Wachler & Associates Health Law Blog

The Centers for Medicare & Medicaid Services (CMS) recently announced that it is planning to launch a new iteration of PECOS in Summer 2023. Dubbed “PECOS 2.0”, the new provider system aims to make the Medicare enrollment and revalidation processes faster and more efficient.

According to CMS, PECOS 2.0 will modernize Medicare enrollment management and allow providers to accomplish more tasks electronically. Some of these changes include faster applications using pre-population information, one application to update multiple enrollments, faster and easier revalidation processes, and the ability to track application status in real-time. CMS has also stated that provider data and records in current PECOS will transfer to PECOS 2.0 seamlessly. Applications currently in progress can be continued in PECOS 2.0, and applications previously closed will be available but will include limited information. All records transferred from current PECOS to PECOS 2.0 will be noted as such to make them easily identifiable. Additionally, providers’ login credentials will not be affected, and providers will still be able to log in to PECOS 2.0 using their Identity & Access (I&A) username and password.

With PECOS 2.0, providers will gain the benefit of consolidated applications, which is a combined application that updates and handles multiple enrollments. Consolidated applications will make it easier for providers to submit changes across multiple similar enrollments and multiple Medicare Administrative Contractors (MACs). When a provider submits a consolidated application that would normally require sending information to two different MACs, PECOS 2.0 will automatically separate the application and send the appropriate information to the relevant MACs. To ensure compliance with varying state requirements, PECOS 2.0 is also introducing a smart error process check which reviews and validates information for correctness as applications are completed. Moreover, there is no additional fee for consolidated applications. Whether providers choose to submit a consolidated application that covers multiple enrollments or an individual application for each enrollment, the fees will be the same and application fees will be automatically determined by each application.

Under the Medicare Part C or Medicare Advantage (MA) program, the Centers for Medicare & Medicaid Services (CMS) contract with Medicare Advantage Organizations (MAOs), typically private insurance companies, that administer MA health plans to Medicare beneficiaries as an alternative to traditional Medicare. Enrollment in MA plan has steadily grown in the last several years, and currently roughly half of all Medicare beneficiaries are enrolled in an MA plan. Further, federal authorities recently accused MAOs of overcharging the Medicare program by millions of dollars. Increased scrutiny of MAOs could lead to more stringent review of claims submitted by providers and MAOs may take greater action against providers through overbearing audits in an effort to offset losses. In any event, providers can likely expect MA plans to increase their audit activity of healthcare providers.

Some of the most popular MA health plans are administered by Humana, UnitedHealthcare, Aetna, BlueCross BlueShield, and Cigna. Audits by MA plans differ from audits conducted by Medicare or those conducted pursuant to commercial insurance plans, but MA plans are governed primarily by the provider’s participation agreement with the MA plan. As part of a provider’s participation contract, MA plans generally have the right to audit a provider’s claims. MA plans may audit providers for a number of reasons, such as suspicions of alleged upcoding, overutilization, irregularities, or fraud and abuse. A provider’s contract with the MA plan will generally prescribe a limited lookback period that restricts how far back in time the plan can review claims for audit purposes. The contract will generally also prescribe the policies and procedures which the plan must follow when conducting audits. However, state laws may affect the extent to which MA plans can audit providers by providing for conflicting maximum lookback periods or imposing other limitations. Notably, health plans may use these audits to retroactively deny a number of claims, which may then be extrapolated over several years of service, resulting in significant alleged overpayments against the provider. This may further result in serious actions such as recoupment, mandatory prior authorization, or even removal from the MA plan’s network of providers. Additionally, certain adverse actions imposed by MA plans may serve as the basis for even further consequences from CMS, such as suspension or termination from the Medicare program. Given the rapid growth of MA plans, providers should be aware of their rights and responsibilities regarding the most common MA plan audits, as well as be proactive in their compliance efforts.

For over 35 years, Wachler & Associates has represented healthcare providers and suppliers nationwide in a variety of health law matters, and our attorneys can assist providers and suppliers in understanding new developments in healthcare law and regulation. If you or your healthcare entity has any questions pertaining to Medicare Advantage audits or healthcare compliance, please contact an experienced healthcare attorney at 248-544-0888 or wapc@wachler.com.

Under the Medicare Advantage (MA) program, the Centers for Medicare & Medicaid Services (CMS) makes monthly payments to Medicare Advantage Organizations (MAOs), typically private insurance companies, according to a system of risk adjustment that depends on the health status of each enrollee. Accordingly, MAOs are paid more for providing benefits to enrollees with more severe diagnoses associated with more intensive uses of healthcare resources than to healthier enrollees who would be expected to require fewer resources. To determine the health status of enrollees, CMS relies on MAOs to collect diagnosis codes from their providers and submit these codes to CMS. While the MA plans conduct audits of the claims submitted to them by providers, CMS conducts audits of MAOs because some diagnosis codes are at higher risk for being miscoded, and MA audits that allegedly identify any improper coding may result in overpayment demands from CMS.

