The New CMS Medicare Exclusion Rules & How to Comply with

On Nov. 4, 2019, a new Final Rule, aka the Program Integrity Enhancements to the Provider Enrollment Process, broadens CMS’ powers to kick labs and other providers and suppliers out of Medicare and other federal health insurance programs (which we’ll refer to collectively as “Medicare”). Punchline: You can now be excluded from enrollment if you are currently or within the past five years have been affiliated with targeted “bad actors.” Here’s a look at the four things lab managers need to know.

  1. How the New Affiliations Rule Works

According to Deborah Samenow, Of Counsel at Baker, Donelson, Bearman, Caldwell & Berkowitz, PC., a key part of the Final Rule is the new “affiliations” provision that allows CMS to bar individuals and organizations that affiliate with those who pose an “undue risk” of committing fraud, waste or abuse based on their relationships with other previously sanctioned entities. While it may sound like legalese, this language is significant because it means that you can be held liable not simply for what your principals, employees and business affiliates do at your lab but what they did during the lookback period, i.e., the five years before they came to your organization.

Example: Your lab can have its Medicare enrollment revoked if one of its owners was an owner or managing employee at another lab that had its enrollment revoked within the past five years.

The other scary part is how broadly the Final Rule defines “affiliates,” cautions Samenow, which includes individuals and entities that:

  • Have a direct or indirect ownership of 5% or more in another organization;
  • A general or limited partnership interest, regardless of the percentage;
  • An interest in which an individual or entity “exercises operational or managerial control over, or directly conducts” the daily operations of another organization “either under direct contract or through some other arrangement”
  • Act as an officer or director of a corporation; or
  • Have any reassignment relationship with the organization.
  1. The New Disclosure Requirements

 The Final Rule requires providers to disclose any direct or indirect affiliation they’ve had within the previous five years with a provider or supplier that has:

  • Uncollected debt;
  • Been or is subject to a payment suspension under Medicare;
  • Been excluded from Medicare; or
  • Had its Medicare billing privileges denied or revoked/

Somewhat problematic, notes Samenow, is that there is no specified period of lookback for these disclosable events once a provider or a supplier has identified an “affiliation.” The Final Rule, she says, seems to indicate that providers and suppliers must report any affiliations within the past five years where such affiliated individuals or entities had any disclosable events ever in their history. For example, you’d have to report any affiliated individual or entity that has ever had uncollected debt. 

  1. The New Grounds for Revocation

The Final Rule also gives CMS power to revoke or deny Medicare participation for providers or suppliers who:

  • Try to come back into the Medicare program under a different name after they’ve had their enrollment revoked or denied;
  • Bill for services or items from noncompliant locations;
  • Exhibit a pattern or practice of abusive ordering or certifying of Medicare Part A or Part B items, services or drugs; or
  • Owe CMS money from an overpayment referred to the US Treasury Department.
  1. The New Penalties

Other new punitive powers given to CMS under the Final Rule is the authority to:

  • Prevent a provider or supplier that’s found to have submitted false or misleading information in its initial enrollment application from enrolling in the program for up to 3 years;
  • Prevent fraudulent or otherwise problematic providers from re-entering Medicare ever again;
  • Ban revoked providers and suppliers from re-entering Medicare for up to 10 years, as opposed to three years under previous rules; and
  • Ban providers and suppliers that have had their Medicare enrollment revoked twice from re-entering the program for up to 20 years.

Impact on Labs

Once the Final Rule takes effect, your lab will have to screen affiliates to determine knowing whether they’ve been excluded from government-funded programs. You could also be penalized for affiliating with companies that are excluded or involved in fraudulent or abusive behavior. Recognize, says Samenow, that a provider or supplier that fails to completely disclose the required affiliate information runs the risk of denial of its initial enrollment application or revocation of its current Medicare, Medicaid or CHIP enrollment. CMS can also deny enrollment based on affiliation with a business that poses an undue risk of fraud, waste or abuse.

While a sanctioned provider or supplier may appeal a denial or revocation, Samenow points out that appeals can take years. The Final Rule, therefore, could put providers and suppliers out of business. Furthermore, she says, a bad actor at just one location could result in denial or revocation for all locations.

For now, says Samenow, the requirement to report affiliates with disclosable events is being phased, and only required “upon request” by CMS. If CMS reaches out to a provider or supplier they’d have to respond. If CMS then finds one or more affiliates that would trigger disclosure, then CMS will require that organization to report all affiliates with disclosable events.

What To Do

CMS has requested comments on how to obtain affiliate information, and it’s important that all interested parties should think about responding, says Samenow. It’s also a good time to put in place systems to comply with the new rules, especially with respect to furnishing accurate data regarding affiliations with disclosable events.


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