CMS Final Rule on Affiliations for Provider Enrollment

The Centers for Medicare and Medicaid Services (“CMS”) has released its Final Rule regarding the disclosure of affiliations in the provider enrollment process. This rule took effect on November 4, 2019. This rule permits the Secretary to revoke or deny enrollment based on the disclosure of any affiliations that CMS determines poses an undue risk of fraud, waste, or abuse. Although this rule will eventually be applicable to all providers, CMS is starting out with a phase-in approach, where the rule will only be applied to initially enrolling or revalidating providers that CMS has specifically determined may have one or more applicable affiliations.

The Final Rule requires providers and suppliers to disclose any current or previous direct or indirect affiliation with a provider or supplier that has a “disclosable event.” The Final Rule defined a disclosable event as: (1) when the provider or supplier has an uncollected debt; (2) the provider or supplier has been or is currently subject to a payment suspension under a federal health care program; (3) the provider or supplier has been or is currently excluded by the Office of Inspector General (“OIG”) from Medicare, Medicaid, or CHIP; or (4) the provider or supplier has had its Medicare, Medicaid, or CHIP billing privileges denied or revoked.

If an entity or individual is affiliated with a provider or supplier with any of the above-mentioned disclosable events, the Secretary is authorized to deny enrollment when it is determined that this affiliation poses an undue risk of fraud, waste, or abuse. To determine the existence of undue risk, CMS will consider: (1) the length and period of the affiliation; (2) the nature and extent of the affiliation; and (3) the type of disclosable event and when it occurred.

According to the Final Rule, an “affiliation” with a provider or supplier means: (1) a 5% or greater direct or indirect ownership interest that an individual or entity has in another organization; (2) a general or limited partnership interest (regardless of the percentage) that an individual or entity as in another organization; (3) an interest in which an individual or entity exercises operational or managerial control over, or directly or indirectly conducts, the day-to-day operations of another organization, either under contract or through some other arrangement, regardless of whether or not the managing individual or entity is a W-2 employee or the organization; (4) an interest in which an individual is acting as an officer or director of a corporation; or (5) any reassignment relationship under 42 § C.F.R. 424.80.

The intention of the Final Rule is to help ensure that entities and individuals who may pose risks to the Medicare and Medicaid programs are removed and excluded from these programs. Furthermore, this Final Rule will prevent providers and suppliers from circumventing Medicare enrollment requirements. In the past, some providers and suppliers would simply change their names, implement complex business structures, or create elaborate inter-provider relationships in order to remain enrolled in Medicare—the Final Rule will eliminate the potential to use these backdoor avenues. CMS estimates that this will lead to approximately 2600 new revocations per year and have an annual cost of $937,500 to providers and suppliers for the first three years of this rule’s implementation.

If a provider or supplier has one or more “disclosable events,” they should consult with an experienced attorney before submitting an enrollment application. Failure to disclose a “disclosable event” can lead to revocation, and how you frame the circumstances surrounding the “disclosable event” can have a significant impact on whether this “disclosable event” will affect the enrollment application.

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