CMS Issues Guidance On Employee Education About False Claims Recovery

On March 22, the Center for Medicare and Medicaid Services (CMS) issued additional guidance on employee education about false claims recovery as mandated by Section 6032 of the Deficit Reduction Act (DRA). These materials supplement a State Medicaid Director (SMD) letter issued on December 13, 2006, and include a SMD letter, a Frequently Asked Questions (FAQ) document, and an official description of the Federal False Claims Act provided by the Department of Justice.

Under Section 6032, certain entities are required to provide very specific education to their employees regarding false claims. (for additional information on Section 6032's requirements, please click here). Section 6032 states that only entities that provide Medicaid health care items or services and receive or make Medicaid payments of $5 million or more are subject to its provisions. The new guidance is in response to requests to clarify many of its provisions, such as the definition of an "entity," how the $5 million dollar threshold is calculated, and which contractor and agents of the entity must be included in the education requirements. There are over 70 questions in the FAQ, so this issue brief will highlight just a few questions. You can view FAQ, the letter, and the Department of Justice description online.

The FAQ addresses several questions regarding the definition of "entity" under the DRA. For example, the FAQ states that neither "the State Medicaid agency nor an agency that is an administrative arm of the Medicaid program would be entities for purposes of section 6032." To be subject to Section 6032, entities must provide Medicaid health items or services. However, "entity" does not refer to only institutional providers. Individuals, as well as government agencies, organizations, units, corporations, partnerships, or other business arrangements may also be subject to Section 6032 if they meet the other requirements outlined in the DRA.

The FAQs also address questions about subsidiaries and "health systems," which may include many different units that may or may not meet the $5 million threshold if considered individually. For purposes of Section 6032, the FAQ defines a "health system" as a single entity if the parent corporation, partnership, government agency or other owner, and its sub-units, are all integrally involved in furnishing Medicaid items or services. In that instance, the entire organization is the entity for purposes of determining the requirements of Section 6032. Otherwise, the sub-units would each be analyzed individually as to whether they are subject to Section 6032.

Regarding the $5 million threshold, the FAQs address how the $5 million should be calculated. CMS has no preference whether a State calculates the $5 million based on date of service versus date of payment, as long as the State is consistent in its methodology. However, whether an entity meets the $5 million annual payment threshold for purposes of section 6032 compliance is based on the amount actually received in a Federal fiscal year, not the amount billed.

Under DRA section 6032, an entity must establish policies for all of its employees and for the employees of its contractors and agents. The FAQs address questions regarding which contractors and agents must be included in employee education regarding false claims. Billing www.nccbh.org and coding vendors are not the only contractors subject to Section 6032: "Other contractors or agents include those which or who, on behalf of the entity, furnish or otherwise authorize the furnishing of Medicaid health care items or services or are involved in monitoring of health care provided by the entity." CMS declines to define what is means by "involved in monitoring of health care."

There are questions specific to Managed Care Organizations (MCOs). For example, one questions asks whether providers who are contractors of Medicaid MCOs must comply as "entities" or as "contractors"? CMS' answer: "For purposes of determining whether an individual or organization must comply with section 6032 as an entity or as a contractor:

a) if a provider is directly paid $5 million in a Federal fiscal year from the State Medicaid Agency, the provider would qualify as an entity, and must comply as such, regardless of whether the provider also contracts with a Medicaid MCO;

b) if a provider contracts with a Medicaid MCO that has met the $5 million threshold, but the provider itself receives less than $5 million annually directly from the State Medicaid Agency, then the provider must comply as a contractor of the Medicaid MCO, regardless of the amount it is paid by the Medicaid MCO for Medicaid patients."

In other words, the source of the $5 million is irrelevant for Section 6032 purposes.

The FAQs state the CMS is leaving it to the states to develop their own enforcement procedures and standards for Section 6032. Unless state has obtained an exemption from CMS, Section 6032 is effective as of January 1, 2007. If states need legislative approval for the necessary State Plan Amendment, states must apply to CMS for delayed implementation. If CMS grants a state delayed implementation, providers in that state will have to be in compliance as of the new effective date. CMS will monitor states' compliance through its "routine oversight."

View the FAQ, the letter, and the Department of Justice description online.

For more information, please contact Tammy Seltzer at TammyS@nccbh.org.