CMS granted Sweeping Authority to Impose Administrative Moratoria on Providers and Suppliers Without Prior Notice and With No Right to Appeal

One obscure but sweeping provision of the Patient Protection and Affordable Care Act (“PPACA”) grants the Centers for Medicare & Medicaid Services (“CMS”) unchecked authority to impose administrative moratoria on new providers and suppliers without any appeal rights. CMS claimed it had broad administrative authority and expanded its ability to impose the administrative moratoria on entire undefined regions, not just provider and supplier types, and determined that it could impose the temporary moratoria without notice. Providers and suppliers need to be aware of this unprecedented authority when drafting binding agreements before receiving enrollment approval.

I. Basis for the Administrative Moratoria

Section 6401(a) of PPACA created 42 U.S.C. § 1395cc(j)(7), which provides CMS the authority to impose temporary moratoria on the enrollment of new Medicare, Medicaid or CHIP providers or suppliers, including categories of providers and suppliers, if CMS determines it necessary “to prevent or combat fraud, waste, or abuse” in the programs. Unfortunately, the breadth of this new authority leaves providers and suppliers with virtually no predictable way to anticipate when and where CMS will impose a moratorium and securely plan future endeavors.

II. CMS’ Expanded Authority

CMS stated that in its view, the statute granted CMS broad authority to implement administrative moratoria and CMS used that authority to promulgate regulations further expanding its authority. To implement the statute, CMS issued 42 C.F.R. § 424.570, which states, “CMS may impose a moratorium on the enrollment of new Medicare providers and suppliers of a particular type or the establishment of new practice locations of a particular type in a particular geographic area.” Through the regulation and the commentary in the February 2, 2011 Final Rule, 76 Fed. Reg. 5965, CMS expanded its administrative moratorium authority in the following ways:

1. Geographic Area. CMS granted itself the ability to impose administrative moratoria in a particular geographic area.
2. Temporary. CMS determined that, in its discretion, the temporary moratoria could be renewed indefinitely.
3. Notice. CMS determined that it did not need to provide any prior notice of its decision to issue an administrative moratorium.

1. Geographic Area:
In addition to expanding its authority to impose a temporary moratorium on an entire geographic area, CMS defined the scope of the geographic area as being completely within CMS’ discretion. In response to a commenter’s request for clarification on the definition of “geographic area”, CMS stated the “geographic area” referred to in the regulation “is the region under the moratorium” and that the geographic region “may constitute a county, a number of counties, state, a number of states, regions, or MSAs.” 76 Fed. Reg. 5920. In other words, there is no restriction on what particular geographic area CMS may declare is covered by the moratorium. CMS could issue a moratorium on any new providers in an entire state or on a particular provider in the entire country. Conversely, the region may be nationwide or it may be a particular town or even area of town.

2. Temporary:
The temporary moratorium is not necessarily temporary. Under its broad authority, CMS determined that the temporary moratorium will last for six (6) months and may be renewed by CMS, in its sole discretion, for additional six month terms indefinitely. In the commentary to the Final Rule, CMS determined the six month duration is sufficiently long enough to enable CMS to assess its impact on the circumstances the moratorium was designed to address and determine if an additional temporary moratorium is needed. Id. Because providers and suppliers cannot appeal CMS’ decision to impose an administrative moratorium, the temporary moratoria could be perpetually renewed for any length of time. One commenter expressed concern that the six (6) month period was not temporary as the statute specified and that the statute did not grant CMS the authority to extend the moratoria. Id. CMS responded by reassuring the commenter that CMS took its responsibility seriously but that CMS believed it has broad discretion to impose and renew a moratorium if it believes the circumstances requiring the moratorium still exist. Id.

3. Notice:
CMS also expanded its authority under the regulation by declaring that the agency was not required to provide any advance notice of the imposition of an administrative moratorium. Under the regulation, CMS will announce its decision to impose a temporary moratorium in the Federal Register. However, CMS explained in the commentary, “We will not be providing advance notice of any planned moratorium as such a notice would likely cause a rush of enrollments of the type posing the problem that would be addressed by the moratorium.” 76 Fed. Reg. 5919.

This complete lack of advance notice creates considerable planning problems for entities seeking to enroll in the federal healthcare programs as a provider or supplier. The provider could have expended considerable resources, incurred significant development costs, and entered into binding agreements, but until the provider or supplier has had its enrollment application approved or recommended for approval by the enrollment contractor, CMS could impose an administrative moratorium that blocks the entire project indefinitely without recourse. To protect against unforeseen administrative moratoria, any leases, contracts, or other documents required to develop a new provider or supplier should contain a provision that allows the provider to terminate the agreement if CMS imposes an applicable administrative moratorium.

