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CMS Issues Final Rule on Medicare Incentive Program and Provider Enrollment Standards

December 5, 2014
AAA Member Advisory
TO:          AAA Membership
FROM:      Brian S. Werfel, Esq., Medicare Consultant
RE:           CMS Issues Final Rule on Medicare Incentive Program and Provider Enrollment Standards

On December 4, 2014, CMS issued a final rule that makes significant changes to the Medicare provider enrollment process.  The final rule was posted in today’s Federal Register and can be accessed at: https://federalregister.gov/a/2014-28505.  These changes are intended to strengthen program integrity, and help ensure that fraudulent entities and individuals are unable to enroll in or maintain their enrollment in the Medicare program.  Several of these changes may directly impact ambulance providers and suppliers. 

The final rule is titled: “Medicare Program; Requirements for the Medicare Incentive Reward Program and Provider Enrollment.”  The provisions of this final rule will take effect on February 3, 2015.  The changes made by this final rule were first proposed in an April 29, 2013 proposed rule.  The American Ambulance Association (AAA) submitted a comment letter on the proposed rule on June 6, 2013.  The AAA’s comment letter can be viewed by clicking here.

Medicare Incentive Reward Program

Section 203 of the Health Insurance Portability and Accountability Act of 1996 required CMS to establish a program to encourage Medicare beneficiaries to report suspected incidences of Medicare fraud and abuse.  Titled the Medicare “Incentive Reward Program,” the program permitted payments to individuals of up to 10% of the amounts recovered, up to a maximum of $1,000. 

In its April 2013 proposed rule, CMS noted that the program has failed to live up to expectations.  Specifically, CMS noted that less than $3.5 million in fraudulent payments has been recovered since the program went into effect in 1998, with individuals receiving less than $16,000 in rewards.  To increase the incentives for individuals to report suspected fraud and abuse, CMS had proposed to dramatically increase the potential rewards.  Under its proposal, CMS would have increased the size of the payments to individuals to 15% of the first $66 million collected.  CMS estimated that these increased incentives would lead to an increase in the number of fines, resulting in annual collections of nearly $24.5 million.

In the final rule, CMS indicated that it received numerous comments on its proposal.  Many commenters expressed concern that the increased rewards would lead to an increase in the number of complaints containing irrelevant or erroneous information, and that the proposal to limit the reward to the first person to report suspected fraud would create a “shoot first, ask questions later” situation.  Commentators also noted that the increased incentives would encourage employee whistleblowers to report their concerns to CMS, rather than using existing internal compliance reporting tools.  Finally, commentators questioned whether CMS had the resources in place to handle the expected increase in tips and complaints. 

In light of these concerns, CMS indicated that it was electing not to implement its proposed changes to the Medicare Incentive Reward Program at this time.  CMS did note that it might choose to implement these changes as part of future rulemaking. 

Limitation on Ambulance ‘Back Billing’

42 C.F.R. §424.520(d) provides that the effective date of billing privileges for physicians, nonphysician practitioners and nonphysician practitioner organizations shall be the later of: (1) the date the filing of a Medicare enrollment application that is subsequently approved by the Medicare contractor or (2) the date the enrolled physician or nonphysician practitioner first began providing services at a new practice location. 

CMS proposed to extend this restriction to ambulance suppliers, effectively placing ambulance suppliers on par with physicians and nonphysician practitioners, who are already subject to this prohibition on “back billing”.  Currently, ambulance suppliers are permitted to obtain billing privileges going back to the date they first began providing services at the new practice location (subject, however, to the existing one-year time limit for submitting claims to Medicare). 

CMS indicated that this constitutes a program integrity measure.  In support of its proposal, CMS noted that ambulance suppliers, as a class, post an elevated risk to the Medicare program.  CMS also cited an “overabundance of ambulance suppliers and an overutilization of ambulance services in particular regions of the country”, as confirmation of its concerns regarding the compliance of ambulance suppliers in the months immediately preceding the filing of a Medicare enrollment application.  CMS estimated that this proposal would save the Medicare program approximately $327 million per year.

In its comment letter, the AAA noted that it understood CMS’ concern that allowing ambulance suppliers to bill for services furnished “well before enrollment” created a potential program vulnerability.  However, the AAA was concerned that a blanket restriction on “back billing” would leave ambulance suppliers without a viable remedy in situations where circumstances beyond the control of the ambulance provider make it impossible to file a Medicare enrollment application prior to the date the ambulance supplier began furnishing services at the new practice location.  The AAA cited examples where an existing ambulance supplier unexpectedly discontinued operations, and a municipality asked the neighboring ambulance supplier to take over operations on relatively short notice.  In these situations, the municipality may issue the new ambulance supplier a temporary license or permit to operate on an interim basis, while waiting on more permanent approvals.  However, the ambulance supplier would not be able to submit a Medicare enrollment without these permanent approvals.  The AAA was concerned that this might result in ambulance suppliers being unable to bill Medicare for services provided during this interim period.  The AAA noted that the possibility of being asked to expand into a new service area on short notice distinguished ambulance suppliers from physicians and nonphysician practitioners, and that the proposed change might make ambulance suppliers less willing to expand into new areas under such exigent circumstances, with potential adverse effects on beneficiary’s access to care. 

