Final Fraud Rule Challenges Providers to Be ‘Perfect’

WASHINGTON — A 111-page final rule expanding the power of
the Department of Health and Human Services to fight fraud could
bring significant changes to HME providers.

And those changes, said Neil Caesar of the Health Law Center in
Greenville, S.C., could depend on where your business is in the
country, as well as your history.

On Feb. 2, CMS and the Office of Inspector General published the
final rule encompassing additional screening
requirements, application fees, temporary enrollment moratoria,
payment suspensions and compliance plans. Effective March 25, 2011,
the new rule implements provisions of the Affordable Care Act and
applies to a variety of entities in addition to HME, including
veteran’s hospitals, occupational and physical therapists,
physicians, health care agencies and hospitals.

“Thanks to the new law, CMS now has additional resources to help
detect fraud and stop criminals from getting into the system in the
first place,” acting CMS Administrator Donald Berwick, M.D., said
in an HHS release. “The Affordable Care Act’s new authorities allow
us to develop sophisticated, new systems of monitoring and
oversight to not only help us crack down on fraudulent activity
scamming these programs, but also help us to prevent the loss of
taxpayer dollars across the board for millions of American health
care consumers.”

The ACA also provides an additional $350 million to ramp up the
anti-fraud efforts.

Caesar said it might take a while before the full impact of the
new rule is realized. “It’s hard to anticipate at this point how
invasive this power will be,” he said, adding that in “finding the
right parameters for this new initiative, there are going to be
some excesses and some hyper-strictness that will create some
burdens.”

The new rule empowers CMS, among other things, to:

• Create a rigorous screening process for providers and suppliers
  enrolling in Medicare, Medicaid and the Children’s Health Insurance
  Program to keep fraudulent providers out. “Types of providers and
  suppliers that have been identified in the past as posing a higher
  risk of fraud, for example, durable medical equipment suppliers,
  will be subject to a more thorough screening process,” according to
  an HHS fact sheet.

• Establish a new enrollment process for Medicaid and CHIP
  providers. States will have to screen providers who order and refer
  to Medicaid beneficiaries to determine if they have a history of
  defrauding government. Those that have been kicked out of Medicare
  or another state’s Medicaid or CHIP will be barred from all
  Medicaid and CHIP programs.

• Temporarily stop enrollment of new providers and suppliers.
  “Medicare and state agencies will be on the lookout for trends that
  may indicate health care fraud — including using advanced
  predictive modeling software, such as that used to detect credit
  card fraud,” HHS said. “If a trend is identified in a category of
  providers or geographic area, the program can temporarily stop
  enrollment as long as that will not impact access to care for
  patients.”

• Temporarily stop payments to providers and suppliers in cases of
  suspected fraud. Under the new rules, if there has been a credible
  fraud allegation, payments can be suspended while an action or
  investigation is under way.

Know Your History

Stakeholders cautiously embraced parts of CMS’ rule when it was
proposed in September, believing that some elements would go
far in keeping fraudulent companies from entering the system.
However, while industry leaders were still digesting the lengthy
rule on Friday — the American Association for Homecare’s
Regulatory Council is analyzing the new rule, said Stacey Harms,
manager of government affairs — they said providers do need
to be wary of some of its final provisions.

“It is tied to all providers, not just [durable medical
equipment providers],” said Caesar. “DME is going to likely lead
the way for the pilot project — which quite possibly means
that [implementation] will be geographically focused.”

In other words, he said, providers in Florida, New York,
Illinois, Texas and California — what Caesar calls “the big
five” areas previously targeted by the government as hotbeds for
fraud — could be the first to be affected by the rules.
“During the pilot program and probably after, suppliers located in
an area with a history of fraud will be scrutinized more
frequently,” he predicted.

Others who could face rigorous scrutiny, according to
Caesar:

• Providers with a bankruptcy in their history;
• Providers who have been subject to government
  investigation;
• Providers who have had a significant number of problems with
  the National Supplier Clearinghouse;
• Providers with overpayments.

“It is likely that history will matter,” Caesar said. “I also
think that product lines are going to matter. Diabetic providers
will be under more scrutiny than an orthotist or prosthetist, power
mobility providers under more scrutiny than [those who carry]
commodes and crutches and so forth.”

He added that savvy HME owners planning to grow might need to
consider whether it is worth it to expand into a category that
places them in the line of fire. “Are you going to expand to a
market of increased scrutiny?” Caesar asked.

Expanding to anything could be a problem.

Under the final rule, current providers opening new locations
could be prevented from doing so under the “stop enrollment”
provision, which allows CMS to halt enrollment to new providers if
fraud is indicated within either a category of providers or a
geographic area — and “new providers” includes established
providers opening new locations.

Also under the final rule, providers would be assigned to one of
three “fraud risk” categories: limited risk, moderate risk and high
risk. The range of screening tools such as license verifications,
database checks, fingerprinting, criminal background checks and
unscheduled or unannounced site visits escalates according to the
category.

CMS places enrolled DME providers in the moderate-risk category,
while new enrollees are designated as high-risk. In addition to all
current screening procedures, the latter would demand
fingerprinting and background checks on owners, authorized
officials or managing employees. Currently enrolled providers
opening new locations are also included in that “high” tier.

AAHomecare took issue with that provision when the rule was
proposed. “One important concern we have is that CMS proposes to
lump together new locations of currently enrolled, compliant
providers and newly enrolling providers with no enrollment history
as a Medicare provider and that may truly pose high risks for the
program,” the association said in comments to CMS. “We believe that
new locations of currently enrolled Medicare DMEPOS providers
should be distinguished from other providers that do not have an
established record with the Medicare program.”

However, CMS said in its final rule, “We disagree. As previously
stated, the addition of a new location is considered an initial
enrollment. Consequently, a new DMEPOS location will be subject to
the ‘high’ level of categorical screening.”

Another issue that could be troublesome, according to Caesar, is
CMS’ new power to stop payments if there is a “credible fraud
allegation.” But exactly what is that?

Under the final rule, a “credible” allegation of fraud could
come from any source, including fraud hotline complaints, claims
data mining or patterns identified through audits or other
investigations. “A patient complaint on questionable billing could
certainly be ‘credible’ to them,” Caesar said. “[Currently, CMS]
goes quickly to prepayment review. So the standard to date for
credible fraud is a pretty low standard … It’s a very low
threshold for investigators to cross.”

Caesar’s advice to providers is to try to be as perfect as
possible by submitting clean claims, incorporating the costs of
government scrutiny into their business plans — that is,
budgeting for such things as audits — and improving their
documentation.

“Clearly, part of this mandate is that they are pushing for
people to demonstrate appropriateness quickly and thoroughly,”
Caesar said. “Documentation needs to be in place. It is good that
they are also talking about this in the context of physicians
needing to have documentation on hand.”

That could help providers, he said, by making it easier to get
the documentation they need.

View the final rule in the Feb. 2 Federal
Register.

Read an HHS fact sheet on the new rules.