Labs Need to Act on New Medicare Enrollment Rules

Attorneys provide guidance on several steps lab directors and pathologists should take now

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CEO SUMMARY: For all healthcare providers—including clinical laboratories and pathology groups—a new rule became effective this month. The rule allows Medicare to revoke or deny enrollment if a provider or supplier’s affiliates pose an undue risk of fraud. Lawyers familiar with the “Program Integrity Enhancements to the Provider Enrollment Process” rule are concerned about its far-reaching and potentially negative effects, especially for compliant labs and pathology groups.

WILL THE NEW FEDERAL RULE INTENDED TO FIGHT FRAUD in federal health programs also end up entrapping compliant clinical laboratories and pathology groups? That’s one question an experienced lab industry attorney is asking, following the release of the new rule last month by the federal Centers for Medicare and Medicaid Services (CMS).

One situation the rule is designed to prevent is individuals and business entities continuing fraudulent or abusive schemes in different places and under different provider names or identifications, explained Danielle E. Holley, a healthcare attorney and principal at O’Connell & Aronowitz, in Albany, N.Y.

The new rule became effective today. It is a concern because it is likely to cause some disruption for clinical laboratories and pathology groups, particularly for those that are, or have worked with, a provider or supplier that has run afoul of CMS’ rules in the past.

“The question is whether CMS has gone beyond what is reasonable and necessary, thereby putting otherwise compliant providers at risk,” stated Holley.

“The goal of the regulation is laudable: to combat and reduce fraud in federal healthcare programs,” she wrote in a summary of the new regulation.

But Holley and other lawyers who represent clinical labs and pathology groups are concerned about the reach of the new rule, which is called the Program Integrity Enhancements to the Provider Enrollment Process. Lawyers also are concerned about the potential challenge of complying with the new regulations under the rule. (See “Labs Must Respond to New CMS Anti-Fraud Rule,” TDR, Oct. 14, 2019.)

Current, Past Lab Affiliations

“Clinical labs and pathology groups could face problems based on the affiliations they have now or have had in the past with other providers and suppliers,” commented Holley. “Providers and suppliers may now have an obligation to disclose to CMS several of their affiliations with other individuals and entities.”

The rule outlines whether a lab or pathology group would need to disclose a potentially troublesome affiliation. “Under the rule, all providers and suppliers who are enrolling initially, or revalidating an enrollment, will need to disclose these affiliations upon CMS request when a disclosable event arises, and CMS determines that the enrolling or revalidating provider or supplier has at least one such affiliation,” she wrote.

Defining ‘Disclosable Event’

Holley restated the CMS rule that defines a disclosable event as including any of the following involving an individual or organization:

  • Currently has an uncollected debt to Medicare, Medicaid, or CHIP, regardless of the amount or whether the debt is being repaid or appealed;
  • Has been or is subject to a payment suspension under a federal healthcare program, regardless of when it was imposed;
  • Has been or is excluded by the federal Office of Inspector General from participation in Medicare, Medicaid, or CHIP, regardless of whether the exclusion is being appealed or when the exclusion occurred or was imposed; or
  • Has had its Medicare, Medicaid, or CHIP enrollment denied, revoked, or terminated, regardless of the reason or whether it’s being appealed or when it was revoked, terminated, or imposed.

Covers Providers, Suppliers

“All healthcare providers and suppliers will need to disclose affiliations with individuals or entities,” stated Holley. “This is required, even if those parties were not enrolled in any of the three federal healthcare programs at the time of the affiliation.”

To determine if they have affiliations with disclosable events, clinical labs and pathology groups will need to look back to each of their affiliations over the past five years, she said.

Clinical laboratory directors and pathologists are likely to have questions about what steps they need to take to ensure that they comply with the rule given that it is in effect as of this month.

To address the most pressing questions lab directors and pathologists may have, Caitlin Forsyth provided guidance. An associate attorney with the law firm of Davis Wright Tremaine in Seattle, Forsyth serves as general regulatory counsel for clinical, molecular, and toxicology labs.

“Under the new rule, your lab or pathology group needs to know about your affiliates’ histories, and if and when CMS requests that you report those affiliations, you would need to disclose it on your enrollment application,” said Forsyth.

Questions and Answers

The following are some common questions labs and pathology groups may have and Forsyth’s answers.

Q. Does the rule require existing clinical labs and anatomic pathology groups to file the CMS-855 enrollment form by a certain time? Or take any action now in response to this new rule?

A. “No, neither clinical laboratories nor pathology groups need to take any action now. We’re in a bit of a wait-and-see period with CMS,” Forsyth said. “But, laboratories and pathology companies would be well served to get a handle now on the histories of the persons and entities that have ownership or controlling interests in their companies, and consider whether there’s anything they’d need to disclose, were CMS to direct them to do so.”

Q. In addition to beginning to collect some information about company owners, officers, and members of the board of directors, what else would you advise that labs and pathology groups do now to comply?

A. “As mentioned, there’s nothing labs and pathology groups need to do right now to comply with the new rule. If and when CMS directs a company to report its disclosable affiliations, we strongly recommend the company consult with counsel to ensure their reporting of disclosable affiliations is both accurate and complete,” she said.

Q. Given that CMS lists five types of provider enrollment transactions, do clinical labs and pathology groups need to be aware of these five transactions?

A. “The five enrollment transactions—initial enrollment, change of ownership, revalidation, reactivation, and change of information—are not new,” Forsyth explained. “It would be wise, however, for labs and pathology groups to have a general understanding of these transactions and know what circumstances might trigger a transaction and, thus, a reporting requirement.

“For example, is your lab appointing a new board?” she asked. “If so, you’ll need to file a change of information to delete the existing directors and report the new directors in Section 6 of the CMS-855 (ownership interest and/or managing control information [individuals]).

“Did your lab or pathology group lab get a notice that you’re due for revalidation?” she continued. “If so, be sure to file a revalidation application within the specified time to avoid penalties, which could include revocation of Medicare enrollment.”

Q. Does the new rule require all currently licensed Medicare providers to submit a CMS-855 that includes the new information about affiliations? Or, should labs wait until CMS publishes the enrollment forms?

A. “No, there’s no requirement to act now,” she explained. “That’s because CMS needs to revise the CMS-855 forms first to accommodate the required disclosures under the new rule. Then, as part of a phase-in process, CMS will give notice to certain providers and suppliers that they need to report their disclosable affiliations to CMS.

“At that point, CMS will determine which providers and suppliers have one or more affiliations that would trigger a disclosure under the new rule,” Forsyth explained. “For now, providers and suppliers will not be required to disclose affiliations under the rule unless CMS determines that the provider or supplier may have at least one affiliation that includes a disclosable event and then specifically requests the lab or pathology group to do so.”

Q. Do the new rules require clinical labs and pathology groups to report referring client physicians or other providers who submit patients’ lab test orders when they know or suspect these providers have past issues with Medicare?

A. “No, that’s not what the rule requires,” she said.

Labs, Path Groups Need to Disclose Affiliations

LANGUAGE IN THE NEW MEDICARE RULE requires providers, including clinical laboratories and pathology groups, to disclose relationships when enrolling or re-enrolling in the Medicare program.

The new rule defines the word “affiliation” as any of the following relationships:

  • A 5% or greater direct or indirect ownership interest that an individual or entity has in a lab or pathology group,
  • A general or limited partnership interest regardless of the percentage,
  • An interest in which an individual or entity exercises operational or managerial control over, or directly or indirectly conducts, the day-to-day operations of the lab or pathology group,
  • An interest in which an individual acts as an officer or director of a corporation,
  • Any payment assignment relationship, as the rule defines.

Contact Danielle E. Holley at 518-462-5601 or; Caitlin Forsyth at or 206-757-8159.


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