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New rule on 'bad actors' means more work for practices


New rule will add scrutiny to practices to disclose affiliations they have with providers ruled as 'bad actors' by CMS.

Although many physician practices run a standard background check on new employees they hire, many do not look closely into vendors and contractors with whom they do business, and few run a check through the OIG exclusion database. Having someone working for your organization, even in a management or administrative capacity, can put a physician practice at risk of losing its own provider number.

Effective November 4, 2019, the rules have gotten even more complicated and extensive, as CMS will now require Medicare, Medicaid and Children’s Health Insurance Program (CHIP) providers and suppliers to disclose certain affiliations they may have with other providers and suppliers who are “bad actors.”

This new rule is an effort to cut down on fraud, abuse and waste and to save taxpayer money. Of course, the administrative burden to health care providers will be significant. You can find a link to the new rule here.

In the eyes of CMS, “bad actors” may include providers or entities who have had previous negative interactions with CMS, such as having been previously sanctioned, experienced a payment suspension, been excluded from federal programs, had billing privileges denied, revoked, or terminated or an outstanding debt owed to the government (including federal student loans). It does not matter whether these particular issues were corrected by the affiliated person or entity, only that they occurred.

The process of identifying all possible affiliations will be introduced over time, but CMS will start by asking providers and suppliers to identify providers/suppliers with whom they are/have been affiliated in the prior five years that require further disclosure. These disclosures will be made on Form CMS-855 once the form is modified to allow such disclosures to be made.  Disclosures will apply to both the initial enrollment and subsequent revalidations.

How will medical practices be affected by this new rule?  First, each practice must try to determine which providers and entities might be considered an “affiliated relationship.” According to CMS, affiliation can mean relationships such as:

  • a five percent or greater direct or indirect ownership interest by an individual or entity in another organization;

  • a general or limited partnership interest in another organization;

  • an interest where an individual or entity exercises operational or managerial control over the day-to-day operations of another organization;

  • an interest where an individual is acting as an officer, director, manager of another entity; or

  • any reassignment relationship under Medicare regulations.

To track down the above relationships, every practice will need to look at its provider and vendor relationships. It will then need to ask those with which it has, or is looking to have, any affiliation to answer questions to disclose whether the relationship is one that must be reported to CMS. A provider or supplier who is identified as being a “bad actor” upfront, will likely need to be avoided entirely to best protect the practice. I have recommended that my clients develop a questionnaire to be completed by all parties with which they do business, and we will also start to introduce representations and warranties into all written contracts in order to address the rule’s requirements.

The repercussions for non-compliance with the new rule are significant. Enrollment with Medicare, Medicaid and CHIP might be put at risk, which can mean losing your provider number and no longer being able to bill federal payors. Other enforcement is still unknown, but certainly possible. To make sure your practice is in compliance with the new rule, be sure to work with health law counsel and your organization’s compliance officer to scrutinize all existing and future relationships.  

Ericka L. Adler, JD, LLM, has practiced in the area of regulatory and transactional healthcare law for more than 20 years. She represents physicians and other healthcare providers across the country in their day-to-day legal needs, including contract negotiations, sale transactions, and complex joint ventures. She also works with providers on a wide variety of compliance issues such as Stark Law, Anti-Kickback Statute, and HIPAA. Ericka has been writing for Physicians Practice since 2011.

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