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14 February 20228 minute read

Medicare audit? CMS expands ability to revoke for non-compliant billing

Providers are taking note of recent changes proposed by the Centers for Medicare & Medicaid Services (CMS) regarding payment rules and updates to certain policies in its Calendar Year (CY) 2022 Physician Fee Schedule (PFS) proposed rule.  These broad revisions provide CMS with greater authority to revoke Medicare billing privileges. 


Among these policies, proposed in July 2021, was a proposal related to provider enrollment to “increase [CMS’] flexibility to address periods of abusive billing that, though comparatively brief, have or could have harmed the Medicare program.”  In making this proposal, CMS acknowledged that it sees itself as the “gatekeeper” to the Medicare program, preventing unqualified and potentially fraudulent individuals and entities from being able to enroll in and inappropriately bill Medicare.  On November 19, 2021, CMS finalized the CY 2022 PFS and this proposal to modify a Medicare enrollment revocation basis for non-compliant billing. 


CMS explained that although it previously could revoke providers and suppliers for non-compliant billing under 42 C.F.R. § 424.535(a)(8), the prior wording of some of the factors in paragraphs (a)(8)(ii)(A) through (F) “hampered [its] ability to do so.”  This regulation permits CMS to revoke a provider’s or supplier’s Medicare enrollment for non-compliant billing or the “abuse of billing privileges.” 


Notably, the prior version of the regulation required CMS to take into account (1) the reason for any claim denials, (2) the length of time over which any pattern or practice of submitting claims that fail to meet Medicare requirements occurred, and (3) how long the provider or supplier had been enrolled in Medicare, in order to determine whether a provider or supplier was engaged in an abuse of billing privileges.  The recently finalized regulation removed those three considerations. 


Revised considerations for non-compliant billing revocation


The revisions proposed by CMS would permit it to focus on the percentage of denials within subsets of the provider’s or supplier’s claim submissions rather than across the entire universe of claims that were denied during the timeframe under consideration. 


CMS described the prior regulation as a framework that “inhibits [its] capacity to target brief periods involving a significant percentage of denied claims” because the regulation has been interpreted to require the percentage be weighed against claim denials over the entire period of a provider’s or supplier’s enrollment.  By restricting the scope of denial percentages to a shorter timeframe, CMS hoped that it could address non-compliant periods by restricting the scope of denial percentages to a shorter timeframe; this reflected its view that “even a comparatively short timeframe of improper billing can threaten the Trust Funds.” 


CMS’ considerations in determining whether revocation is appropriate now include:


  • The percentage of submitted claims that were denied during the period under consideration.
  • Whether the provider or supplier has any history of final adverse actions and the nature of any such actions.
  • The type of billing non-compliance and the specific facts surrounding said non-compliance (to the extent this can be determined).
  • Any other information regarding the provider or supplier’s specific circumstances that CMS deems relevant to its determination.

CMS recognized that even if a period of erroneous claim submissions reflected “no nefarious intent by the provider,” the provider still failed to comply with Medicare billing rules, which presents a risk to the Medicare program.  Therefore, CMS explained that it does not believe the claim denial reason is “particularly germane” to the question of whether the revocation reason should apply. 


Comments on proposed revisions


Although several commenters expressed concern regarding the proposal, CMS finalized the proposal with no modifications.  Commenters stated that the proposed revisions give CMS “unfettered discretion to target any short period of non-compliant billing without having to consider the provider’s/supplier’s behavior during its period of enrollment.”  Further, commenters noted that brief periods of erroneous claims can occur for many reasons without ill intent by a provider or supplier; revocation in those instances would be “far too severe a penalty” and commenters were concerned that these changes would “impose significant burdens on providers and suppliers.” 


CMS responded that while it appreciated the commenters’ concerns, its revocation authority under 42 C.F.R. § 424.535(a)(8)(ii) is discretionary, not mandatory, and that it “carefully weighs” facts and circumstances of the situation, “conscientiously consider[s] the regulatory factors,” and only takes revocation action when it is “genuinely warranted.”  Although it noted that it has “never applied [its non-compliant billing revocation authority] as a matter of course,” the agency opined that providers and suppliers “have a responsibility to submit correct claims” and a period of repeated non-compliant billing, even if comparatively short, does not remove this responsibility. 


CMS further explained that reviewing a short period of non-compliant billing over an entire enrollment period would hamper its efforts to address shorter but significant periods of non-compliant billing within that larger period.  It noted that in several ‘potential revocation for non-compliant billing situations,’ CMS could not take action because, “in effect, the provider’s or supplier’s length of enrollment (a criterion not altogether different from the entire period of billing during enrollment) overrode any shorter billing aberrations.”  CMS believes “this problem must be remedied” with these revisions. 


Declining to review the reason for the claim denials, CMS explained that the “core consideration is the incorrect claim submission itself rather than the reason it occurred” and even if a series of non-compliant claims did not involve any deceit by the provider or supplier, the “fact remains that the latter did not adhere to Medicare claim submission requirements.”  CMS asserts that considering the reason for claim denial(s) would “partially alleviate the provider or supplier of its responsibility to always remain compliant with [CMS] billing policies” and that this result is inconsistent with CMS’ need to protect the Trust Funds. 


Finally, CMS rejected requests to give a provider or supplier an opportunity to correct claim submission errors or to provide advance notice of CMS’ concerns.  Instead, CMS finalized the proposal without this suggested corrective or waiting period, noting that “it is not CMS’ obligation to delay a crucial program integrity measure, such as a revocation, to enable the provider or supplier to execute steps that should have been taken previously.” 


The finalized proposal became effective on January 1, 2022. 




As noted above,these are broad revisions to the agency’s Medicare revocation authority for non-compliant billing and provide CMS with significantly greater authority to revoke Medicare billing privileges.  In particular, the revised regulation expressly removes any consideration of the reason for the claim denial, making it far easier for CMS to issue a revocation determination – a potential death sentence for healthcare businesses – with respect to a provider or supplier who made an unintentional billing error.  These changes could be the foundation for a potential refined and targeted enforcement action against a provider or supplier who may find itself facing one bad audit. 


In addition, the regulation and rulemaking do not mention the effect, if any, of appealing claim denials resulting from an audit (that might be the reason for a potential revocation).  With the current appeals backlog and processing time for higher level adjudication of Medicare claim appeals, delays in the appeals process may have unintended consequences if a provider or supplier were facing potential revocation that might hinge on the success of these appeal efforts. 


It remains to be seen whether CMS will tread lightly with this proposed expansion of its revocation authority or whether this is yet another tool CMS plans to use aggressively in its quest to end “pay and chase” in federal healthcare fraud efforts and enforce its role as gatekeeper of the Medicare program.


If you have any questions regarding this development, please contact your DLA Piper relationship attorney, any member of the DLA Piper Healthcare group, or the author of this alert.