By Victoria H. Johnson and Edward J. Cyran
On February 3, 2015, the authority of the Centers for Medicare & Medicaid Services (CMS) to deny Medicare enrollment and revoke Medicare billing privileges of providers and suppliers significantly expanded. All physicians, and especially solo practitioners and physicians in group practices, should be aware that they could now be held responsible by CMS for overpayments or other outstanding debts of their prior practices or other Medicare billing entities to CMS. Providers should also know that CMS may deny enrollment or revoke a provider or supplier’s Medicare billing privileges if the provider or supplier, or an owner or a managing employee of the provider or supplier, has been convicted within the last 10 years of any state or federal felony which CMS determines is detrimental to the best interests of the Medicare program and its beneficiaries.
CMS proposed Rule 6045-F on April 29, 2013. Following a comment period, the Rule was finalized on December 5, 2014, and took effect on February 3, 2015. (The full text of the Rule may be accessed here.) The purpose of the Rule is to strengthen the integrity of the Medicare program and curtail the enrollment of fraudulent providers. It serves as the latest effort by CMS to ensure that taxpayer dollars are spent on medically necessary and properly billed services. However, the changes made by the Rule can ensnare unaware physicians and groups.
The Rule implements various provider enrollment requirements, three of which are of particular importance to physicians and physician groups:
1. Unpaid Medicare Debts: The Rule expressly grants CMS the ability to deny the enrollment of any provider or supplier, if such individual or entity was previously affiliated with a provider or supplier that has unpaid Medicare debt and left such provider or supplier within one year of the termination of the provider or supplier’s Medicare enrollment. However, CMS will not deny enrollment unless it determines that the uncollected debt poses an undue risk of fraud, waste or abuse. There are two exceptions to this rule: (1) if the enrolling provider or supplier, or an owner of the provider/supplier, agrees to a repayment schedule for the entire debt in accordance with CMS regulations; or (2) if the enrolling provider or supplier, or an owner of the provider/supplier, repays the debt in full.
According to CMS, the purpose of this rule is to prevent the owner of a provider or supplier that has incurred “substantial debt” to Medicare from exiting the Medicare program and attempting to re-enroll under a new business entity without paying off the outstanding debt. However, the language of the rule makes it difficult for any physician-owner of a practice with any amount of Medicare debt to enroll a new practice or provider site in Medicare. CMS states that it will be careful and judicious in its decision-making process, and will consider various factors, including, but not limited to, the amount of the debt, the length of time during which the owner owned the prior entity, and whether the debt is currently being appealed. Nonetheless, CMS retains significant discretion over each decision.
As a result of this new rule, physician practice owners who are considering dissolving their prior practice entity and terminating its Medicare enrollment should prioritize addressing any outstanding Medicare debt. This is particularly true if the physician has sold his/her practice and transitioned to employment with a hospital or other group. Steps may include: (1) appealing the debt; (2) entering into a repayment program; or (3) paying the debt in full. In addition, physician groups considering the admission of a new owner should conduct proper due diligence to make sure that the physician’s prior practice(s) have no outstanding Medicare debt.
Physicians should note that this change applies to all providers and suppliers, regardless of type. Thus, it extends to physician ownership in other types of suppliers such as ambulatory surgical facilities.
2. Conviction of a Felony. The Rule now grants CMS the ability to deny the enrollment, or revoke the billing privileges, of any provider or supplier whose managing employee has been convicted of a state or federal felony for which denial or revocation would otherwise be permitted under the existing regulations if such felony had been committed by the provider, the supplier or an owner thereof. (Under the previous regulation, enrollment could not be denied or revoked based on a managing employee’s felony conviction.)
3. History of Felony Conviction: The Rule clarifies that CMS may deny the enrollment or revoke the Medicare billing privileges of any provider or supplier if that provider, supplier, or any owner or managing employee of the provider/supplier, was, within the last 10 years, convicted of any state or federal felony which CMS determines is detrimental to the best interests of the Medicare program and its beneficiaries.
Like its decisions on denial or revocation for prior unpaid Medicare debts, CMS states that it will be judicious in its decision-making regarding the denials or revocations of providers or suppliers as a result of the conviction of an owner or managing employee of a felony offense. According to CMS, not every felony conviction will automatically result in a denial or revocation. However, every felony offense committed by an owner or managing employee is in question, even those felonies relating to drugs, alcohol or traffic violations. Further, CMS will not make exceptions to the rule for reasonable efforts at due diligence by a provider or supplier. The provider or supplier is responsible for determining the criminal histories of its owners and managing employees.
With CMS’ new ability to deny enrollment or revoke billing privileges due to the felony history of managing employees, as well as its reiteration of the broad nature of actionable felony offenses, it is more important than ever before for physicians and physician groups of all sizes to conduct thorough background checks on prospective and existing owners and managing employees. Note that the definition of “convicted” includes: (1) the entrance of a guilty plea or plea of nolo contendere; (2) the participation in a deferred adjudication or similar program; and (3) any instance where the felony conviction has been expunged or otherwise removed from the individual’s record. If any existing owner or managing employee has been convicted of a felony offense within the last 10 years that previously would not have been considered by CMS, the group should consult legal counsel immediately to help determine whether reporting the felony offense is required and what further action should be taken. Penalties for not reporting final adverse actions against a provider, supplier, or owner or managing employee can include revocation or suspension of the provider or supplier’s Medicare billing privileges.
As a result of these changes to provider enrollment, certain situations that may not have been a significant concern for physicians and groups now must become areas of focus. The stakes of being denied Medicare enrollment or having Medicare billing privileges revoked may be too high for most providers and suppliers to ignore. If you believe that your practice needs to take steps to address these changes or wish to inquire further into these and other changes to Medicare enrollment by Rule 6045-F, we recommend that you contact your legal counsel.
Victoria H. Johnson is a partner with Fox Rothschild LLP and a member of the Health Law and Corporate practice groups. She can be reached at firstname.lastname@example.org. Edward J. Cyran is an associate with the firm and focuses his practice on corporate and health law matters. He can be reached at email@example.com.
(Image by Ken Teegardin via Flickr.)