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New rule on ‘bad actors’ means more work for practices


CMS now requires 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 considered “bad actors.”

Pay attention to who works with or in your practice

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

Effective in November, the rules became complicated and extensive, as CMS now requires 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 considered “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 healthcare providers will be significant.

In the eyes of CMS, “bad actors”may include providers or entities who have had previous negative interactions with CMS, such as having been 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.

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 these types of relationships, every practice will need to look closely at its providers and vendors. It will then need to ask those with which it has, or is looking to have, any affiliation to answer questions designed to determine 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 whom they do business, and we will also start to introduce representations and warranties into all written contracts in order to address the rule.

The consequences for non-compliance are significant. Enrollment in Medicare, Medicaid and CHIP might be put at risk, which can mean losing your provider number and no longer being able to bill federal payers.

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.

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