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For healthcare providers participating in the Medicare program, facing a claims audit can be both challenging and time-consuming. Denials are common during these audits, and when they occur, the appeals process can stretch over months or even years. Each step requires careful strategy and timely action.

Typically, a Medicare audit is initiated when a Medicare contractor requests medical records from a provider. At this early stage, it’s crucial to understand the context of the request. Identifying the type of contractor involved, whether it’s a Medicare Administrative Contractor (MAC), Unified Program Integrity Contractor (UPIC), Recovery Audit Contractor (RAC), or Supplemental Medical Review Contractor (SMRC), can provide important insight into what kind of review is being conducted. The nature of the review itself also matters: is it a pre-payment or post-payment audit? Is it part of a Targeted Probe and Educate (TPE) program, a Comprehensive Error Rate Testing (CERT) audit, or a Potential Payment Error Opportunity (PPEO) initiative? Is there a likelihood that the audit includes statistical extrapolation?

The provider’s own history and operational context can also affect the review. For instance, has the provider faced similar audits recently? Was there a recent ownership transfer? Are any necessary records held by another entity? These details may guide the provider’s next steps. Depending on the scope and risk level of the audit, providers might take proactive measures to support their claims. This could include submitting additional documentation, hiring a clinical reviewer to evaluate the claims, engaging directly with the contractor, or preparing a detailed legal response. In other situations, simply submitting the requested records and awaiting a decision may be the most prudent course.

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The HHS Office of Inspector General (OIG) recently issued several new work plan items outlining audits it intends to perform and initiative it intends to undertake. OIG investigations and initiatives can concern activities by federal healthcare programs like Medicare and Medicaid, their contractors, and participating providers. However, it is often providers who experience the downstream impacts of OIG initiatives. Healthcare providers should be aware of OIG’s enforcement priorities.

First, OIG intends to review Medicaid nonemergency medical transportation services. OIG noted that such services can pose a significant risk of fraud, waste, and abuse in Medicaid and that past OIG work has identified significant vulnerabilities in State and Federal efforts to reduce fraud, waste, and abuse involving nonemergency medical transportation in Medicaid. It appears that OIG intends to conduct targeted reviews of certain nonemergency medical transportation providers. Such providers should be prepared for increased levels of scrutiny from OIG and their local Medicaid programs.

Second, OIG intends to produce a white paper regarding fraud, waste, and abuse related to durable medical equipment (DME) in Medicare. DME has long been an area of concern for the Medicare program and federal law enforcement and OIG noted that that recent cases demonstrate that fraudsters continue to target DMEPOS billing and have developed new schemes. OIG intends to build on its extensive experience with DME fraud and provide further information about the nature of DMEPOS fraud in Medicare, key program integrity vulnerabilities, and potential actions to reduce fraud, waste, and abuse.

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Entities operating in the healthcare industry, especially those that submit claims to government-funded programs like Medicare or Medicaid, must navigate a complex landscape of laws designed to prevent fraud, waste, and abuse. The most critical federal statutes in this area include the Physician Self-Referral Law (commonly known as the “Stark Law”), the Anti-Kickback Statute (AKS), and the Eliminating Kickbacks in Recovery Act (EKRA). Even seemingly straightforward business relationships can demand intricate legal analysis when these laws are involved.

The Stark Law (42 U.S.C. § 1395nn) restricts physicians from referring patients for certain healthcare services, referred to as “designated health services,” to entities with which they or their immediate family members have a financial relationship, unless a specific exception applies. These financial ties can take various forms, including employment arrangements, compensation agreements, or investment interests. Notably, the Stark Law doesn’t cover all services under Medicare or Medicaid, only those specifically listed as designated health services. Although the law includes a number of exceptions, such as those for in-office ancillary services or arrangements based on fair market value, each exception has detailed criteria that must be satisfied fully for it to be valid.

Similarly, the Anti-Kickback Statute (42 U.S.C. § 1320a-7b(b)) prohibits the offer, payment, solicitation, or receipt of anything of value in exchange for referrals or to induce business for services reimbursable by federal healthcare programs. The AKS has a broader scope than the Stark Law, covering any service billed to these federal programs, and defines “remuneration” broadly to include cash, gifts, discounts, or anything else of value. The statute is accompanied by a set of “safe harbors,” regulatory provisions that protect certain arrangements from enforcement actions if all specified conditions are met.

