Health Care Alert
July 2010
Authors:
Richard P. Church
richard.church@klgates.com
919.466.1187
Virginia E. Worthy
jenny.worthy@klgates.com
704.331.7508
K&L Gates includes lawyers practicing out
of 36 offices located in North America,
Europe, Asia and the Middle East, and
represents numerous GLOBAL 500,
FORTUNE 100, and FTSE 100
corporations, in addition to growth and
middle market companies, entrepreneurs,
capital market participants and public
sector entities. For more information,
visit www.klgates.com.
Health Care Reform Client Alert Series
On March 23, 2010, President Obama signed into law the comprehensive health care
overhaul known as the Patient Protection and Affordable Care Act ("PPACA"), Pub.
Law 111-148. 1 This wide-ranging law has far-reaching implications on the
financing and delivery of health care in the United States. In addition, it contains
substantial changes to federal health care program requirements, including health
care fraud and abuse provisions. The following K&L Gates LLP client alert is one in
a series of alerts directed to the health care provider and supplier community that are
focused on particular implications of PPACA as to the payment and regulation of
health care providers and suppliers.
Revisions to Medicare and Medicaid Provider/Supplier
Enrollment & Billing Requirements
PPACA amends Medicare and Medicaid provider/supplier enrollment and billing
processes as a means to strengthen program quality and integrity. Specific
provisions require:

Providers and suppliers to be enrolled pursuant to enhanced screening
procedures and requirements.

New providers and suppliers to be subject to a provisional period of enhanced
oversight.

Imposition of civil monetary penalties (“CMPs”) or exclusion for certain false
statements, omissions, and misstatements in an enrollment application.

Termination of participation in Medicaid if an entity is terminated from
Medicare.

Providers’ and suppliers’ National Provider Identifier (“NPI”) to be included on:
(1) Medicare provider and supplier enrollment applications, (2) Medicaid
provider agreements, and (3) all Medicare and Medicaid claims.

