Beware CMS’ Ability to Preemptively Suspend or Revoke a Provider’s License

by John W. Kaveney

Most providers primarily worry about the financial impact of fraud and abuse and other compliance issues. However, as occurred recently in Dallas Texas, federal and state agencies can also come for a provider’s license either via a limitation, suspension or revocation causing far greater long-term and permanent damage to the institution. And, what is most troubling, is that the authority to take such action does not necessarily require the right of the provider to receive a hearing or even an opportunity to refute the allegations.

On August 18th a Dallas laboratory filed suit against federal and state officials and agencies seeking to temporarily restrain them from suspending or revoking the company’s federal laboratory licenses. This lawsuit was prompted as a result of federal inspectors allegedly finding regulatory violations in the way the laboratory operated and conducted business. It is believed that the federal and state investigations came as a result of a lawsuit filed by the private insurer, UnitedHealthcare, against the laboratory. In that lawsuit UnitedHealthcare claims that there were bribes and kickbacks to doctors and other providers during a five year period for overpriced and unnecessary drug and genetic tests.

According to a letter sent on May 10th from CMS to the laboratory’s officials, there were “systemic and pervasive problems throughout the laboratory which [] led to the findings of immediate jeopardy.” A finding of immediate jeopardy provides CMS with the authority under federal law to suspend, limit or even revoke a laboratory’s license to operate arguably without any right to a hearing or opportunity for the laboratory to refute the allegations.

These events demonstrate the broad authority held by CMS to pull licenses if it is believed that the ongoing actions are likely to cause patients injury, harm, impairment or death. This further underscores the critical importance of maintaining an effective compliance program and having proper protocols in place to perform internal audits/investigations and to respond to and remediate any outside audits/investigations. Furthermore, this laboratory is just the latest example of situations where claims and disputes with a private payer can quickly pivot to investigations and claims by the federal or state governments. Providers must be diligent in addressing the allegations of private payers and always be mindful of how those allegations may impact on federal or state health care programs. Failing to do so can place a provider in a detrimental position. And, for most providers, having their licenses suspended or revoked, even if just for the period of time the investigation is occurring, can be catastrophic to their business.