Ryland Close, Belmont Law Class of 2020; Patsy Powers and Justin Hickerson, Attorneys at Waller

The Centers for Medicare and Medicaid Services (CMS) is expanding its authority to revoke or deny providers’ and suppliers’ Medicare, Medicaid and Children’s Health Insurance Program (CHIP) enrollment based upon their affiliation with a sanctioned entity.

The rule will go into effect on November 4, 2019, and comments will be accepted until 5 p.m. on that day.

Under the new rule, providers and suppliers will be required to disclose in enrollment applications any current or previous, direct or indirect, affiliation (defined below) with a provider or supplier that:

1. has uncollected debt;
2. has been or is subject to a payment suspension under a federal health care program;
3. has been or is excluded by the Office of Inspector General (OIG) from Medicare, Medicaid, or CHIP; or
4. has had its Medicare, Medicaid, or CHIP billing privileges denied or revoked. CMS refers to these four categories as “disclosable events.”

The rule broadly defines “affiliation” as:

• a 5 percent or greater direct or indirect ownership interest that an individual or entity has in another organization;
• a general or limited partnership interest (regardless of the percentage) that an individual or entity has in another organization;
• an interest in which an individual or entity exercises operational or managerial control over, or directly or indirectly conducts, the day-to-day operations of another organization, either under contract or through some other arrangement, regardless of whether or not the managing individual or entity is a W–2 employee of the organization;
• an interest in which an individual is acting as an officer or director of a corporation; and,
• any reassignment relationship.

The rule defines “uncollected debt” as:

(i) Medicare, Medicaid or CHIP overpayments for which CMS or the state has sent notice of the debt to the affiliated provider or supplier; (ii) Civil money penalties imposed under this title; (iii) Assessments imposed under this title. Uncollected debt must be disclosed regardless of: (i) the amount of the debt;

(ii) whether the debt is currently being repaid (for example, as part of a repayment plan); or

(iii) whether the debt is currently being appealed.

The Secretary will soon be allowed to revoke or deny enrollment based on such an affiliation when the Secretary determines that the affiliation poses an “undue risk” of fraud, waste or abuse. The rule identifies factors that CMS will use to determine whether an “undue risk” exists. Those factors are:

• The duration of the disclosing party’s relationship with the affiliated provider or supplier;
• Whether the affiliation still exists and, if not, how long ago it ended;
• The degree and extent of the affiliation (for example, percentage of ownership); and,
• If applicable, the reason for the termination of the affiliation.

CMS will also look into the affiliate’s disclosable event when determining whether the affiliation poses an undue risk. The government will examine:

1. the type of action;
2. when the action occurred or was imposed;
3. whether the affiliation existed when the action (for example, revocation) occurred or was imposed;
4. if the action is an uncollected debt — (a) the amount of the debt; (b) whether the affiliated provider or supplier is repaying the debt; and (c) to whom the debt is owed (for example, Medicare); and,
5. if a denial, revocation, termination, exclusion, or payment suspension is involved, the reason for the action (for example, felony conviction; failure to submit complete information).

Fortunately for providers, CMS determined that it would be unduly burdensome for all providers to submit any applicable affiliation information as of the time this rule takes effect. Therefore, under the rule, a provider or supplier will be required to report any and all affiliations upon initial enrollment or revalidation or when CMS specifically requests such information from the provider.

With regard to Medicaid, CMS has adopted a “phased-in” approach to implementing affiliate disclosure requirements. This phased-in approach is aimed at achieving “a more targeted approach” that will be expanded with future rulemaking. With regard to Medicaid and CHIP providers and suppliers, each state will choose from one of two options for implementing the new affiliate disclosure requirements.

Under the first option, disclosures must be submitted by all newly enrolling or revalidating Medicaid and/or CHIP providers that are not enrolled in Medicare, while under the second option disclosures are only necessary if the state, with the consultation of CMS, determines that a disclosure is necessary and requests the disclosure from the provider.

Through this rule, CMS also expanded some of its current enforcement tools. For example, CMS plans to increase the maximum re-enrollment bar from three years to 10 years (with certain exceptions), and if a provider or supplier is revoked from Medicare for a second time, CMS may place a re-enrollment bar on that provider of up to 20 years.

Although the affiliation disclosures will be required only upon initial application, revalidation, or when specifically requested by CMS, individuals and entities that are affiliated with a number of providers and suppliers should begin the process of collecting or confirming information about its affiliates. The information required may be extensive, as the rule applies equally to for-profit and non-profit entities, and CMS has specifically stated that non-health care investors such as private equity sponsors, large mutual or pension funds will not be exempt from the affiliation disclosure requirements.