Physicians and other professionals who order or refer certain items and services
for Medicare beneficiaries to be enrolled in the Medicare Provider Enrollment,
Chain and Ownership System (“PECOS”).
1
On March 30, 2010, President Obama signed the reconciliation bill (H.R. 4872, the “Health Care
and Education Reconciliation Act of 2010” or “Reconciliation Bill”), which amended PPACA.
Health Care Alert
Background
Leading up to the health care reform debate, the
Centers for Medicare and Medicaid Services
(“CMS”) instituted a number of changes to the
provider and supplier enrollment requirements as a
means to fight program fraud and abuse. 2 In this
regard, Daniel Levinson, Department of Health and
Human Services’ (“HHS”) Inspector General
articulated the Office of the Inspector General’s (the
“OIG”) Five-Principle Strategy for fighting fraud
and abuse in testimony to Congress. Item No. 1 was
tightening Medicare and Medicaid enrollment.
Levinson argued:
“Medicare and Medicaid provider enrollment
standards and screening should be strengthened,
making participation in Federal health care programs
as a provider or supplier a privilege, not a right. It is
more efficient and effective to protect the programs
and beneficiaries from unqualified, fraudulent, or
abusive providers and suppliers up front than to try
to recover payments or redress fraud or abuse after it
occurs. Greater transparency in the enrollment
process will help the Government know with whom
it is doing business.” 3
Congress responded to this testimony through
PPACA with a number of significant changes to the
enrollment process and enrollment requirements
related to referring professionals for certain
Medicare and Medicaid items and services.
Enhanced Provider Enrollment
Requirements
PPACA amends provider/supplier enrollment
processes for Medicare, Medicaid, and the
Children's Health Insurance Program (“CHIP”) 4 to
require enhanced provider screening and disclosure
and a provisional period of enhanced oversight.
Within 180 days of PPACA’s enactment, the
Secretary of HHS must develop a provider
screening process, which may be implemented via
interim final rulemaking. This process must include
a licensure check and may include criminal
background checks, fingerprinting, unannounced
site visits (including pre-enrollment site visits),
database checks (including checks in other states),
and any other screening the Secretary of HHS
deems appropriate. 5
As to providers and suppliers not enrolled as of the
date of PPACA’s enactment, the enhanced
screening procedures will be effective one year
from PPACA’s enactment date (March 23, 2011);
for providers and suppliers enrolled as of PPACA’s
enactment, the enhanced screening will be effective
two years from PPACA’s enactment date (March
23, 2012); provided, however, if such provider or
supplier is due for a revalidation of enrollment, such
enhanced screening shall be effective as to
revalidations beginning 180 days from PPACA’s
enactment date (September 19, 2010).
Beginning one year from PPACA’s enactment date
(March 23, 2011), providers and suppliers
undergoing either a new enrollment or enrollment
revalidations must also disclose “any current or
previous affiliation (directly or indirectly)” with a
provider or supplier that:
2
For example, CMS implemented accreditation and surety
bond requirements for Durable Medical Equipment (“DME”)
suppliers and a prohibition on the assumption of Medicare
provider agreements for home health agencies (“HHAs”)
having undergone a change or transfer of ownership in the
past thirty-six months. See 74 Fed. Reg. 166 (Jan. 2, 2009);
74 Fed. Reg. 58,078 (Nov. 10, 2009). In addition, CMS
amended the effective date of physician billing privileges and
clarified its handling of effective dates as to other enrollment
applications. See 73 Fed. Reg. 69,726 (Nov. 19, 2008); 75
Fed. Reg. 23,852 (proposed May 4, 2010).
3
D. Levinson, Testimony before House Subcommittee on
Health, Health Care Reform; Opportunities to Address Waste,
Fraud and Abuse (June 25, 2009).
4
Pursuant to Section 6401(b), PPACA mandates that state
Medicaid plans and CHIP include the provisions discussed
herein regarding enhanced provider screening, initial
oversight, additional disclosure requirements regarding
affiliated entities, temporary enrollment moratoriums imposed
by HHS, and compliance programs. Pursuant to Section 6502
of PPACA, state Medicaid plans must also be amended to
exclude from participation those entities or individuals that
own, control, or manage an entity that (1) has unpaid
overpayments, (2) is suspended or excluded from
participation, or (3) is affiliated with an individual or entity that
has been suspended or excluded from participation.
5
See PPACA § 6401(a)(3).
July 2010
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Health Care Alert

Has uncollected debt. 6

Has been subject to payment suspension under a
federal health care program.

Has been excluded from participation in
Medicare, Medicaid or CHIP.