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Physicians and other healthcare professionals who labor under the decreasing reimbursement and increasing administrative burden of insurance companies and government healthcare programs, especially Medicare, may wonder if there is a way to accept payment directly from patients and avoid the obstacles presented by billing third-party payors.

While a strictly cash-pay or “concierge” practice is not a viable business model for many providers, for certain providers responding to the needs of certain patient populations, it can be a highly successful model that avoids many of the costs, delays, and administrative issues created by the need to bill third-party payors and comply with payors’ endlessly complex and shifting rules. Practice structures and pricing models can be highly variable and customizable to the needs of the practice and its patients. State law and licensing rules may in some cases limit certain structures or activities, but these would apply to a provider regardless and are generally far less burdensome than the restrictions imposed by payors.

Some practices may choose a more limited route and choose to accept commercial insurance plans, while not accepting Medicare or Medicaid plans. This approach can often limit many of the worst downsides of accepting third-party payment, while still leaving the practice open to a large patient population.

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Generally, in the Medicare claims appeal process, a determination that is favorable to the provider ends the appeal process. Only under very limited circumstances can the Centers for Medicare & Medicare Services (“CMS”) or its contractors directly appeal a favorable appeal determination. However, there are certain mechanisms that can be used to reopen, review, and change favorable determinations with which CMS disagrees.

The Medicare claims appeal process is a lengthy, complex, and administratively burdensome process for providers. It includes five levels of appeal, the first four of which are directly controlled by CMS or The Department of Health and Human Services (“HHS”) itself. First is Redetermination by a Medicare Administrative Contractor (“MAC”). Second is Reconsideration by a Qualified Independent Contractor (“QIC”). Third is review by an Administrative Law Judge (“ALJ”) employed by the Office of Medicare Hearings and Appeals (“OMHA”), a division of HHS. Fourth is review by the Medicare Appeals Council, another division of HHS. Fifth is review by a federal court.

Where a provider prevails at the ALJ review, a distinct CMS contractor, the Administrative QIC (“AdQIC”) is tasked with reviewing an ALJ decision. Where CMS, through the AdQIC, disagrees with the ALJ, in some limited circumstances, the AdQIC can directly file an appeal of the ALJ decision to the Appeals Council. However, more often the AdQIC will simply “refer” a provider’s victory to the Appeals Council for the Appeals Council to considering review of its “own” accord. The Appeals Council nearly always takes such cases and often overturns the provider’s favorable determination. CMS and/or HHS may also simply direct the ALJ, who is employed by HHS, to change the decision.

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Medicare-enrolled hospice providers are under increasingly close scrutiny. Due to concerns regarding hospice compliance and with fraud, waste, and abuse by hospice providers, both the Centers for Medicare & Medicaid Services (“CMS”) and the Department of Health and Human Services Office of Inspector General (“OIG”) have stepped up audits, investigations, and enforcement actions against hospice providers. One of these measures are Provisional Period of Enhanced Oversight (“PPEO”) audits of Medicare-enrolled hospices. Providers should be aware that the stakes in a PPEO audit can be unexpectedly high, while the margin for error unexpectedly low.

CMS implemented PPEO audits as a direct response to concerns regarding hospice fraud and compliance issues. Pursuant to the PPEO program, since mid-2023, CMS audits all “newly-enrolled” hospice providers in Arizona, California, Nevada, and Texas. “Newly-enrolled” is not limited to hospice providers enrolling in Medicare for the first time, but also includes those that undergo a Change of Ownership (“CHOW”) as that term is defined under the Medicare program, those that undergo a 100% change in ownership, and those reactivating Medicare enrollment after being in a deactivated status.

PPEO audits have been compared to Targeted Probe and Educate (“TPE”) audits because, like a TPE audit, a PPEO audit can include multiple rounds of review between which the provider may receive education and an opportunity to address the issue or issues identified by the review. However, this comparison only goes so far and in practice TPE and PPEO are often very different. TPE generally consists of three rounds of review, occasionally four, and the contractor conducting the review is required by CMS rules to offer education to the provider and to wait between rounds of review to give the provider a chance to implement changes and address any issues that have been identified. Further, under TPE, providers are generally not referred to CMS for sanctions until they have failed three consecutive rounds of review by demonstrating consistently high error rates across all three rounds. TPE can, and often does, result in revocation of billing privileges, but generally not before the provider has failed three rounds of review.

