Medicare Revocations and Enrollment Denials: Proposed Rule Adds False Claims Act Judgments and Misdemeanors; Creates New “Stay of Enrollment”

Continuing a now annual tradition, the Centers for Medicare & Medicaid Services (CMS) has included expansions and enhancements to its authorities to deny enrollment or revoke a provider’s Medicare billing privileges (currently listed in 22 different categories) in Section III.K of the Physician Fee Schedule Proposed Rule (CMS-1784-P, referenced here as “the Proposed Rule”).

The Proposed Rule is expected to be published in the Federal Register on August 7, 2023. Comments must be submitted no later than September 11, 2023 in the manner specified in the Proposed Rule.

Summary of the Potential Impact

The proposed revisions include several provisions that could potentially impact providers and suppliers, and for sake of brevity, we highlight only those we consider to be most significant.

Assuming adoption of the Proposed Rule, and as discussed in more detail below, providers and suppliers should be especially cautious when assessing risks of association with any owners, managing employees or organizations, officers or directors whose backgrounds reflect a misdemeanor conviction within the prior 10 years, or a false claims act (FCA) judgment (not settlement) in the prior 10 years. Similarly, those now considering misdemeanor pleas or proceeding to trials on FCA cases should be aware that these actions may impact their or their affiliate’s future Medicare participation.

The Proposed Rule also would expressly provide that a violation of applicable provider and supplier standards would be grounds for revocation for Independent Diagnostic Testing Facilities (IDTFs), durable medical equipment suppliers (DMEPOS), opioid treatment programs, home infusion therapy suppliers, and Medicare diabetes prevention programs.

Finally on our list of “top [enrollment] hits” of the Proposed Rule is a new enrollment status, called a “stay of enrollment” that (as CMS puts it) “would represent, in a sense, a ‘pause’ in enrollment, during which the provider would still remain enrolled in Medicare” but would not receive payment for items or services furnished during this period.

Background of Enrollment Authorities

CMS’ actions against Medicare billing privileges are separate and distinct from the actions taken by the Office of Inspector General (OIG) under its mandatory and discretionary exclusion authorities. More specifically, CMS may revoke billing privileges even if OIG has declined to exercise its discretion to exclude a provider. According to the Health Care Fraud and Abuse Control Report for FY 2021, CMS deactivated 123,000 enrollments, and revoked 2,290 enrollments during the applicable period.

As defined in 42 C.F.R § 424.502, a revocation “means that the provider or supplier’s billing privileges are terminated.” (All references to regulations contained in this article can be found in Subpart P of Part 424, although the Proposed Rule itself now directly incorporates some requirements outside of Part 424, arguably making them “Conditions for Medicare Payment” as Part 424 is titled.) After billing privileges are terminated, the provider or supplier is subject to an enrollment bar of a minimum of one (1) year to a maximum of ten (10) years. CMS may add additional time to the reenrollment bar, even if that makes the time exceed 10 years, if it finds that a provider or supplier is attempting to circumvent its existing reenrollment bar by enrolling in Medicare under a different name, numerical identifier, or business identity. At the conclusion of the reenrollment bar period, the provider or supplier may reapply – but that application will be reviewed in the context of 15 grounds for denial, some of which parallel the grounds for revocation.

The effective date of a revocation is 30 days after notice is mailed to the provider or supplier, EXCEPT if the revocation is based on exclusion or debarment, a felony conviction, license suspension or revocation, or a practice group location is determined to be non-operational. With respect to the latter categories for revocation, the effective date will be the date of the triggering action (e.g., the date of the felony conviction). The Proposed Rule includes significant additions and revisions to the Effective Date regulation.

The Proposed Changes (in brief)

• Misdemeanor Conviction. A Medicare enrollment application could be denied, or an existing enrollment revoked, if a provider or supplier, or any owner, managing employee or organization, officer, or director, has been convicted (as the term is defined in 42 C.F.R. § 1001.2) of a misdemeanor under Federal or State law within the previous 10 years that CMS deems detrimental to the best interests of the Medicare program and its beneficiaries. The regulation would state that these offenses include, but are not limited to, fraud or other criminal misconduct involving the provider or supplier’s participation in a Federal or State health care program; assault, battery, neglect or abuse of a patient; and any other misdemeanor that places the Medicare program or its beneficiaries at immediate risk.
• False Claims Act Judgment. CMS clearly states that this revocation and denial provision would only apply to a judgment (i.e., a final adjudication of liability), and not a civil settlement. CMS could revoke or deny the enrollment if the provider or supplier, or any owner, managing employee or organization, officer or director had a civil judgment imposed against them within the previous 10 years. CMS identifies several factors it would consider in applying this authority, including the degree of the owning or managing party’s control over the provider or supplier (e.g., percentage of ownership, scope of day-to-day operational authority).
• Violation of Provider and Supplier Standards. As noted above, this revocation and denial provision will apply to various categories of providers/suppliers that have standards for enrollment. For example, for IDTFs and DMEPOS suppliers, the standards include requirements for maintenance of liability coverage, solicitation of patients, and customer service requirements.
• Effective Dates for Revocations. Key changes to this provision clarify that a retroactive date of revocation would apply in the following new categories, and would track the date of the underlying “trigger” action: (1) revocations for misdemeanor convictions; (2) revocations based on a State license surrender in lieu of further disciplinary actions; (3) revocations based on termination from a Federal health care program other than Medicare; (4) revocations based on termination of a provider agreement (some complicating details should be reviewed to determine applicability to a particular situation); (5) revocations based on a violation of provider and supplier standards – where the trigger date will depend upon the specific action resulting in the standard or condition violation.
• Stay of Enrollment. CMS notes that in some situations, a revocation or deactivation of billing privileges may be a harsher remedy than is merited by the facts and is seeking to establish a “middle ground between a deactivation and non-action on our part” that could be available at CMS’ discretion (and not required as a predicate step for deactivation or revocation). For the stay to be implemented, the provider or supplier must be non-compliant with at least one enrollment requirement; and CMS must ascertain that the provider or supplier can remedy the non-compliance via the submission of an appropriate enrollment report (Form CMS-855, Form CMS 20134, or Form CMS-588, change of information or revalidation application). When a stay period is imposed, the provider or supplier would not receive payment for services or items furnished during this period. A stay period would last no longer than 60 days. CMS contemplates that the documentation required to remove the stay would produce less burden for the provider or supplier and could be processed more quickly by the Medicare contractor. A rebuttal process will mirror that for deactivations and payment suspensions.

Parties concerned with the above revisions may wish to make timely comments. Compliance programs should review the provisions and assess the increasing compliance risks that come with these proposals.

Foley is here to help you address the short- and long-term impacts in the wake of regulatory changes. We have the resources to help you navigate these and other important legal considerations related to business operations and industry-specific issues. Please reach out to the authors, your Foley relationship partner, or to our Health Care Practice Group with any questions.