CMS Issues Final Rule in Response to Alleged Catheter Fraud

WASHINGTON—The Centers for Medicare and Medicaid Services (CMS) issued a final rule in response to reports of alleged catheter fraud. The final rule, “Medicare Program: Mitigating the Impact of Significant, Anomalous and Highly Suspect Billing Activity on Medicare Shared Savings Program Financial Calculations in Calendar Year 2023,” is part of a strategy aiming to address what the agency called significant, anomalous and highly suspect (SAHS) billing activity within the accountable care organizations (ACOs) reconciliation. 

The new rule comes after a $2 billion urinary catheter scam was discovered in early 2024. The proposed rule was issued in June 2024. In early 2023, CMS identified a rise in urinary catheter billings, which was attributed to a small group of durable medical equipment supply companies. CMS determined that the beneficiaries did not receive catheters and were not billed directly, physicians did not order these supplies and supplies were not needed. 

The rule finalizes policy changes for assessing performance year (PY) 2023 financial performance of shared savings program ACOs; establishing benchmarks for ACOs starting agreement periods in 2024, 2025 and 2026; and calculating factors used in the application cycle for ACOs that are applying to enter a new agreement period beginning on January 1, 2025. Additionally, the rule continues ACO participation in the program for PY 2025, as a result of SAHS billing activity for the two intermittent urinary catheter codes: A4352 (intermittent urinary catheter; coude tip, with or without coating) and A4353 (intermittent urinary catheter, with insertion supplies) represents SAHS billing activity. 

A proposal in the calendar year (CY) 2025 physician fee schedule addresses SAHS billing activity for CY 2024 and onward. The final rule fact sheet summarizes the Medicare Shared Savings Program policies that are included in this final rule. 

CMS uses payment amounts on Medicare Parts A and B claims to calculate various factors used in shared savings program financial calculations, including expenditures for people assigned to an ACO, expenditures for the national assignable fee-for-service population and the assignable population in an ACO’s regional service area, as well as in calculations used to determine ACO revenue status. 

Generally, a health care common procedure coding system (HCPCS) or current procedural terminology (CPT) code exhibits SAHS billing activity when there is a significant increase in claims, either in volume or dollars or with national or regional impact. These billing activities represent a deviation from historical utilization trends that are unexpected, not clearly attributable to reasonably explained changes in policy or the supply or demand for covered items or services.