Contained within the 850-page discussion draft of health reform legislation released by the House Tri-Committee (Ways and Means, Energy and Commerce and Education and Labor) Chairs on Friday are a multitude of new and "enhanced" program integrity measures aimed at curbing fraud and abuse in the Medicare program.

Self-Referral Law Changes

The legislation eliminates the rural provider exception for hospitals and the whole hospital exception, both of which currently protect physician ownership in hospitals. Physician-owned hospitals with provider agreements in effect as of January 1, 2009, would be grandfathered, although the legislation prohibits increases in physician ownership percentages and provides substantial restrictions on a hospital’s ability to add operating or procedure rooms and beds. Grandfathered hospitals would be subject to significant reporting and disclosure requirements, including a requirement to disclose to patients in writing if the hospital does not have 24/7 on-premises physician coverage.

Enhanced Penalties and New Violations

Enhanced monetary penalties and administrative sanctions are created for false statements on provider or supplier enrollment applications, false statements in claims data, submission of false information by MedicareAdvantage (MA) and Part D plans, and delay of Inspector General investigations and audits. Additionally, sanctions are expanded to individuals who furnish, order, refer or certify the need for items covered by federal healthcare programs, as well as those individuals or entities that bill for such items.

New provisions are added to establish violations for enrolling an individual in a plan without consent, transferring an enrolled individual to another plan without consent or solely for the purpose of earning a commission or failing to comply with marketing restrictions.

Hospice Quality of Care

A new section added to the Social Security Act would authorize the Secretary of Health and Human Services (HHS) to take actions ranging from terminating the certification of a hospice program to appointing temporary management and other intermediate sanctions upon a determination by the Secretary of substandard quality of care. Civil money penalties not exceeding $10,000 for each day of noncompliance are authorized.

Provider Enrollment Provisions

A new provision to the Social Security Act would authorize the Secretary to make determinations of significant risk of fraudulent activity by category of provider or supplier within a geographic area, or under Medicare, Medicaid, or CHIP. Such determinations would convey a multitude of requirements for providers first enrolling or renewing enrollment in these programs, ranging from screening and oversight requirements to outright moratoriums on enrollment.

Payment and Repayment Provisions

Providers, suppliers, Medicaid managed care organizations or other entities with knowledge of an overpayment would be required to report the reason for the overpayment and return the overpayment to the Secretary, state, intermediary, carrier or contractor, as appropriate, within 60 days from the time it was identified or the date on which payment is required by the applicable claims appeal or reconciliation process, whichever occurs later.

The draft legislation authorizes the Secretary to establish payment modifiers under the fee schedule for evaluation and management services that result in ordering additional services, prescription drugs or the furnishing or ordering of durable medical equipment.

The time limit for claims filing under Medicare Part A & B would be reduced from three years to one calendar year, effective January 1, 2010. Additionally, durable medical equipment orders and skilled nursing services would require certification by a participating physician who does not have an employment relationship with the facility. In the case of home health services, a certification or recertification of the need for such services must be made after a face-to-face encounter with the patient.

Mandatory Compliance Programs

Providers and suppliers would be required to adopt compliance programs with specified core elements as a condition to program participation. The Centers for Medicare & Medicaid Services (CMS) would have enforcement authority for determining a provider’s compliance and may impose sanctions ranging from a maximum monetary penalty of $50,000 for each violation to disenrollment of the provider.

For highlights from the bill’s access and coverage provisions, please see the June 11, 2009, issue of the Health Law Update.