CMS can now exclude physicians and practices from Medicare and Medicaid

The agency that pays your Medicare and Medicaid claims can now also bar your practice from billing either program.

HHS Secretary Robert F. Kennedy Jr. handed the department's permissive exclusion authority to the CMS administrator in a notice published in the Federal Register on Oct. 14. The delegation took effect immediately. Until now, the HHS Office of Inspector General was the only agency that used the power. OIG keeps it; CMS now shares it.

CMS asked for the authority, according to the notice, which argues that the agency running Medicare and Medicaid is best positioned to investigate and build the evidence behind exclusion decisions. Kennedy first announced the move at an HHS antifraud press conference in August, where CMS Administrator Mehmet Oz said the agency would use the power "judiciously," according to a client alert from McDermott Will & Schulte. The Oct. 14 notice also ratifies any actions CMS took under the authority before the notice took effect.

What CMS can exclude for

Permissive exclusions are discretionary: the statute says the secretary "may" exclude. Mandatory exclusions, such as those for felony health care fraud and patient abuse convictions, were not part of the delegation. Under Section 1128(b) of the Social Security Act, the grounds most likely to touch a physician practice include:

• Misdemeanor convictions related to health care fraud or controlled substances
• Losing or surrendering a license over professional competence, performance or financial integrity
• Billing substantially above usual charges, or furnishing services substantially beyond what patients need
• Fraud, kickbacks and other conduct prohibited under the civil monetary penalty and anti-kickback provisions
• Knowingly false statements or omissions on a program enrollment application

Exclusions for misdemeanor convictions default to three years under the statute, and license-based exclusions last at least as long as the license action. An excluded individual or entity can receive no federal health care program payment for items or services it furnishes, orders or prescribes, according to OIG.

What CMS cannot do

The notice withholds two powers from CMS: holding hearings and issuing regulations. Kennedy keeps rulemaking and reporting to Congress. CMS must use the authority under HHS' existing policies, procedures and regulations, and the notice says OIG's authority, delegated in 1988, is unchanged.

The hearing carve-out matters because the statute gives excluded parties a right to notice and a hearing. For exclusions based on fraud or kickbacks, the provider is entitled to a hearing before an administrative law judge before the exclusion takes effect, unless HHS decides patient health or safety requires faster action.

Why settlements just got harder to read

The biggest practical change may show up at the negotiating table. In a False Claims Act settlement, OIG often releases its exclusion authority for fraud and kickbacks in exchange for a corporate integrity agreement or in recognition of a self-disclosure, according to McDermott partners Tony Maida and James A. Cannatti III and associate Dexter Golinghorst. Practices that settle through OIG's Self-Disclosure Protocol can obtain the same release. Until now, getting it meant dealing only with OIG's Office of Counsel.

No guidance explains how CMS and OIG will coordinate those decisions, the attorneys wrote. Among the open questions they raised:

• Whether CMS will sign False Claims Act and self-disclosure settlements to give its own exclusion release
• Whether CMS would then also release the other administrative authorities that settlements have historically reserved because CMS was not a party
• Whether CMS will write its own integrity agreements or join OIG's
• Whether a favorable OIG advisory opinion binds CMS
• What criteria CMS will apply, and whether it will follow OIG's process for setting the length of an exclusion

The McDermott alert ran in August, after Kennedy's announcement. The Oct. 14 notice formalizes the delegation but answers none of those questions.

What to ask before you sign

For practices in active settlement talks, the attorneys advise raising these issues with counsel now and getting clarity in the specific matter. In practice, that means asking whether any exclusion release in the agreement binds CMS as well as OIG, whether CMS has reviewed or signed the terms and which CMS authorities the government is reserving.

CMS has already been more aggressive with its own administrative tools under Kennedy, imposing record numbers of Medicare revocations and payment suspensions, according to McDermott. Self-disclosure still carries weight: The Villages Health earned cooperation credit in its $541.5 million False Claims Act settlement, as Rachel V. Rose, JD, MBA, wrote for Physicians Practice. But a practice weighing disclosure now has to account for a second agency that can exclude. For documentation risks worth checking first, see these seven audits to run on scribe and template notes.

Neither CMS nor OIG has said when guidance on how the two agencies will share the authority will arrive.