CMS’ Revocations Authority Extended to Capture Repeated Non-Compliance

Andrew B. Wachler, Esq.
Kevin R. Miserez, Esq.

On December 5, 2014, a final rule was published in the Federal Register extending CMS’s revocation authority for “abuse of billing privileges” under 42 CFR 424.535(a)(8) (“Final Rule”). Prior to the Final Rule, CMS was authorized to revoke providers pursuant to 424.535(a)(8) when it was determined that a provider submitted a claim or claims for services that could not have been furnished to a specific individual on the date of service at issue. Such violations occur in instances where (1) the beneficiary’s date of death precedes the date of service, (2) the physician or beneficiary is not in the state or country when services were claimed to have been rendered, and (3) when the equipment necessary for testing is not present where the testing is said to have occurred.

As provided in the Final Rule, CMS did not propose any changes to existing language above. Rather, CMS renumbered the existing language in the Final Rule as (a)(8)(i), and a new subsection was added as (a)(8)(ii). The new section appearing at 42 CFR 424.535(a)(8)(ii) became effective on February 3, 2014, and now authorizes CMS to revoke a provider’s Medicare billing privileges when CMS determines that the provider has a “pattern or practice” of submitting claims that fail to meet Medicare requirements. Thus, the Final Rule will capture providers who submit claims for medically unnecessary services or fail to maintain sufficient documentation to support their claims, among other reasons causing submission of non-compliant claims.

While CMS stated in the Final Rule that the new revocation authority is intended to cover a variety of situations in which a provider “regularly and repeatedly” submits non-compliant claims over a period of time, CMS did provide that “sporadic billing errors” would not rise to the level of revocation under (a)(8)(ii). However, CMS acknowledged that it did not define “pattern or practice” so that CMS could maintain the flexibility necessary to address a variety of factual scenarios. Instead of specifically defining “pattern or practice,” the Final Rule includes six (6) factors that CMS will consider in making its revocation determinations for (a)(8)(ii) violations. The six factors CMS will consider, as appropriate or applicable, include:

1) The percentage of submitted claims that were denied;
2) The reason(s) for the claim denials;
3) Whether the provider or supplier has any history of final adverse actions (as that term is defined under § 424.502) and the nature of any such actions;
4) The length of time over which the pattern has continued;
5) How long the provider or supplier has been enrolled in Medicare; and
6) Any other information regarding the provider or supplier’s specific circumstances that CMS deems relevant to its determination as to whether the provider or supplier has or has not engaged in the pattern or practice described in this paragraph.

In response to the public’s comments to the Proposed Rule regarding CMS’ consideration of those claims that were or continue to be the subject of a CMS audit, CMS provided in the Final Rule that it will exclude from its revocation determination those claim denials that have been (1) fully (rather than partially) overturned on appeal, and (2) finally and fully adjudicated. However, CMS acknowledged that claim denials which are still pending at any stage in the Medicare appeals process can be taken into consideration by CMS in determining whether to revoke a provider’s Medicare billing privileges. In light of this information, it behooves providers, when they receive the results of an audit, to carefully review the authorities relied upon by the auditor and effectuate any appropriate changes to their documentation and billing practices.

Another key component of the Final Rule is that CMS (not its contractors) will make all determinations to revoke providers under (a)(8)(ii), including any determination in response to providers’ revocation appeals. Prior to the Final Rule, providers faced with a revocation would submit an appeal to the Medicare Administrative Contractor (e.g., WPS) to review and consider whether to uphold or reverse the initial revocation determination. Now, all appeals will be conducted by CMS Central Office. A recent CMS Transmittal (Transmittal 582) implemented a change to Chapter 15 of the CMS Program Integrity Manual to provide, “With respect to (a)(8), CMS Central Office – rather than the contractor – will (1) make all determinations regarding whether a provider or supplier has a pattern or practice of submitting noncompliant claims; (2) consider the relevant factors; (3) accumulate all information needed to make such determinations; and (4) prepare and send all revocation letters.

The CMS Transmittal established another significant change to the revocation process. Previously, upon receiving notice of the revocation, providers were entitled to submit a Corrective Action Plan (“CAP”) within 30 days of the revocation notice, in addition to filing a written appeal. The CAP process was an opportunity for providers to correct the deficiencies that resulted in the revocation and provide CMS with written evidence that the provider is currently in compliance with Medicare requirements. If the CAP was approved by CMS, the revocation would be rescinded and the provider’s Medicare billing privileges would be reinstated. However, with the new change provided in the CMS Transmittal, providers revoked pursuant to (a)(8) are no longer entitled to submit a CAP and must rely exclusively on their written appeal of the revocation.

The Final Rule stresses the importance of a provider’s compliance with Medicare reimbursement requirements. Although non-compliance in this context has always posed a significant risk for overpayment demands resulting from CMS audits, a provider’s repeated non-compliance now exposes the provider to CMS’ increased revocation authority. A provider should have effective compliance protocols in place to deal with Medicare claim rejections. Furthermore, providers should closely evaluate CMS’s rationale for any claim denials and determine any corrective actions necessary for ensuring the provider’s billing and documentation practices meet Medicare requirements going forward.