Skip to Content

Congress Includes Fraud and Abuse Changes in Medicare Sustainable Growth Rate Legislation

on Thursday, 21 May 2015 in Health Law Advisory: Zachary J. Buxton, Editor

President Barack Obama signed the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) on April 16, 2015, repealing the Medicare program’s embattled Sustainable Growth Rate formula (SGR), thereby avoiding a potential 21 percent cut to Medicare physician payments. The Act—Public Law 114–10—furthers the Federal government’s mission to transition health care to a more quality- and outcome-based reimbursement system for medical services.

Beginning in July 2015, MACRA increases Medicare physician payments 0.5 percent each year through 2019, and implements a 0.0 percent increase through 2025. The quality- and outcome-based reforms, referred to as the Merit-Based Incentive Payment System (MIPS), begin in 2019. MIPS combines several CMS quality initiatives, including the Meaningful Use program, Physician-Quality Reporting System (PQRS), and Value-Based Payment Modifier for physicians.

MACRA also contains a myriad of Medicare payment reforms and changes to prevent Medicare fraud. Most of the fraud provisions have little to no impact on providers and suppliers, e.g., the removal of beneficiary Social Security account numbers on the Medicare issued card, and the requirement for a prescriber’s National Provider Identifier for prescription drug claims provided under Medicare Part D.

MACRA’s most significant fraud and abuse change adds “medically necessary” to the Gainsharing Civil Monetary Penalty (CMP) Law (42 USC 1320a-7a(b)) and subjects a hospital or critical access hospital to a potential civil monetary penalty of up to $2,000 for each violation.
Gainsharing arrangements seek to align hospitals and physicians to share in any patient care cost savings as a result of the physician’s actions. If a physician successfully provides care to a patient at a cost of $100 that would have otherwise cost $200, the hospital may pay the physician a fixed percentage of the savings.

Historically, the Office of Inspector General (OIG), in a 1999 Special Advisory Bulletin, noted the breadth of the original Gainsharing CMP and concluded it prohibited gainsharing arrangements seeking to reduce or limit services to Medicare and Medicaid beneficiaries. Because of its breadth, the OIG has addressed numerous gainsharing arrangements through Advisory Opinions since the 1999 Special Advisory Bulletin. It has never pursued any of these arrangements in an enforcement action.

MACRA reduces some of this uncertainty and inserts “medically necessary” into the Gainsharing CMP: “[i]f a hospital or critical access hospital knowingly makes a payment, directly or indirectly, to a physician as an inducement to reduce or limit medically necessary services provided” to a Medicare or Medicaid beneficiary, a facility is subject up to a $2,000 penalty per violation.

Thus, gainsharing arrangements designed to reduce or limit services deemed medically necessary to Medicare or Medicaid beneficiaries are prohibited under the MACRA addition. The change is effective immediately and applies to payments as of April 16, 2015.

In addition to the Gainsharing CMP modification, MACRA contains the following fraud and abuse provisions that should not drastically impact Medicare providers and suppliers:

  1. Medicare Administrative Contractor Improper Payment Outreach and Education Program: Requires Medicare Administrative Contractors (MACs) to provide information to providers and suppliers in their jurisdiction on the most frequent and expensive payment errors during the last quarter. This information is provided by Recovery Audit Contractors (RACs);
  2. Removes Medicare beneficiary Social Security Numbers from the Medicare issued card;
  3. Requires the National Provider Identifier (NPI) on pharmacy claims under Medicare Part D or Part C Medicare Advantage prescription drug plans starting in 2016.

Overall, MACRA continues the Federal government’s recognition of the future of health care reimbursement that is increasingly wedded to higher quality at lower cost.

Zachary J. Buxton

1700 Farnam Street | Suite 1500 | Omaha, NE 68102 | 402.344.0500