Has had its billing privileges denied or revoked
(presumably as to Medicare, Medicaid or
CHIP).
If HHS determines a provider’s or supplier’s
previous or current affiliations pose an undue risk of
fraud, waste, or abuse, the enrollment or revalidation
application may be denied. 7
Upon a timeline to be determined in HHS’s
discretion per provider or supplier type, PPACA
makes the establishment of a corporate compliance
plan a condition of enrollment in Medicare,
Medicaid and CHIP. HHS is directed to define the
“core elements” of a conforming plan by industry or
category, although it is expected that these core
elements would follow prior OIG guidance
regarding model compliance program elements. 8
Based on the level of risk associated with a provider
or supplier, the Secretary of HHS is also authorized
to require a provider or supplier (except physicians)
to present a surety bond in an amount (not less than
$50,000) that the Secretary determines is
commensurate with the volume of the provider’s or
supplier’s billings. With regard to existing DME
and HHA surety bond requirements, HHS must take
into account the volume of billing when determining
the appropriate amount of the surety bond
requirement (which again shall not be less than
$50,000 in any instance). 9
Finally, upon enrollment in Medicare, Medicaid, or
CHIP, PPACA mandates HHS develop a provisional
6
PPACA does not specify to whom such uncollected debt
would be owed. Presumably this provision will be limited via
rule making to outstanding debt in the form of refunds or other
funds owed to a federal health care program. However, based
on the statutory language alone it is potentially subject to
broader application.
7
See id.
8
See id.
9
See id. § 6402(g).
period of enhanced oversight for new providers or
suppliers. Such enhanced oversight shall be for a
period of 30 days to one year and may include such
programs as pre-payment review or payment caps. 10
Beginning January 1, 2011, if the Secretary of HHS
determines there is a significant risk of fraudulent
activity among suppliers of DME in a particular
area, the Secretary may withhold payment of claims
for a 90-day period from the first claim submitted
by such a new DME supplier. 11
In order to fund this enhanced enrollment program,
PPACA also institutes application fees for
institutional provider and supplier enrollments of
$500 in 2010, with a percentage increase equal to
the change in the consumer price index for each
subsequent year. The Secretary of HHS may waive
the fee on a case-by-case basis if the imposition of
the application fee would result in hardship or
would impede beneficiary access to care as to a
state Medicaid program. 12
Combating Fraud and Abuse in the
Enrollment Process
PPACA expands the scope of CMPs to include
penalties for knowingly making or causing to be
made a false statement, omission, or
misrepresentation of a material fact in an enrollment
application to a federal health care program. 13
Liability for such acts shall be $50,000 for each
false statement or omission and assessment of not
more than three times the total amount claimed for
each item or service on which payment was made
based on such false application. In addition, such
acts are grounds for permissive exclusion from
further participation in federal health care
programs. 14
Under PPACA, HHS is also authorized to impose
temporary moratoriums on new provider or supplier
enrollments in Medicare, Medicaid or CHIP,
including a moratorium on enrollment of whole
categories of providers or suppliers, if HHS deems
10
See id. § 6401(a)(3).
See Reconciliation Bill § 1304.
12
See PPACA §§ 6401(a)(3), 10603.
13
See id. § 6402(d)(2).
14
See id. § 6402(d)(1).
11
July 2010
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Health Care Alert
such moratorium necessary to prevent or combat
fraud, waste, or abuse. These moratoriums will be at
the discretion of the Secretary of HHS and are not
subject to judicial review under the language found
in PPACA.15
Finally, PPACA mandates that state Medicaid plans
terminate any individual or entity from state
Medicaid participation if such individual or entity is
terminated from Medicare or another state’s
Medicaid program.16
Enrollment Requirements Related to
Medicare Billing
PPACA also mandates various enrollment
requirements related to billing for Medicare and
Medicaid items and services. 17 On May 5, 2010,
CMS issued an interim final rule with comment
period addressing several of these PPACA mandated
enrollment billing changes, all of which became
effective July 6, 2010. 18
The rule requires Medicare and Medicaid
participating providers or suppliers to include their
NPI on all enrollment applications, provider
agreements, and claims. As to claims, all identified
providers/suppliers must have their NPI included
(i.e., billing entity as well as, e.g., referring
physician). 19 A Medicaid or Medicare claim
submitted by a provider/supplier that does not
contain the required NPI(s) will be rejected.
However, a claim submitted by a beneficiary may
still be submitted without the NPI as long as the
claim contains the valid legal name of the health
care provider and the referring or ordering physician
meets the PECOS enrollment requirements
15
See id. § 6401(a)(3).
See id.§ 6501.
17
See id. §§ 6402(a), 6401(b), 6405.
18
See 75 Fed. Reg. 24,437 (May 5, 2010) (42 C.F.R. pts. 424
and 431).
19
See 42 C.F.R. 424.506. Prior to PPACA’s enactment,
Medicare required NPIs from providers and suppliers with
regard to both enrollment applications and Medicare claims. In
