS and state Medicaid programs, more stringent measures will be undertaken for those providers and suppliers in the "high" and "moderate" risk categories. The new screening procedures are applicable to newly enrolling providers and suppliers, including eligible professionals beginning on March 25, 2011. For those providers and suppliers currently enrolled in any of the three programs and who are due for revalidation of their enrollment information between March 25, 2011, and March 22, 2012, the newly implemented screening procedures will also apply to them beginning March 25, 2011. Other currently enrolled providers and suppliers will be subject to the new procedures beginning on March 23, 2012. However, CMS has the authority to require any provider or supplier to revalidate its enrollment information prior to the end of the three-year (for DMEPOS suppliers) or five-year (for all other suppliers and providers) revalidation cycle.

The final rules place physicians, non-physician practitioners and medical groups (with the exception of physical therapists and physical therapist groups) in the category of "limited" risk. Joining these providers in this category are hospitals, ambulatory surgery centers, most pharmacies, radiation therapy centers and skilled nursing facilities, among others. These limited risk providers will be subject to many of the same screening procedures currently in use by CMS: licensure verification, database checks (social security number, national provider identifier, national provider data bank and OIG exclusion lists among the several), and verification of any provider or supplier-specific requirements.

In addition to the screening requirements required of limited risk category providers and suppliers, those in the "moderate" risk level category (including ambulance suppliers, comprehensive outpatient rehabilitation facilities [CORF], independent diagnostic testing facilities, physical therapy providers and groups, and currently enrolled home health agencies), may face unscheduled or unannounced site visits from CMS's contractors. Finally, those entities currently placed in the "high" risk category (newly enrolling home health agencies and durable medical equipment, prosthetics, orthotics and supplies [DMEPOS] provider) will find any individual holding an ownership interest in the company of five percent or more subject to finger-print based criminal history record checks of law enforcement repositories.

Individual states will be responsible for implementing the new screening requirements for those providers enrolling only in Medicaid or CHIP. States will be allowed to rely on the screening results obtained by Medicare contractors for those providers who are seeking dual enrollment in Medicare and Medicaid/CHIP. For those categories of Medicaid providers not recognized by Medicare, state Medicaid agencies will have the discretion to evaluate the potential risk of such providers and place them in an appropriate Medicaid category of risk. In addition, every state Medicaid agency will now be required to obtain dates of birth and social security numbers for all managing employees of providers enrolling in Medicaid.

Provider and suppliers, current and potential, should understand that these risk categories are not static and CMS may adjust the classification of providers/suppliers based on specific program vulnerabilities, such as having been subject to a payment suspension in the past, exclusion from a federal health care program or revocation of Medicare or Medicaid billing privileges.

Application Fee for Institutional Providers and Suppliers

Institutional providers and suppliers will find applying for initial enrollment in the Medicare program, establishing a new practice location or enrolling or re-enrolling in a Medicaid program to be a bit more expensive starting on March 25, 2011. Beginning on that date, Medicare institutional providers and suppliers enrolling or revalidating must submit a $500 application fee, or the application fee and a request for a hardship waiver, at the time of application. Failure to include the fee will result in the application being treated as not having been filed in the event the hardship waiver is not granted. If the waiver is granted, the application fee will be refunded. Institutional providers and suppliers include hospitals, ambulatory surgery centers, CORFS, DMEPOS suppliers, laboratories and others. It does not include individual practitioners or physician or nonphysician practitioner organizations.

States will also begin collecting a $500 application fee from many prospective or re-enrolling institutional providers. Providers not subject to the Medicaid application fee include individual practitioners, providers who are enrolled in and have paid the application fee in another state's Medicaid program, and Medicare providers and suppliers who have already paid the Medicare application fee.

Temporary Moratoria on Enrollment of Providers and Suppliers

CMS was granted the authority under Section 6401(a) of the ACA to impose a temporary moratoria on newly enrolling Medicare providers and suppliers of a particular type or of a specific category of provider in a discrete geographic location if CMS determines that there is a significant potential for fraud, waste or abuse with respect to the specific type of provider or within a certain geographic region, or both. The types of trends that CMS may base such a moratorium on include findings of a highly disproportionate number of providers relative to the number of beneficiaries, a rapid increase in a category's enrollment applications, that a state has placed a moratorium on Medicaid enrollment of a particular type of provider or in a specific geographic area, or if CMS, in conjunction with the OIG or the Department of Justice, identifies an area or provider category as having a significant potential for abuse, waste or fraud.

Any temporary moratoria imposed by CMS will apply only to the enrollment of new providers/suppliers of the identified variety. The moratoria will not apply to applications for changes in practice locations, changes in provider or supplier information (such as address or phone number changes), or changes in ownership (except for home health agencies). Nor will a moratorium apply to any enrollment application that has been approved by a Medicare contractor at the time the moratorium is issued but that has not been entered into the Provider Enrollment, Chain and Ownership System. Initial moratoriums may last six months, but CMS may extend a moratorium in six month increments at its discretion. States must also comply with any moratorium issued by CMS by suspending enrollment of the identified type of providers in its Medicaid program, unless the state determines that doing so will adversely affect its Medicaid beneficiaries access to care.

Termination of Provider Participation

While taking new steps to prevent excluded providers from enrolling in Medicare, CMS is also ramping up its efforts to ensure that providers and suppliers excluded from participation in one federal program is barred from participation in all federal health care programs. States are now required to exclude from participation in their Medicaid and CHIP programs any provider that has been excluded with cause from participation in the Medicare program or another state's Medicaid program. CMS is establishing a Web-based portal through which states will be required to file monthly reports of those providers terminated from participating in their Medicaid programs on or after Jan. 1, 2011. States will not be required to report those providers excluded prior to Jan. 1, 2011, nor are they to report providers who have voluntarily terminated their Medicaid participation, unless such termination was done in an effort to avoid sanctions. Only those providers who have exhausted all of their appeal rights on the state level will be terminated from Medicare under the new regulations.

If you have any questions about these new federal regulations, please contact Kevin Woodhouse or Margaret Emmert.

This publication is intended for general information purposes only and does not and is not intended to constitute legal advice.  The reader must consult with legal counsel to determine how laws or decisions discussed herein apply to the reader's specific circumstances.

Feb. 16, 2011