Therefore, the AAA asked CMS to consider creating a mechanism to permit ambulance suppliers to obtain retroactive billing privileges in those instances where factors beyond the control of the ambulance service made it impracticable to file the enrollment application at an earlier date.  The AAA proposed that CMS either: (1) permit ambulance suppliers to file a preliminary enrollment at the time they anticipate commencing operations at a new practice location (which could then be supplemented once the ambulance supplier obtains all required operating licenses, vehicles, employees, etc.) or (2) permit ambulance providers to appeal for retroactive billing privileges. 

The AAA also asked CMS to clarify the “date of filing” of a Medicare enrollment application.  Specifically, the AAA asked CMS to recognize the date the Medicare enrollment was initially received by the Medicare contractor as the correct “date of filing.”  Without clarification, the AAA was concerned that Medicare contractors would use the date on which the contractor first deemed the application to be “complete.”  This was intended to address situations where the Medicare contractors requests additional information as part of the enrollment process. 

As part of the final rule, CMS elected to implement its proposal to limit the “back billing” of ambulance claims.  As a result, following the implementation date of this final rule, the effective date of a newly enrolling ambulance supplier’s billing privileges will be the later of: (1) the date of filing of a Medicare enrollment that is subsequently approved or (2) the date on which the ambulance supplier first begins providing services at the new practice location. 

The AAA is pleased to note that CMS agreed that an exception to this general rule was warranted for situations where the failure to file an enrollment application prior to the commencement of operations at the new practice location was the result of circumstances beyond the ambulance supplier’s control.  CMS implemented this exception by revising the existing regulations at 42 C.F.R. §424.521(a) to now include ambulance providers (currently, this regulation applies only to physicians and nonphysician practitioners).  Accordingly, following the implementation date of this final rule, a newly enrolled ambulance supplier will be able to submit claims for services provided at a new practice location for up to: (1) 30 days prior to the effective date of its billing privileges if circumstances precluded enrollment in advance of providing services to Medicare beneficiaries or (2) 90 days prior to the effective date of its billing privileges if a Presidentially-declared disaster (Stafford Act) precluded enrollment prior in advance of providing services to Medicare beneficiaries. 

In the final rule, CMS also clarified that the “date of filing” is the date on which the provider or supplier submitted its CMS-855 application via mail or Internet-based PECOS.  CMS further clarified that a Medicare contractor’s request for additional information does not constitute a final disposition of an enrollment application (and, therefore, that the date the application was submitted would remain the “date of filing”); however, if an application was rejected by the Medicare contractor, that would be a final disposition, and if the application is resubmitted, the date of that resubmission would become the new “date of filing.”  Therefore, so long as an enrollment application is not rejected, the effective date of the supplier’s billing privileges will revert back to the date the enrollment application was first submitted (or the date on which it first began providing services at that location, whichever is later).

Limitation on use of Corrective Action Plans

When a provider or supplier has its billing privileges revoked, current Medicare regulations provide for two possible remedies.  The first is to appeal the revocation; the second would be to submit a corrective action plan (CAP) to its Medicare contractor.  If CMS or the Medicare contractor determines that the provider or supplier is in compliance with Medicare requirements, its billing privileges can be reinstated.  CMS adopted its proposal to limit the availability of the CAP process to revocations based on minor noncompliance with enrollment requirements.  Specifically, CMS had proposed to exclude the use of the CAP process whenever a revocation was based on certain reasons, including: 

• exclusion from the Medicare program of the provider or supplier, or an owner or managing employee of the provider or supplier;
• the felony conviction of the provider, supplier, or an owner (or, as proposed in this rule, a managing employee);
• providing false or misleading information on its enrollment application,
• the failure to disclose a practice location; or 
• evidence, following an on-site review, that the provider or supplier is no longer operational.  Providers and suppliers revoked for one of these reasons would be limited to appealing the revocation of their billing privileges.

The AAA had supported this proposed change, but asked CMS to clarify the definition of a practice location for ambulance services.  The AAA’s concern was that, at the time these changes were proposed, there was no national standard for what defined a “practice location” for ambulance services.  Instead, each Medicare contractor was using its own standard.  

In response to the AAA’s comments, on December 27, 2013, CMS issued Transmittal 499 (Change Request 8544).  That Transmittal clarified that the following constitute “practice locations” for an ambulance supplier:

• each site at which its vehicles are garaged;
• each site at which its personnel are dispatched; and
• its base of operations, i.e., primary headquarters.  Note: CMS indicated that an ambulance supplier can only have one base of operations.   

AAA members are encouraged to review their existing enrollment information with Medicare to ensure that all locations that fall within the above-referenced definition are properly disclosed.  To the extent one or more practice locations are omitted, AAA members are advised to update their enrollment information as soon as possible. 

