Section 6402(h) of the Patient Protection and Affordable Care Act (“PPACA”) allows CMS to suspend Medicare payments to a provider when there is a “credible allegation of fraud” unless there is “good cause not to suspend payments.” While CMS has long had the ability to suspend payments for a limited time when there is “reliable evidence of overpayment,” the new provision broadens that authority and permits much longer payment suspension period. The new provision thus gives CMS much more leverage to obtain settlements, as the suspension of payments to a provider could mean all or most of the provider’s Medicare cash flow would cease until an investigation is resolved.

In the September 23 Federal Register, CMS proposed regulations to describe how CMS will use these new powers. The proposed rule defines a “credible allegation of fraud” as “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.” According to CMS, whether the allegation is credible depends on its “indicia of reliability,” and “many issues related to this definition will need to be determined on a case-by-case basis by looking at all the factors, circumstances and issues at hand.”

CMS retains discretion whether or not to impose or continue a suspension of payment, as there may be good cause not to suspend payments. CMS has described several circumstances that may constitute such “good cause” not to suspend payments:

  • Specific requests by law enforcement
  • If beneficiary access to necessary items or services may be jeopardized
  • If CMS determines that other available remedies (e.g., an injunction) would more effectively or quickly protect Medicare funds
  • If CMS determines that a payment suspension or continuation of a payment suspension is not in the best interests of the Medicare program.

CMS will end a payment suspension when a fraud investigation is resolved by settlement, judgment or dismissal or when the case is closed because of lack of evidence. The proposed rule requires CMS to assess whether there is still good cause to continue the payment suspension every 180 days, and, as part of this assessment, to request certification from the OIG or other law enforcement agency that the matter is still under investigation. Under the proposed regulations, the duration of a suspension of payments may be much longer than suspensions under CMS’s old authority relating to “reliable evidence of an overpayment.” Under the old regulations, payments could be suspended only for the length of time necessary to determine the amount of a suspected overpayment. Under the new regulations, suspensions may continue as long as an investigation goes on, which may be a long time.

Until the rules are final and CMS begins operating under them, it is difficult to tell how the suspension power will be used. The “credible allegation of fraud” standard is quite broad and CMS could, for example, suspend payments based on allegations from a whistleblower as long as CMS found the allegations “credible.” Once Medicare payments are suspended, providers will have a strong incentive to accept a settlement from the OIG or other law enforcement agency in order to again begin receiving Medicare payments.

CMS’s new authority may also create a dilemma with respect to the already difficult factors relating to self-disclosure of Medicare billing and payment violations. To enter the OIG self-disclosure protocol, providers must report fraud or a similar violation rather than merely an overpayment. Such a self-disclosure could itself certainly be regarded by CMS as “credible evidence of fraud,” and thus might lead to a payment suspension. However, under PPACA’s new self-reporting rules relating to overpayments, failure to disclose could lead to False Claims Act liability. Either route is risky, but providers will have to decide which door to go through.

The proposed rule remains subject to public comment. Comments are due by November 16, 2010.