III. Lack of Substantive Requirements:

The regulations do little to provide additional explanation or limitations on CMS’ administrative authority to unilaterally impose a moratorium. Under 42 C.F.R § 424.570(a)(2), CMS may impose the moratorium if it determines there is a significant potential for waste, fraud or abuse regarding a particular provider or supplier type or in a particular region based on:

1. A CMS identified trend that appears to be associated with a high risk of fraud, waste or abuse such as a high number of providers or suppliers in a category relative to the number of beneficiaries or a rapid increase in enrollment applications within a category;
2. A state has imposed a moratorium on Medicaid enrollment in a particular geographic region or on a particular provider or supplier type; or
3. A determination that is made in consultation with the Office of Inspector General (“HHS OIG”) and/or the Department of Justice (“DOJ”).

As part of its explanation, CMS stated it “will consider any recommendation from the DOJ, HHS OIG, or the [Government Accountability Office] to impose a temporary moratorium….” 76 Fed. Reg. 5918. The regulations leave the door wide open for the DOJ, HHS OIG and GAO to start imposing targeted moratoria in consultation with CMS. Quality providers in service areas known for abuse, such as outpatient psychiatric, home health and hospice services, may find expansion efforts thwarted by blanket moratoria. Several commenters expressed concerns about the effect these moratoria may have on beneficiaries’ access to care and were dismissed by CMS with its assurance that CMS takes access to care seriously. 76 Fed. Reg. 5921.

The regulations fail to provide any substantive standards that would allow providers to plan their future developments or gauge when CMS may impose a new moratorium for six months with indefinite renewals. In response to one comment that observed CMS failed to outline the criteria it will use to make its moratoria decisions, CMS essentially said providers and suppliers will just have to trust CMS. CMS stated, “We would not impose a temporary enrollment moratorium without an adequate rationale” and that if CMS determines a temporary moratorium is warranted, it will explain the reasons in the public notice. 76 Fed. Reg. 5920. CMS
declined to address one commenter’s suggestion that CMS publish the data relied on when issuing a temporary moratorium and instead repeated its position that it has broad authority and will discuss the issues associated with the decision in the Federal Register notice. 76 Fed. Reg. 5922.

IV. The Lack of Oversight or Review

CMS’ broad administrative authority to unilaterally declare enrollment moratoria also includes a prohibition on any substantive review or appeal of CMS’ decisions. The statute specifically states, “[t]here shall be no judicial review under section 1395ff of this title, section 1395oo of this title, or otherwise, of a temporary moratorium imposed under subparagraph (A).” 42 U.S.C. § 1395cc(j)(7)(B). CMS explained in the preamble commentary to the final rule that providers and suppliers may file an administrative appeal; however, the scope of review “will be limited to whether the temporary moratoria applies to that particular provider or supplier.” 59 Fed. Reg. 5918. In other words, the only basis for an administrative appeal is whether the provider or supplier is of the type or is located in the particular region subject to a moratorium. Providers and suppliers cannot challenge CMS’ rationale or basis for imposing or continuously renewing a temporary administrative moratorium.

IV. Limitations

The statute and regulations provide few limitations on CMS’ authority to impose the moratoria. The administrative moratoria do not apply to changes in practice location or changes in provider or supplier information (i.e. address, phone number, etc). The moratoria will not apply to any provider or supplier that has been approved or recommended for approval by the appropriate Medicare enrollment contractor, but not yet entered into the Medicare Provider Enrollment, Chain and Ownership System (“PECOS”) at the time the moratorium is imposed. Lastly, the moratoria will not apply to providers or suppliers that are new as a result of a merger, change of ownership, or consolidation.

Conclusion

While attempts by the government to prevent and deter provider fraud are laudable, the lack of any discernible criteria, prior notice or substantive review relating to CMS’ authority to unilaterally impose enrollment moratoria on providers and suppliers or geographic regions creates a great deal of uncertainty for healthcare entities attempting to plan for the future. Providers and suppliers need to take the possibility of a moratorium into account when drafting binding leases, services agreements and other binding agreements.

“CMS Granted Sweeping Authority to Impose Administrative Moratoria on Providers and Suppliers Without Prior Notice and with No Right to Appeal.”

Louisiana Hospital Association Impact Law brief, Vol. 28, (No. 2). Feb. 26, 2013

Michael R. Schulze