Revocation of Billing Privileges

In the final rule, CMS elected to finalize its proposal to expand its existing authority to revoke a provider’s or supplier’s billing privileges for engaging in certain abusive billing practices.  Currently, this authority is limited to situations involving the submission of claims for services that could not have been furnished to a specific individual on that particular date of service, including:

• situations where the beneficiary was deceased;
• situations where the directing physician or beneficiary was not in the state or country when the services were allegedly furnished; and
• situations where the necessary equipment was not present when the testing was alleged to have occurred. 

CMS had proposed to expand this authority to encompass situations where it determines that the provider or supplier has engaged in a pattern or practice of billing for services that do not meet Medicare requirements.  This proposal would reflect a shift in CMS’ focus, as the existing authority focused on individual claims, while the new authority would focus on overall billing patterns.  In the proposed rule, CMS identified several factors it would take into account in determining whether to exercise this new authority to revoke a provider’s or supplier’s billing privileges:

• the percentage of claims denied;
• the total number of claims denied;
• the reason for the denials;
• whether the provider or supplier has any history of “final adverse actions”;
• the length of time over which the pattern has continued;
• how long the provider or supplier had been enrolled in Medicare; and
• Any other information regarding the provider or supplier’s specific circumstances that CMS deems relevant. 

In the final rule, CMS elected to retain each of these factors, with the exception of the total number of claims denied.  CMS indicated that it agreed with one commentator that the “total number of claims denied” factor could present a distorted view of the provider or supplier’s billing practices, and therefore elected remove that factor from its list of criteria.

The AAA was generally supportive of the new authority to revoke a provider’s or supplier’s billing privileges in clear-cut cases of fraudulent or abusive billing.  However, the AAA was concerned that, as initially proposed, the new authority lacked certain procedural safeguards to ensure that a provider’s or supplier’s billing privileges were not revoked in error.  The AAA was specifically concerned that Medicare contractors may deny claims incorrectly at the initial level, which are then paid on appeal.  For this reason, the AAA urged CMS to clarify that it would consider the results of the administrative appeals process prior to making any determinations regarding a pattern of abusive billing.  The AAA, along with several other commentators, also urged CMS to provide an expedited appeals process for providers or suppliers that have their billing privileged revoked under this new authority. 

In the final rule, CMS acknowledged the concerns raised by the AAA and other commentators, and indicated that successfully appealed claims would be excluded from consideration.  However, CMS indicated that pending appeals would continue to be considered for purposes of whether a pattern of abusive billing existed.  CMS stated that excluding such pending appeals might encourage providers and supplier to file what it termed “meritless” appeals simply to avoid the revocation of their billing privileges. 

CMS also elected not to provide an expedited appeals process for revocations based on an alleged pattern of fraudulent or abusive billing.  CMS noted that these revocations would be afforded the same appeal rights as providers or suppliers who have their billing privileges revoked for other reasons. 

While the AAA is disappointed that CMS did not create additional procedural safeguards to ensure that billing privileges are not revoked in error, we think it is important for our members to note that, in its discussion of this new authority, CMS reiterated multiple times that it would use this new authority only after what it described as “careful and thorough consideration.”  CMS also indicated that it does not intend to revoke a provider’s or supplier’s billing privileges for inadvertent or sporadic billing errors.  Furthermore, CMS noted that the agency, not its Medicare contractors, would be the ones making such determinations.  Thus, at this point, the expectation is that this new authority will be used sparingly. 

Additional Provisions of Final Rule

CMS also finalized the following changes to Medicare enrollment requirements:

1.  Clarifying that physicians and nonphysician that enroll in the Medicare program simply to order or certify items or services for Medicare beneficiaries are not granted Medicare billing privileges.

2.  Expanding CMS’ authority to deny Medicare enrollment if a provider or supplier, or the owners of the provider or supplier, owned or were otherwise affiliated with a provider or supplier that owes a preexisting debt to Medicare. 

3.  Permitting Medicare to deny an enrollment application and/or revoke a provider’s or supplier’s billing privileges, if the provider’s or supplier’s managing employee was convicted of a felony within the past 10 years.  Currently, enrollment can only be denied or revoked based on a felony conviction of the provider or supplier itself, or the owner of the provider or supplier.  CMS is also expanding the list of felonies that could lead to a denial or revocation of billing privileges. 

4.  Limiting the period of time Medicare providers or suppliers would have to submit claims for past services to 60 days following the effective date of its billing privileges.  Currently, only physician organizations, physicians, nonphysician practitioners and independent diagnostic testing facilities are subject to this 60 day limit.  The 60 day limit would all provider and supplier types, with the exception of home health agencies.  Home health agencies would be required to submit claims no later than 60 days after the later to occur of: (i) the effective date of its revocation or (ii) the end of the last payable episode. 

5.  Clarifying that the re-enrollment bar following the revocation of a provider’s or supplier’s billing privileges starts 30 days after CMS or its contractor mails notice of its revocation determination to the provider or supplier.

As noted earlier, the final rule will take effect on February 3, 2015.

Guaranteed cash flow during transition.