Adds Another $250 Million to Combat Medicare Fraud and Errors

The new health reform legislation signed by President Obama on March 23 (H.R.3590), plus the reconciliation “fixes” enacted on March 25 (H.R. 4872) provide $250 Million of additional funding for Medicare audits and enforcement, create new federal enforcement tools, create a new Stark self-disclosure process, mandate compliance and return of overpaymentsby all providers, and expand the role of Recovery Audit Contractors (RACs) to include pursuit of improper payments in Medicaid claims, for all 50 states.

RACs in Medicaid

The expansion of the permanent RAC program to include all Medicaid claims has been enacted without a demonstration program, to determine its feasibility. Since each state handles its Medicaid program differently, there is a huge potential for confusion and errors, that could cost countless hours and dollars to alleviate. Nevertheless, states will be required to hire the RACs by year end to identify and recoup both under- and overpayments for Medicaid.

Additional Integrity Efforts

The new legislation adds $250 million over the next 10 years to the Health Care Fraud and Abuse Control funds and integrity programs to fight fraud and abuse. Among those efforts, the reform law:

• Creates a data repository for CMS to match claims with agencies such as the Social Security Administration and Veterans Affairs to identify fraud and abuse;
• Requires that overpayments be reported and returned 60 days after they are identified;
• Withholds federal Medicaid matching payments for states that fail to report enrollee encounter data in the Medicaid Statistical Information System;
• Requires that orders for items or services be prescribed by a Medicare-enrolled physician or other eligible professional (for orders made on or after July 1, 2010);
• Requires physicians to maintain and provide documentation upon request for certifications for durable medical equipment and home health services, for orders made on or after Jan. 1, 2010;
• Requires physicians to have a face-to-face encounter with a patient before prescribing DME or home health services, for those prescribed after Jan. 1, 2010;
• Increases (to $50,000 for each false record or statement) civil monetary penalties for making false statements to federal health care programs or for delaying inspections, with these provisions applicable to acts committed on or after Jan. 1, 2010;
• Suspends payments during fraud investigations; and
• Allows HHS to place a temporary moratorium on enrollment of new providers and suppliers in Medicaid if it’s determined that this will prevent or combat fraud, waste or abuse.

Stark Self-disclosure Restored

The new law restores the self-disclosure process for Stark violations, requiring the Department of Health & Human Services (HHS) to create a Stark self-disclosure process within six months. The law also allows penalties for violating Stark to be reduced, according to (1) the nature and extent of the improper or illegal practice; (2) the timeliness of such self-disclosure; (3) the cooperation in providing additional information related to the disclosure; and (4) such other factors as HHS considers appropriate.

Last year, an Open Letter from the Inspector General to Healthcare Providers put an end to provider self-disclosures to OIG for Stark-only violations. After that letter was published on March 24, providers could still reveal Stark violations to OIG, hoping to get reduced penalties, but only if they were also supplying self-disclosure of kickback violations.

Further, regarding kickbacks, the new law clarifies that claims submitted to Medicare which include items or services resulting in violations to the anti-kickback statute do in fact constitute false or fraudulent claims, and a person submitting a false or fraudulent claim can be held accountable for committing a violation, and does not have to have specific intent to commit any violation.

Clarifications in the False Claims Act

The False Claims Act received clarification of some ambiguous language in its “public disclosure” section. In the new law, the Department of Justice can now object when courts dismiss claims just because the same allegations were publicly disclosed in federal hearings, congressional reports or investigations, or through the news media. Legislators say this will resolve differences among federal courts, so that lawsuits won’t be dismissed just because the same or similar information is contained in public reports.

New Providers To Be Closely Monitored

Under the law, HHS will establish new procedures to screen Medicare, Medicaid and CHIP providers and suppliers — again, within six months. The procedures will now include cross-checking state licensure organizations, conducting criminal background checks, fingerprinting, performing unannounced visits, etc. New providers and suppliers could now have a period of enhanced oversight, lasting from 30 days to as much as a year. During that time, they could be subject to prepayment reviews and even payment caps. Also, HHS may now adjust payments of providers and suppliers who have past-due obligations to the IRS.

Disclosure requirements for providers and suppliers may be increased when applying for Medicare enrollment or revalidation. Applicants must disclose any current or previous affiliation with a provider or supplier who has uncollected debt, has been suspended or excluded from a federal health care program, or who has had billing privileges denied or revoked.

Further, as a condition of enrollment in Medicare, providers and suppliers must establish compliance programs in line with a timeline to be established by HHS. Previously, in some states, such as New York, providers were already required to have compliance programs in place. At the federal level, the Deficit Reduction Act mandated certain aspects of compliance programs, such as employee training requirements, but this new law seems to build on those requirements.

DME Payments Can Be Withheld for 90 Days

The reconciliation amendments to the law (H.R. 4872) evidently lets HHS withhold payments to new durable medical equipment (DME) suppliers for 90 days, if HSS decides there is significant risk of fraudulent activity among suppliers in a particular category or geographic area.

Find text for both bills in our Documents Section:

H.R. 4872 Health Care and Education Reconciliation Act of 2010

H.R. 3590 Patient Protection and Affordable Care Act