2008, Medicaid began requiring providers report NPIs on all
Medicaid claims. The interim rule codifies these preexisting
practices and mandates that states obtain NPIs on Medicaid
enrollment applications for the first time. See 75 Fed. Reg. at
24,440.
16
identified below. 20 Providers and suppliers that
enrolled prior to obtaining an NPI (and the NPI is
not in their enrollment record) are required to report
the NPI to Medicare in an enrollment application. 21
The rule also requires physicians and professionals
who order or refer covered Medicare durable
medical equipment, prosthetics, orthotics and
supplies (“DMEPOS”), home health, laboratory
services, imaging services, or specialist services to
be enrolled in PECOS. 22 Medicare contractors may
deny a claim if the ordering or referring supplier is
not enrolled in PECOS (provided the supplier has
not opted out of the Medicare program, in which
case they will have an opt-out record in PECOS that
will suffice).
To avoid claim denials, suppliers and HHA
providers will need to ensure that those physicians
and other professionals from whom they accept
orders or referrals have enrolled in PECOS, which
requires the provision of updated information in a
CMS Form 855 enrollment application. 23 CMS
suggests that generally physicians and other
referring professionals that enrolled more than six
years ago (and have not had reason to update their
enrollment record during that time) will not be
enrolled in PECOS, which was implemented in
2003. If physicians are not in PECOS, they will
need to submit a paper enrollment application to the
applicable Medicare contractor or enroll
electronically via the Internet. 24
20
See 42 C.F.R. § 424.507.
See id. § 424.506(b)(2).
22
See id. § 424.507.
23
This information can be found at:
http://www.cms.gov/MedicareProviderSupEnroll/06_Medicare
OrderingandReferring.asp#TopOfPage.
24
The interim rule also addresses documentation issues
related to such referrals not related specifically to enrollment
status. Under the rule, the billing entity and referring
physician must maintain ordering and referring documentation
and make the same available to CMS or its contractor for at
least seven years from the date of the order or referral
DMEPOS, home health, laboratory services, imaging services,
and specialist services. See PPACA § 6406; 42 C.F.R. §
424.516(f). As to DME and HHA items and services, PPACA
also makes it a condition of payment that such services are
accompanied by a face-to-face encounter with the patient
during the six-month period preceding any written order by the
referring physician. See PPACA § 6407.
21
July 2010
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Health Care Alert
Notwithstanding the July 6, 2010 effective date, on
June 30, 2010, amid concerns over PECOS
enrollment difficulties, CMS announced that it
would delay rejecting claims based on orders,
certifications, and referrals made by suppliers that
have attempted to enroll but have not had an
application approved by the July 6, 2010 effective
date. Although the effective date of the regulation
will remain July 6, 2010, CMS indicated contractors
would not reject claims on such orders and referrals
until an as yet to be determined date. Further, CMS
suggested it would use a “contingency plan” to meet
the PPACA requirement that it only pay claims
referred by eligible professionals after July 1, 2010.
PPACA imposes a similar requirement for orders or
referrals subject to the Medicaid program. PPACA
mandates any ordering or referring physicians or
professionals be enrolled as a participating provider
under the state plan or a waiver program. The NPI of
the ordering or referring physician must also be
specified on any claim for payment based on the
referral or order. 25
Next Steps
Providers and suppliers should begin taking action
now in light of the various changes occurring or
contemplated in the various enrollment-related
PPACA changes. In light of existing guidance from
the OIG recommending health care entities adopt
compliance plans and providing model forms as to
the same, providers or suppliers that do not have
such plans or have not recently updated their
compliance plan may wish to begin preparing or
reviewing the same now. Likewise, notwithstanding
the temporary delay in the PECOS enrollment
requirement, Medicare suppliers and home health
providers should insure that each referring physician
has a valid PECOS enrollment or has attempted to
enroll from this date forward to insure that claims
for services will be paid. Finally, providers and
suppliers should stay tuned for further guidance
from CMS and state Medicaid agencies regarding
the implementation of the various enhanced
screening and enrollment requirements.
25
For additional information, please contact:
Boston
Paul W. Shaw
617.261.3111
paul.shaw@klgates.com
Harrisburg
Ruth E. Granfors
717.231.5835
ruth.granfors@klgates.com
Miami
William J. Spratt
305.539.3320
william.spratt@klgates.com
Newark
Stephen A. Timoni
973.848.4020
stephen.timoni@klgates.com
Pittsburgh
Edward V. Weisgerber
412.355.8980
ed.weisgerber@klgates.com
Research Triangle Park
Richard P. Church
919.466.1187
richard.church@kglates.com
Mary Beth Johnston
919.466.1181
marybeth.johnston@klgates.com
See PPACA § 6401(b).
July 2010
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Health Care Alert
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©2010 K&L Gates LLP. All Rights Reserved.
July 2010
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