On September 23, 2010, the Centers for Medicare & Medicaid Services (CMS) issued a proposed rule that would implement certain fraud and abuse provisions of the Patient Protection and Affordable Care Act (PPACA). These provisions were included in PPACA as a way to help reduce the costs of reform. CMS stated that the provisions “are of critical importance in the transition of CMS’ antifraud activities from ‘pay and chase’ to fraud prevention.” As such, the proposed rules are focused on measures to prevent the enrollment of fraudulent providers and suppliers and the payment of improper claims, as opposed to remedial measures.

The most significant provisions of the proposed rule include the following.

Screening of Providers and Suppliers in the Medicare and Medicaid Programs

The proposed rule created three categories of risk and places different types of providers/suppliers into one of the categories. Each of the three categories has different levels of screening procedures that the providers/suppliers must undergo. The categories are labeled according to the level of risk that CMS deems the provider/suppliers to present to the Medicare and Medicaid programs: limited, moderate, or high.

  • Limited Risk: Entities in the limited-risk category include physicians, non-physician practitioners, group practices, medical clinics, ambulatory surgery centers, critical-access hospitals and skilled nursing facilities. Additionally, providers/suppliers of any type that are publicly traded on the NASDAQ or NYSE would only be subject to the limitedrisk category screening requirements because they present limited risk based on the financial oversight required by the stock exchanges.  

If in the limited risk category, a provider/supplier would be subject to verification of provider/supplier-specific conditions of participation and requirements under Medicare, license verifications and database checks before and after enrollment that would verify social security numbers, tax delinquency and any exclusions from the Medicare or Medicaid programs.

  • Moderate Risk: Providers/suppliers in the moderate risk category include ambulance service providers, community mental health centers, comprehensive outpatient rehabilitation facilities and independent clinical laboratories. Currently enrolled home health agencies and durable medical equipment, prosthetics, orthotics and supplies (DMEPOS) suppliers are classified as moderate risk, while those that have not yet enrolled are high risk.  

In addition to the screening process for the limited risk category, moderate risk providers would also be subject to the additional measure of unscheduled or unannounced site visits, both before and after enrollment in the programs.

  • High Risk: The high risk category is proposed to be limited to newly enrolling DMEPOS suppliers and home health agencies. These entities would be subject to more thorough investigation by Medicare contractors using the screening tools listed above for limited and moderate risk providers, as well as criminal background checks and fingerprinting.  

Timing of New Screening Procedures

For initial enrollment applications and applications for a new practice location, the new screening procedures would be effective March 23, 2011. Currently enrolled provider/suppliers who are revalidating their enrollment in the programs between March 23, 2011, and March 23, 2012, will also be subject to the new screening process on March 23, 2011. For other currently enrolled providers/suppliers, the screening procedures would be effective March 23, 2012.

A Mechanism for Suspension of Payments Pending Investigation of Credible Allegations of Fraud

The proposed rule allows for a suspension of payments to a provider/supplier during an investigation of a credible allegation of fraud. For purposes of Medicare, a “credible allegation of fraud” is defined to include “an allegation from any source, including but not limited to fraud hotline complaints, claims data mining, patterns identified through provider audits, civil false claims cases, and law enforcement investigations.” Such a determination would be made on a case-by-case basis.

The Medicare payment suspension would be in place until the “resolution” of the investigation. CMS proposes that the “resolution” occurs when “legal action is terminated by settlement, judgment, or dismissal, or when the case is closed or dropped because of insufficient evidence.”

CMS also proposed certain good-case exceptions to the Medicare payment suspension, including when the OIG or law enforcement asks that a suspension not be imposed because it might jeopardize an investigation or when it is determined that a payment suspension would jeopardize beneficiary access to care.

For purposes of Medicaid, the proposed rule allows a withholding of Federal Financial Participation (the federal portion of Medicaid payments) in instances where a state Medicaid program fails to withhold payments in cases of alleged fraud as is permitted under existing regulation 42 C.F.R. § 455.23 (unless the Medicaid program shows that good cause exists not to suspend the payments). CMS also proposed a number of amendments to existing 42 C.F.R. § 455.23 to conform Medicaid’s payment suspension process to the new process proposed for Medicare.

The Availability of a Temporary Moratoria

CMS proposed the imposition of a moratoria on its acceptance of applications for initial enrollment or, for currently enrolled providers/suppliers, applications to establish new practice locations when one or more of the following events occurs:

  1. CMS identifies trends that suggest high risks of fraud, waste, or abuse;
  2. a state has imposed a moratorium on enrollment; or
  3. CMS identifies a particular provider/supplier type or geographic area as having potential for fraud, waste, or abuse.  

Interestingly, despite the moratorium, CMS proposed appeal procedures for providers/suppliers who have applications denied during the moratorium. Providers/suppliers would be able to appeal an adverse determination based on a temporary moratorium up to the Department Appeal Board level of review.

Notably, individual state Medicaid agencies would be required to comply with CMS’s moratoria unless the state determines that doing so would negatively affect access to care.

Cross-termination of Providers from the Medicare and Medicaid Programs

CMS proposed a requirement that a state Medicaid agency deny or terminate enrollment for any provider/ supplier that:

  1. was terminated from participation in Medicare;
  2. had its Medicare billing privileges revoked; or
  3. was terminated from participating in any other state’s Medicaid program.

CMS also proposed a provision that would allow it to revoke a provider/supplier’s Medicare billing privileges when a state Medicaid agency revokes, terminates or suspends the provider/supplier’s enrollment or billing privileges.

Imposition of Certain Application Fees

The proposed rule included a provision that any “institutional provider,” must also submit an application fee when enrolling in Medicare or revalidating enrollment. For this purpose, an “institutional provider” is defined as any provider that utilizes form 855-A, 855-B (with the exception of physicians or other practitioners) or 855-S. If the institutional provider is unable to afford the application fee, the provider would be required to obtain a hardship exception. CMS may use the failure to include an application fee as a reason to deny enrollment or revalidation. The initial application fee is proposed to be $500.00 and will be adjusted annually.

Solicitation of Comments Regarding Required Compliance Programs

Finally, the proposed rule sought comments on the provisions of PPACA that require providers and suppliers to establish compliance programs, including the provision of PPACA that would require the use of the elements of an effective compliance and ethics program set forth in the US Federal Sentencing Guidelines Manual as the basis for such required compliance programs. While PPACA’s requirement would apply to all providers and suppliers, there are more detailed compliance program requirements for nursing homes. As such, operators of nursing homes may be especially inclined to provide comments. All comments on the proposed rule, including comments on the requirement to establish a compliance program, are due to CMS by November 16, 2010.