On September 5, 2019, the Centers for Medicare and Medicaid Services (“CMS”) released a final rule with comment period entitled, “Program Integrity Enhancements to the Provider Enrollment Process” (the “Final Rule”). The Final Rule, aiming to “address various program integrity issues and vulnerabilities by enabling CMS to take action against unqualified and potentially fraudulent entities and individuals,” significantly expands CMS’ ability to deny or revoke the Medicare enrollment of providers (e.g., hospitals, skilled nursing facilities, home health agencies, hospices, etc.) and suppliers (e.g., physicians, therapists, ambulance services, durable medical equipment suppliers, etc. in ways that may create concerns even for providers and suppliers who are fully qualified and have not engaged in any fraudulent conduct.

Guilt by Association – Denial and Revocation Based on an Affiliate’s Conduct

The Final Rule requires providers and suppliers to disclose any current or previous direct or indirect “affiliation” with other providers or suppliers that have uncollected debt, have been subject to federal health care program payment suspension, or have been excluded from or denied billing privileges under Medicare, Medicaid, or CHIP. For purposes of these “disclosable events”, CMS defines “affiliation” to include an ownership interest of at least five percent, any general or limited partnership interest, an exercise of operational or managerial control or conduct of day-to-day operations, acting as an officer or director, and any reassignment relationship under 42 C.F.R. § 424.80. CMS will have the authority to deny or revoke Medicare enrollment based on any disclosable event that CMS determines poses “an undue risk of fraud, waste, or abuse”, or based on a failure to disclose a disclosable event.

Denial and Revocation of Medicare Enrollment Based on Expanded Types of Participant Conduct

The Final Rule also grants CMS even broader authority to deny or revoke a provider’s or supplier’s Medicare enrollment in a number of circumstances, including when a provider’s or supplier’s enrollment was previously revoked under another name; when a provider or supplier bills for services at locations that it knew or should reasonably have known did not comply with Medicare enrollment requirements; when a provider “has a pattern or practice of ordering, certifying, referring, or prescribing” items or services payable under the Medicare program that CMS deems as “abusive” or “represents a threat to the health and safety of Medicare beneficiaries,” or “otherwise fails to meet Medicare requirements”; when a provider or supplier has existing debt that CMS referred to the Department of Treasury; when a provider or supplier is otherwise barred from another federal health care program; or when a provider’s or supplier’s license is currently revoked or suspended in a state other than the state of enrollment.

The Final Rule not only expands the bases for penalties, but also increases the length of the associated enrollment bars. The Final Rule increases the maximum enrollment bar from three years to ten years, establishes a maximum reenrollment bar of 20 years for a second revocation, and prohibits any provider or supplier from enrolling in the Medicare program for up to three years if its enrollment application is denied for false, misleading, or omitted information.

Effects of the Final Rule

CMS anticipates that the Final Rule will save the government $47.35 billion over a ten-year period and estimates the Final Rule will affect only “about 2,500 to 4,500 providers and suppliers per year.” CMS Administrator Seema Verma opined that the Final Rule will provide CMS with “tools to stop criminals before they can steal from taxpayers,” stating, “we have played an expensive and inefficient game of ‘whack-a-mole’ with criminals – going after them one at a time – as they steal from our programs. These fraudsters temporarily disappear into complex, hard-to-track webs of criminal entities, and then re-emerge under different corporate names. These criminals engage in the same behaviors again and again.”

However, by its plain language and with the passage of time, the Final Rule’s effects may extend far beyond “criminals,” potentially subjecting many non-criminal – indeed, wholly compliant – providers and suppliers to exile from Medicare participation. The Final Rule allows CMS to impose penalties not just on criminals and fraudsters, but also more broadly on any provider who merely associates or used to associate with them, whether knowingly or unwittingly. Further, the Final Rule extends authority to CMS to revoke Medicare enrollment for regulatory non-compliance – non-compliance that, prior to the Final Rule’s effective date, may have resulted in financial penalties and corrective action, but not disenrollment. Finally, the Final Rule allows CMS to deny or revoke Medicare enrollment on account of a provider’s uncollected debt, payment suspension, or exclusion – potentially ejecting providers and suppliers from Medicare participation who have not yet exhausted their appeal rights – an affront to the due process otherwise offered by CMS rules.

The Final Rule is effective November 4, 2019. CMS is accepting comments on the affiliation disclosure provisions only until 5:00 p.m. on November 4, 2019. Prior to the Final Rule’s effective date, providers and suppliers may wish to consider closely examining their direct and indirect affiliates for disclosable events, as well as the effect that any prior revocations, billing at Medicare non-compliant locations, enrollment denials, existing debt, terminations or suspensions from other federal health care programs, or licensure suspensions may have on continued Medicare program enrollment.