On September 23, 2010, the Centers for Medicare and Medicaid Services (CMS) issued a proposed rule implementing several provisions of the Patient Protection and Affordable Care Act (PPACA) which is designed to prevent fraud and abuse in Medicare, Medicaid and the Children's Health Insurance Program.

Supplier/Provider Enrollment. As part of this proposed rule, CMS will classify each Medicare provider/supplier type into one of three categories. Each classification would subject providers to different levels of security screenings for enrollment in federal healthcare programs. This statutory requirement for tighter scrutiny over potential Medicare/Medicaid suppliers and providers follows the recent general trend toward stricter controls over participation in those programs. The new categories would be as follows:

  1.  Limited Risk Providers. This category would include physicians, nonphysician practiioners, medical groups and ambulatory surgery centers. This category of providers would be subject to licensure and other database checks.
  2. Moderate Risk Providers. This category would include independent diagnostic testing facilities, independent clinical laboratories and other entities that are not publicly traded. This category of providers would be subject to a site visit in addition to licensure and other database checks.
  3.  High Risk Providers. This category would include newly-enrolled home health agencies and suppliers of durable medical equipment, prosthetics, orthotics and supplies (DMEPOS), as well as any low-to-moderate risk providers that have had their identities stolen within the Medicare program or have been the subject of certain program sanctions. This category of providers would subject to criminal background checks and fingerprinting requirements in addition to a site visit and database checks.

Application Fees. For the first time, the proposed rule would impose an application fee on certain providers and suppliers (including hospitals, ASCs, DMEPOS suppliers, IDTFs, independent clinical labs, and others, but not including physicians). It also would implement a moratorium on enrollment of new Medicare suppliers and providers and practice locations in 6 month increments where, based on federal or state criteria, there is a significant risk of fraud and abuse for the supplier type. These moratoria would be announced publicly and would be a significant factor for consideration in restructuring existing suppliers/providers or establishing new healthcare businesses.

Suspension of Payments Pending Fraud Investigation. The proposed rule provides some guidance on an important provision of PPACA, which permits Medicare to suspend payments to a provider or supplier pending an investigation of a "credible allegation of fraud." The rule points out that CMS already has the ability to suspend payments pending investigations, but PPACA provides an opportunity to revise and clarify this suspension right. The proposed rule would include a definition of a "credible allegation of fraud" 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." Further, "credible" means having "an indicia of reliability."

Solicitation of Comments for Compliance Plan Requirements. Finally, CMS solicits comments regarding the requirement that certain types of suppliers and providers must have compliance and ethics plans. CMS indicated that it will take into account the views of industry stakeholders and issue further rulemaking on this specific issue "at some point in the future."

The proposed rule is open for comment until November 16, 2010.

View the proposed rule here: