Signed, sealed, denied: buyer beware
by Sharon Briggman
April 24, 2014

The implementation of competitive bidding and ongoing Medicare cuts and audits have had a devastating impact on many HME providers. As a result of these recent challenges, many HME companies have been forced to diversify and find new sources of revenue in mergers and acquisitions. While mergers and acquisitions are a growing reality, it’s important for both prospective buyers and prospective sellers to understand that the provider enrollment process continues to be one of the most effective safeguards used to protect the Medicare Program. Results of an audit conducted by the Office of Inspector General (OIG) identified several deficiencies with the supplier enrollment process for DME suppliers. As a result of their findings, several recommendations were made to the Centers for Medicare & Medicaid Services (CMS), one of which included revising the enrollment application form. In addition to the OIG report, the Balanced Budget Act (BBA) of 1997 included amendments to sections of the Social Security Act, requiring suppliers and providers to disclose additional information such as Employer Identification Numbers (EIN) along with applicable Social Security Numbers (SSN) along with pertinent business affiliations. The term “owner” was also defined as “any individual or entity that has any partnership interest in, or that has a 5 percent or more direct or indirect ownership interest in the applying provider or supplier.” Enrollment into the Medicare Program is the role of the Centers for Medicare & Medicaid Services (CMS) contractors. Often viewed as the gatekeeper of entry into the Program, CMS contractors continue to enforce a myriad of program integrity initiatives based on applicable legislation.

The Medicare Enrollment Process

As a part of its enrollment process, CMS requires all new providers and suppliers seeking reimbursement under the Medicare program for health care items and services to submit the appropriate CMS Form 855 for the purpose of enrollment into the Medicare Program. Once enrolled, the provider or supplier receives their billing privileges along with an applicable billing number. The CMS-855 enrollment process is conducted through the Medicare Administrative Contractor (MAC) and the National Supplier Clearinghouse (NSC) for DME suppliers. As a part of their ongoing initiative to ensure that all current or potential providers and suppliers are qualified to provide services to Medicare beneficiaries, CMS recently published an article which instructs Medicare Contractors to deny newly enrolling or change of ownership (CHOW) applications when an existing or delinquent overpayment exists. As this is debt owed by the debtor to the United States (US) Government or US Treasury. This statue applies to an owner of a current provider, supplier, physician or non-physician practitioner. It does not apply to hospitals. On Oct. 17, 2013, the Centers for Medicare & Medicaid Services (CMS) published a revised MLN Matters article MM8039. The article notified providers and suppliers of the following—under 42 C.F.R. § 424.530(a)(6), “an enrollment application for a new enrollment or a change of ownership (CHOW) may be denied if the current owner of the applying provider or supplier, or the applying physician or non-physician practitioner, has an existing or delinquent overpayment that has not been repaid in full at the time the application was filed.” The “owner” is defined as any individual or entity that has any partnership interest in, or that has a 5 percent or more direct or indirect ownership interest in the applying provider or supplier. The guidance outlined in the Oct. 17, 2013, clarifies CMS’ initial guidance on May 31, 2013, which instructed the MACs to deny the enrollment applications regardless of the reason for the overpayment. CMS’s updated guidance now indicates that enrollment denials are not appropriate when overpayments are being offset, appealed or are on a Medicare approved plan of repayment. Upon receipt of the applicable CMS-855 Form, the Medicare contractor will determine if there is an existing or delinquent Medicare overpayment. If an owner, physician or non-physician practitioner has such an overpayment, the contractor shall deny the application, using 42 CFR 424.530(a)(6). CMS interprets the rule to apply to an entity’s owners collectively. One owner’s overpayment liability will not be attributed to the other owners of an entity submitting an initial enrollment or CHOW application. The contractor cannot deny the application based on the one owner’s overpayment. Example 1—Dr. Ramia was set up as a sole proprietorship (Ramia Medicine). He incurs a $60,000 overpayment. He closes his business and terminates his enrollment with Medicare. Eight months later, Dr. Ramia decides to enroll as an LLC. He has 25 percent ownership in this new business, and there’s a new name, RM’s Medicine, LLC. A denial in this case would not be appropriate because the provision applies to all owners collectively. The initial overpayment of $60,000 was attached to Dr. Rami. Example 2—Dr. Ramia was set up as a sole proprietorship (Ramia Medicine). He incurs a $60,000 overpayment. He closes his business and terminates his enrollment with Medicare. Eight months later, Dr. Ramia decides to enroll as a sole proprietorship, his practice name is RM’s Medicine. A denial is warranted because §424.530 (a)(6) applies to physicians and the $60,000 overpayment was attached to him as the sole proprietor.

Supplier Provider Business Transactions

Various types of business transactions between suppliers and providers can have a significant impact on the type of information an organization must furnish on the CMS-855. A careful review of potential transactions will ensure the correct business structure is established.

Business Structures

Sole Proprietorships One person owns all of the business’s assets, and it is not incorporated. Partnerships An association of two or more persons/entities who carry on a business for profit. Each partner in a partnership is an owner. Limited Liability Companies (LLC) A legal entity that is neither a partnership nor a corporation but has characteristics of both. Joint Ventures Two or more persons/entities combine efforts in a business enterprise and agree to share profits and losses. Corporations An entity that is separate and distinct from its owners (called stockholders or shareholders)

Before You Sign, Seal and Shake on a Transaction

Due to the continuing enrollment changes, it is imperative that providers and suppliers remain attentive and vigilant with regards to provider enrollment updates as well as pending initiatives. Ensure that information on the CMS-855 is complete, correct, and current. In conclusion, prior to entering into a transaction with another supplier or provider, check to ensure that the supplier is actually accredited for the applicable products and services listed on their CMS-855.