Since MAOs receive additional payments when they cover patients with more severe health conditions, this structure presents a potential for fraud and abuse whereby some MAOs may use additional diagnoses to attain high-risk scores, while not necessary reflecting these diagnoses in any documentation. In fact, MA plans have come under scrutiny recently after a Freedom of Information Act (FOIA) lawsuit revealed millions of dollars in overcharges by certain MAOs, specifically health insurers that issue MA plans. A common allegation involves “chart reviews” wherein MA plans find additional diagnosis that are supported by the medical records but were not previously reported or coded. Federal authorities tend to take issue with such diagnoses where they lead to higher cost for the Medicare program but not additional service being provided to the beneficiary. Healthcare providers have historically also encountered significant issues with MA programs. Payment, audits of providers, and claim adjudication are usually governed by contracts that are not necessarily the same amongst MA plans, and which most likely differ from the rules and regulations applicable to traditional Medicare. This is, where providers are audited by MA plans, the audits tend to resemble the commercial insurance audits, rather than traditional Medicare audits.

To provide oversight of the MA program, CMS performs audits of MA plans through the Risk Adjustment Data Validation (RADV) program. RADV audits are designed to identify improper risk adjustment payments made to MAOs in situations where medical diagnoses submitted for payment allegedly were not supported in the beneficiary’s medical record, ensuring that MAOs do not game the system and claim more money than they should. Each year, CMS selects several MA plans for RADV audits to ensure that medical record documentation supports diagnoses submitted for risk adjustment. The RADV audit process generally requires MAOs and their providers to submit a sample of medical records to validate risk adjustment data, in addition to other requirements. In a recently issued final rule, CMS stated that it will only extrapolate audit findings beginning with the plan year 2018 RADV audit, and will not extrapolate audit findings prior to 2018. As MA plans are becoming increasingly popular amongst Medicare beneficiaries while at the same time drawing more scrutiny from government regulators, providers should make efforts to ensure compliance with MA program requirements, as well as be prepared to appeal any denials.

The Centers for Medicare & Medicaid Services (CMS) recently issued a proposed rule that would require disclosure of private equity (PE) or real estate investment trusts (REITs) ownership, managerial, and other disclosable information for Medicare skilled nursing facilities (SNFs). The proposed rule also includes recommendations for comparable requirements for Medicaid nursing facilities (NFs) at the state level. If finalized, the proposed rule would likely increase the complexity of transactions involving PE or REIT ownership of SNFs and increase the reporting burden of PE or REITs with existing ownership interest in these facilities.

The timing of this proposed rule, according to CMS, is purposefully aligned with the Biden Administration’s recent initiative to improve the safety, quality, and accountability of nursing homes. The proposed rule also complements other recent CMS efforts intended to strengthen provider enrollment rules to “stop fraud before it happens” and stop playing “pay and chase” with individuals and organizations that the agency views as posing an undue risk of fraud, waste, or abuse to the Medicare and Medicaid programs. CMS stated that this proposed rule is necessary to obtain important data about the owners and operators of Medicare SNFs and Medicaid NFs, enabling CMS and states to better monitor the ownership and management of these providers. Given allegations of quality issues and differences in outcomes of these facilities with certain types of owners, CMS views this as an especially critical consideration.

If finalized, the proposed rule would require disclosure of the following information for all Medicare SNFs and Medicaid NFs:

As part of the Inflation Reduction Act (IRA) of 2022, the Centers for Medicare & Medicaid Services (CMS) is required to establish the Medicare Drug Price Negotiation Program (Negotiation Program) to negotiate maximum fair prices (MFPs) for certain high expenditure, single source drugs and biologicals. In accordance with the IRA’s requirements, CMS recently issued an initial guidance memorandum for implementation of the Negotiation Program for initial price applicability year 2026, as well as solicitation of comments.

The initial guidance memorandum describes how CMS intends to implement the Negotiation Program for initial price applicability year 2026 (January 1, 2026 to December 31, 2026), and specifies the requirements that will be applicable to manufacturers of Medicare Part D drugs that are selected for negotiation and the procedures that may be applicable to manufacturers of Medicare Part D drugs, Medicare Part D plans (both Prescription Drug Plans (PDPs) and Medicare Advantage Drug Plans (MA-PDs)), and providers and suppliers (including retail pharmacies) that furnish Medicare Part D drugs.

Additionally, the IRA creates several new sections under the Social Security Act (Act) to administer and govern the Negotiation Program. Specifically, in accordance with the IRA and the newly created provisions under the Act, CMS’ initial guidance provides that with respect to each initial price applicability year, CMS shall: