Clarifying Medicare Participation and Assignment Rules

This article is part one of two articles that will review ways that may help to limit Medicare audit risk. As O&P providers and suppliers struggle through the everincreasing burden of Medicare claim audits, there are very few encouraging signs or protective steps that professionals can pursue. Questions often arise as to whether O&P practitioners can limit their Medicare involvement in order to limit audit risk exposure. This two-part article series will examine creative approaches to limit Medicare audit risk. But as the details emerge in the course of this article, bright-line approaches to achieve this goal remain elusive. In this installment, we'll examine an often misunderstood area of Medicare law, that of Medicare participation and assignment. Part 2 will examine Medicare enrollment, the use of Advance Beneficiary Notices (ABNs), and a beneficiary's choice not to submit a Medicare claim. Current State of Affairs for Medicare O&P Audits Though the Recovery Audit Contractor (RAC) program is on a temporary hiatus, other contractors (Unified Program Integrity Contractors and the Supplemental Medical Review Contractor) are being brought in by the Centers for Medicare & Medicaid Services (CMS) to combat fraud, waste, and abuse. And the RAC pause is not indefinite-once the new round of contracting is complete, new RACs will be on the prowl for claims to deny. Or, potentially worse, the same RACs will be back at it, using the same aggressive tactics to deny legitimate claims. Meanwhile, the appeals process has become so overwhelmed and backlogged at the Administrative Law Judge (ALJ) level that providers and suppliers will need to wait a minimum of two years to have their appeals heard. In actuality, it will probably be closer to four or five years for many appeals to be decided by an ALJ. The lower levels of appeal tend to be unfavorable venues for providers, with the Durable Medical Equipment Medicare Administrative Contractors (DME MACs) and the Qualified Independent Contractor (QIC) often "rubberstamping" denials that have been appealed. This is combined with the ever-increasing documentation burdens placed on O&P providers, with a heavy focus on the one type of documentation the practitioner has very limited control over-physician documentation. Given this bleak scenario, it is not surprising that many O&P providers are looking for a way to avoid involving Medicare in their claims processing procedures. Some O&P providers may decide to stop serving Medicare beneficiaries entirely. But given the demographics of the population most in need of O&P care, this is not likely to be feasible for many providers. Therefore, facing the choices at hand, it is tempting for O&P providers to find ways to serve Medicare beneficiaries as patients without billing Medicare directly. Unfortunately, this allure can be misleading. In most cases, it is almost impossible for O&P providers to entirely avoid billing Medicare for services provided to Medicare beneficiaries. There is a way in which providers and suppliers can bill the Medicare beneficiary for items and services rendered and merely assist the beneficiary in obtaining reimbursement from Medicare. This process involves refusing assignment of the Medicare claim. But refusing assignment is not a complete solution to the audit and denial problem faced by many O&P providers. Medicare Participation Before an O&P provider decides to refuse assignment of Medicare claims, the provider's participation status must be determined. Generally, suppliers enroll with Medicare prior to providing items and services to Medicare beneficiaries and, during the enrollment process, the supplier also decides whether to sign a participation agreement. Many providers become participating suppliers, which requires them to accept assignment of all Medicare claims. Some providers, however, choose to remain non-participating. (See chart.) Providers who have already entered into participation agreements with CMS may opt out in the future, but they must take affirmative steps to do so prior to refusing to accept assignment of any Medicare claims. A supplier who wishes to opt out of his or her participation agreement must submit a letter, signed by the authorized official, to the National Supplier Clearinghouse (NSC) during the open enrollment period, which runs from mid-November through the end of December of each year. The change from "participating" status to "non-participating" status will become effective on January 1 of the following year. There are potential criminal and civil penalties for suppliers who refuse to accept assignment without first terminating their participation agreement. Any individual who accepts assignment and who "knowingly, willfully, and repeatedly" violates the participation or assignment agreement shall be guilty of a misdemeanor and subject to a fine of not more than $2,000 or imprisonment of not more than six months, or both. CMS may also exclude a supplier from program participation and from any state healthcare programs (e.g., Medicaid). Finally, civil monetary penalties (CMPs) of up to $2,000 per item or service claimed may be assessed against any entity that violates an assignment agreement. Refusing Assignment Assuming that the supplier's status under Medicare is listed as non-participating, the supplier is permitted, but