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Recently, the Centers for Medicare & Medicaid Services (CMS) published the calendar year (CY) 2026 Medicare Physician Fee Schedule (PFS) Proposed Rule. The Proposed Rule includes significant changes to Medicare telehealth policies, among other proposals. Healthcare providers that utilize telehealth in their practices should understand the proposed changes and be prepared to comply with any shifts in Medicare policy if the proposed changes become final.

In the proposed rule, CMS proposes simplifying the current five-step process to determine if a service qualifies for the Medicare Telehealth Services List. Under the new process, CMS would only keep three criteria: the service must be separately payable under the PFS; fall within the scope of certain federal laws regulating telehealth services; and be deliverable through real-time, two-way interactive communication. This change aims to lower provider burden and speed up access to new telehealth services.

Based on the revised review process, CMS proposes adding five new services to the Medicare Telehealth Services List for CY 2026:

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Medicare-enrolled providers have seen a recent increase in the number of deactivations issued by the Centers for Medicare & Medicaid Services (CMS) and its contractors. A deactivation of Medicare billing privileges effectively turns off a provider’s ability to bill Medicare and at first glance may appear to be similar to a Medicare revocation. However, the two are very different in practice and in how a provider may respond.

A revocation of Medicare billing privileges has long been a punitive measure to remove a provider or supplier’s ability to bill Medicare. CMS usually imposes these based on alleged misconduct by the provider, such as repeatedly billing claims that do not comply with Medicare requirements or being convicted of a felony. CMS will generally impose a bar of how long the provider must wait before it can attempt to re-enroll with Medicare, usually ten years. A Medicare revocation may also lead to a provider’s termination by other payors, including Medicaid and Medicare Advantage plans. A revocation can be a very serious sanction.

A deactivation of Medicare billing privileges is often more administrative in nature. It removes a provider’s ability to bill Medicare, but generally on different grounds, such as not billing Medicare for six months, not reporting a change in information, or not being in full compliance with all enrollment requirements, among others. When a provider is deactivated, it can generally reactivate its billing privileges by correcting the administrative issue and recertifying that its enrollment information is correct. Some provider types, especially home health agencies, may have additional requirements. Where a “gap” exists between when the provider’s billing privileges are deactivated and when they are reactivated, Medicare will likely deny claims from that period. The provider may consider whether to appeal the deactivation itself, in addition to any reactivation. The provider may also need to appeal any denied claims from such a period.

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The regulatory process for appealing Medicare claim denials and overpayments is a complex, lengthy, and administratively burdensome process. Through up to five levels of appeals, Medicare-enrolled providers and suppliers, and their representatives, must contend with inflexible deadlines, tight procedural and bureaucratic requirements, and biased reviewers, all while contesting the denials and asserting the medical necessity of the items or services at issue.

After a Medicare Administrative Contractor (MAC) has issued an Initial Demand, the letter that informs the provider of the claim denials, the reasons for the denials, and the amount of repayment demanded, the first step in appeal is Redetermination. Redetermination review is conducted by the same MAC who issued the Initial Demand and the contractor nearly always upholds its earlier decision. A provider can stop or halt recoupment of the alleged overpayment at this stage of appeal, but only if it requests Redetermination within a certain timeframe.

After Redetermination, the next level of appeal is Reconsideration. Reconsideration is conducted by a Qualified Independent Contractor (QIC), a separate Medicare contractor than the contractor that conducted Redetermination. The QIC is generally more impartial than the MAC, but often finds against the provider. A provider can stop or halt recoupment of the alleged overpayment at this stage of appeal as well, but only if it requests Reconsideration within a certain timeframe.

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Recently, the Centers for Medicare & Medicaid (CMS) released the CY 2026 Physician Fee Schedule (PFS) Proposed Rule, introducing sweeping changes to Medicare Part B payment policy. Among the most significant updates is a restructuring of how Medicare pays for skin substitute products commonly used by wound care providers.

Skin Substitutes Reclassified as Incident-to Supplies

Historically, Medicare has paid for skin substitutes as biological products under the Social Security Act, using the Average Sales Price (ASP) methodology to determine reimbursement rates. However, CMS has raised concerns about increasing costs and utilization rates, noting that Medicare Part B spending on skin substitutes rose from millions in 2019 to billions in 2024.

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