CMS’ New Rule Targets “Bad Actors” and Anyone That Associates With Them

by John W. Kaveney

On September 4, 2019, the Centers for Medicare and Medicaid Services (“CMS”) issued a final rule allowing it to revoke health care providers’ and suppliers’ Medicare enrollment if they are affiliated with targeted “bad actors.” This first of its kind rule, issued as part of CMS’ Program Integrity Enhancements to the Provider Enrollment Process (CMS-6058-PC), will go into effect on November 4, 2019. According to CMS, this rule will “strengthen the agency’s ability to stop fraud before it happens by keeping unscrupulous providers out of our federal health care insurance programs.”

The new rule provides for several new tools in CMS’ arsenal against fraud, waste and abuse in the federal health care programs. First, it allows CMS to identify individuals and organizations that pose an undue risk based on their relationships with other previously sanctioned entities. CMS, in its press release, provides an example: “[a] currently enrolled or newly enrolling organization that has an owner/managing employee who is ‘affiliated’ with another previously revoked organization can be denied enrollment in Medicare, Medicaid and CHIP or, if already enrolled, can have its enrollment revoked based on the problematic affiliation.” Consistent with this approach, providers and suppliers are going to be required to disclose current or previous direct or indirect affiliations with a provider or supplier that has been suspended, excluded or had their enrollment revoked. The goal is to prevent those found to be involved in criminal and fraudulent conduct from continuing to reappear as part of new organizations or working with new individuals hiding behind their names.

Second, the rule will also permit CMS to now block providers and suppliers who are revoked from re-entering the Medicare program for 10 years, versus the historic 3 year revocation period before allowing re-enrollment. And, for those with second revocations, the provider or supplier can now be blocked from the federal programs for up to 20 years.

CMS believes that this new rule will help put a stop to the “pay and chase” approach that has been the historic model in addressing federal health care fraud.

As a result of this new rule, providers and suppliers will need to be even more mindful of who they do business with and understand that CMS will be taking an even more critical look at their Medicare enrollment if they affiliate with anyone who has had an issue with CMS. Given CMS will arguably be able to now act to revoke a provider or supplier based on a perception of a potential risk due to an affiliation with a “bad actor,” providers and suppliers will need to be even more vigilant given their enrollment could be targeted before they even realize there is any sort of issue. Thus, the onus is on providers and suppliers to be careful who they employ, hire, or otherwise do business with because CMS may lump you in with that “bad actor’s” reputation.