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New Rule Aims to Reduce Fraud, Assess Risk of Medicare Providers

As the impact of the Affordable Care Act (ACA) on providers continues to unfold, the tools the legislation provides to reduce fraud, waste and abuse are being implemented. The Centers for Medicare & Medicaid Services (CMS) has issued a final rule, effective March 25, 2011, that increases the scrutiny placed on medical service and medical supply providers applying for enrollment or revalidation as a Medicare provider.

Based on CMS experience with various types of providers and its assessment of risk of fraud, waste and abuse, providers and suppliers will be classified into limited-, moderate- and high-risk categories. Each category has corresponding screening levels. Click here to see where you fall in the risk matrix, along with related screening requirements.

Screening levels for providers and suppliers in the limited-risk category are largely unchanged from existing screening measures. These procedures include verification of provider-specific requirements as established by Medicare, license verifications and various database checks. Moderate-risk providers and suppliers will be subject to additional screening procedures, including unannounced site visits. Finally, the screening procedures for providers and suppliers in the high-risk category will be extended to include fingerprint-based criminal history checks of key individuals, including owners and managing employees.

To cover the costs of additional screening procedures, CMS will begin charging institutional providers a $505 application fee in 2011; this fee will be adjusted annually for inflation. If the fee is not submitted, the application will be rejected or billing privileges revoked, as applicable. “Institutional provider” includes any provider or supplier submitting a paper Medicare enrollment application using the CMS-855A form, CMS-855B form, not including physician and nonphysician practitioner organizations, CMS-855S form or the associated Internet-based Provider Enrollment, Chain, and Ownership System (PECOS) enrollment applications.

The final rule also enables CMS to impose incremental six-month moratoria on the enrollment of new Medicare providers and suppliers in certain situations, including:

  • Instances where CMS has identified trends that could be indicative of fraud, waste and abuse, including a disproportionate number of providers relative to the number of beneficiaries and rapid increase in enrollment applications within a particular provider category
  • A state-imposed moratorium on enrollment in a particular geographic area or a particular provider type
  • CMS, in conjunction with the Office of Inspector General (OIG), identifying a significant risk of fraud, waste and abuse in a particular provider type or geographic area

The ACA also gives CMS greater authority in the suspension of payments to providers during an investigation of credible fraud allegations. Existing rules allowing CMS to suspend payments for 180 days with a one-time 180-day extension will be relaxed and will no longer apply if the case is being considered by the OIG for administrative action. Extensions beyond 180 days also can be granted if requested by the U.S. Department of Justice due to an ongoing investigation.

CMS efforts to reduce fraud, waste and abuse continue to evolve, and health care providers should consider the implications of this final rule. For more information, please contact your BKD advisor.

This post was written by:

Chris has more than nine years of experience in the health care industry. He provides a variety of attest and consulting services to hospitals and other health care entities, including annual financial statement audits, cost report preparation and financial feasibility studies.

2 Responses to “New Rule Aims to Reduce Fraud, Assess Risk of Medicare Providers”

  1. avatar Karen LaFontaine says:

    Our hospital outpatient pharmacies want to get DMEPOS numbers to fill prescriptions for diabetic supplies. Do you think we would get rated as a hospital or as a DMEPOS supplier? I wonder whose fingerprint they’d want?

  2. avatar BKD CPAs & Advisors says:

    CMS has indicated that ownership will not be a factor in the risk level assignment. This same question came up during the comment period. See the question and response below:

    “Comment: Several commenters supported the placement of hospitals in the limited screening level. However, they added that high risk or moderate risk providers and suppliers that are members of, operate as a part of, or are owned by a hospital or a health system, should instead fall under the same limited risk assignment that CMS proposes for hospitals.

    Response: Again, for reasons already mentioned, we have declined to subcategorize individual providers and suppliers based on their ownership.”

    Should CMS require fingerprints for a new DMEPOS provider owned by a hospital, they will likely request those of the managing employee listed on the application.

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Recent Comment

  • Karen Vance says:
    This would be under §484.18 of the Conditions of Participation describing regulations for the Plan of Care. Below is the Standard that addresses your issue: "§484.18(b) - Agency professional staff promptly alert the physician to any changes that suggest a need to alter the plan of care." From the State Operations Manual (guidance for state surveyors) "The
    February 24, 2011 on Webinars

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