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CMS finalizes new provider enrollment regulations aimed at reducing fraud

December 9, 2014

On December 5, the Centers for Medicare & Medicaid Services (CMS) published a Final Rule, which among other things permits CMS to revoke a provider or supplier's Medicare billing privileges where there is a pattern or practice of billing for services that do not meet Medicare requirements. The new regulations are effective February 3, 2015.

Revocation of Billing Privileges

CMS commentary accompanying the Final Rule emphasizes that sporadic billing errors or the occasional submission of an erroneous claim due to a provider's misunderstanding of Medicare rules are not the target of these new regulations. Rather, in determining whether a provider or supplier has a pattern or practice of submitting claims that fail to meet Medicare requirements, CMS will consider the following factors: (1) the percentage of submitted claims that were denied; (2) the reason(s) for the claim denials; (3) whether the provider or supplier has any history of final adverse actions (as that term is defined under § 424.502) and the nature of any such actions; (4) the length of time over which the pattern has continued; (5) how long the provider or supplier has been enrolled in Medicare; and (6) any other information regarding the provider or supplier's specific circumstances that CMS deems relevant to its determination as to whether the provider or supplier has or has not engaged in the pattern or practice of submitting claims that fail to meet Medicare requirements.

Medicare Debt

Another significant aspect of the Final Rule expands CMS’s ability to deny the enrollment of providers, suppliers, and owners affiliated with an entity that has unpaid Medicare debt.  This new regulation only applies to initial enrollment applications and according to CMS is aimed at providers and suppliers that accumulate large Medicare debt, exit the Medicare program and then attempt to re-enroll through other means, such as by having family members or other individuals pose as owners. 

Notably, the existing version of this regulation is limited to situations in which the current owner, physician or non-physician practitioner had a Medicare debt, while the new regulation focuses on the entity in which the enrolling provider, supplier or owner had a prior relationship.  This means that CMS could deny the initial enrollment application of a provider or supplier where one of its owners held an ownership interest in a previously enrolled entity with outstanding Medicare debt.  This regulation underscores the importance of the due diligence process in transactions, particularly in the context of new affiliations and joint ventures that involve the formation and initial enrollment of a new provider or supplier.

Felony Convictions

Under current regulations, a provider or supplier’s Medicare enrollment may be denied or revoked if the provider or supplier—or any owner of the provider or supplier—has been convicted of certain felonies within 10 years preceding enrollment or revalidation.  Among the changes to the regulations, CMS has expanded the list of felonies such that any felony conviction that CMS determines to be detrimental to the best interests of the Medicare program and its beneficiaries could be the basis for a denial or revocation.  Further, a felony conviction against a supplier or provider’s managing employee, and not just an owner, may now be a basis of a denial or revocation.  Accordingly, all providers and suppliers should review their existing procedures in place for performing background checks to ensure that managing employees are subject to adequate criminal background screening.

Although CMS has stated that these new regulations will help ensure that “fraudulent” entities and individuals do not enroll in or maintain their enrollment in the Medicare program, all providers and suppliers, however well-intentioned, should be aware of these new regulations and have adequate policies and procedures in place to avoid denial or revocation of Medicare enrollment.  These new regulations are also noteworthy for providers and suppliers involved in acquisitions and other transactions involving the assumption of liabilities of the acquired entity.   

If you have questions regarding these new regulations or other aspects of Medicare enrollment, please contact Jennifer Benedict or Gregory Nowakowski or any one of our Health Care Practice Group attorneys.

A previous version of this alert authored by Jennifer Benedict and Gregory Nowakowski was published by the American Health Lawyers Association. Copyright 2014, American Health Lawyers Association, Washington, DC. Reprint permission granted.