CMS Moratoria Extension May Adversely Affect Market Competition

BNA’s Health Care Daily Report™ sets the standard for reliable, high-intensity coverage of breaking health care news, covering all major legal, policy, industry, and consumer developments in a...

By James Swann

Feb. 3 — While a recent extension of a government freeze on new Medicare provider enrollments in several states points to a more aggressive fraud-fighting strategy, it also may be reducing market competition and having little impact on criminal behavior, health-care attorneys told Bloomberg BNA Feb. 3.

The temporary moratoria authority may be a good example of a proactive approach to fraud prevention, Kirk Nahra, an attorney with Wiley Rein in Washington, said, but it also has some complicated implications for the overall health-care delivery system.

“It's essentially saying, ‘we've got a big fraud problem, and no one can come into this market until we figure out how to fix it,'” Nahra said.

Nahra said the moratoria authority is also unusual because it applies to an entire industry, rather than a specific individual, which raises some practical concerns over how long the Centers for Medicare & Medicaid Services can keep extending it and blocking new entrants to the market.

Under Section 6401(a) of the Affordable Care Act, the CMS has the authority to impose a temporary moratorium on the enrollment of new Medicare, Medicaid or CHIP providers and suppliers, including categories of providers and suppliers, if the CMS determines that it's necessary to prevent or combat fraud, waste or abuse.

Moratoria can be extended in six-month increments.

The Jan. 29 extension covers new ambulance providers and home health agencies (HHAs) operating in certain metropolitan areas within six states—Florida, Illinois, Michigan, Texas, Pennsylvania and New Jersey.

Lack of Competition

The moratoria authority itself is a crude fraud-fighting instrument, Kevin McAnaney, with the Law Offices of Kevin G. McAnaney in New York, told Bloomberg BNA.

“While they may screen out some bad apples, they prevent a lot of good apples from competing,” McAnaney said.

The use of the moratoria authority may have less to do with fighting health-care fraud and more with the CMS having too much on its plate to figure out how to enroll bona fide providers, McAnaney said.

Criminal Impact

Beyond affecting market competition, the temporary moratoria may not be having much impact on real fraudsters, Kirk Ogrosky, an attorney with Arnold & Porter LLP in Washington, told Bloomberg BNA. Ogrosky said real criminals don't sit around waiting for the CMS to lift the temporary moratoria but instead move to another provider segment that has a low barrier to entry.

“People who commit fraud simply don't care about or comply with these types of hurdles,” Ogrosky said.

As a result, when the CMS puts up administrative road blocks, they tend to hurt legitimate businesses that care about compliance, Ogrosky said.

Instead of employing temporary moratoria on an entire segment of providers, the CMS could survey active providers with anomalous claims patterns in the affected metro areas and revoke the providers that prove to be fraudulent, Ogrosky said.

“That would allow the communities to get better service without being burdened by criminal enterprise,” Ogrosky said.

With the system in place, a criminal could pay cash for a small business that has a current Medicare provider number and then never file any change of ownership documentation with the CMS, effectively circumventing the temporary moratoria, Ogrosky said.

“It may take CMS over 120 days to realize that claims spiked and there is no one left at the empty shell of a business,” Ogrosky said.

To contact the reporter on this story: James Swann in Washington at jswann1@bna.com

To contact the editor responsible for this story: Janey Cohen at jcohen@bna.com