not required, to accept assignment of Medicare claims. Accepting assignment is determined on a claim-by-claim basis. Thus, a provider may decide to accept assignment on one claim for a Medicare beneficiary but refuse assignment for a different claim for that beneficiary with items or services rendered later. In any event, once a claim is filed as assigned, Medicare will treat that claim as assigned even if the assignment was billed in error. Non-participating suppliers may not split claims however. All related claim lines must be billed together either as assigned or unassigned. This is true even if the total number of claim lines attributable to a single date of service exceeds the number of lines permitted on a single claim form and spills over onto separate claim forms. In refusing to accept assignment, a supplier is no longer bound by the durable medical equipment, prosthetics, orthotics, and supplies (DMEPOS) fee schedule payment amounts. This is the primary benefit of refusing assignment. A provider who refuses assignment may charge the beneficiary whatever amount he or she wants for orthotic or prosthetic services. While non-participating physicians are limited to charging a maximum of 115 percent of the physician fee schedule, there is no limit on the charges that DMEPOS suppliers, including O&P providers, may charge for unassigned claims. This amount may be charged to the beneficiary upfront, with payment made directly by the beneficiary rather than by the Medicare program. However, refusing to accept assignment does not eliminate the supplier's interaction with Medicare. Even if a supplier refuses to accept assignment of a specific claim, the supplier is still responsible for filing the Medicare claim on behalf of the beneficiary-not simply completing the paperwork, but actually filing the claim and addressing any filing deficiencies noted by the DME MAC. Suppliers who fail to do so may be subject to civil monetary penalties. Failure to file the claim within the one-year filing deadline will preclude the supplier from collecting payment from the beneficiary, except for the 20 percent copayment and any applicable deductible amount. Once the claim is filed, Medicare makes payment to the beneficiary, not the provider. The payment amount is limited to no more than the DMEPOS fee schedule amount, however, regardless of whether the amount charged by the O&P provider was higher. Practical Impact While O&P providers may be enticed by the prospect of getting payment upfront from beneficiaries for whatever amount they choose, it is important for suppliers to understand that those entities that refuse to accept assignment are not immune to Medicare audits. Unassigned claims are as vulnerable to auditing as assigned ones, although the current reality is that very few (if any) unassigned claims have been audited. (And it is unclear whether the RACs have authority to audit such claims since they are merely filed by suppliers on behalf of beneficiaries rather than by the providers and suppliers themselves.) The apparent low level of auditing of unassigned claims may not continue indefinitely, especially if entire categories of suppliers, such as O&P providers, begin filing claims on an unassigned basis. If an unassigned claim is audited by a Medicare contractor, failure to accept assignment does not insulate the supplier from being assessed an overpayment for the item unless the item is a non-covered item or service under Medicare or the supplier has obtained a signed ABN, which we will discuss in more depth in Part 2 of this article series. For items and services that are never covered under Medicare, the beneficiary and supplier are essentially acting outside of the Medicare program, and the program's rules therefore do not apply. However, for items and services that are covered, at least under certain circumstances, the beneficiary is entitled to coverage under the program and the supplier has to comply with respect to medical necessity criteria and other coverage rules as a result of working with that beneficiary. Thus, if an item or service provided to a Medicare beneficiary is determined to not be medically necessary, the provider is responsible for knowing that and for having provided the item or service anyway. In the case of a Medicare audit and a resulting denied claim, regardless of whether the claim is assigned or unassigned, the full amount of the payment must be refunded. In the case of an assigned claim, this is carried out when the DME MAC recoups the payment it made to the supplier directly. With unassigned claims, the Medicare-allowed payment amount paid to the beneficiary is usually also demanded or recouped by the DME MAC directly from the provider. This occurs even though payment was made by Medicare directly to the beneficiary. Medicare is loath to demand money back from beneficiaries except in rare instances; therefore, Medicare tends to pursue repayment from the provider or supplier rather than from the beneficiary, assuming that the provider or supplier was paid by the beneficiary. Where a supplier has charged the beneficiary more than the Medicare allowed amount, the supplier is also responsible for refunding the balance of any amount that was charged to the beneficiary directly to the beneficiary. The refund must be made to the beneficiary within 30 days after the date the supplier receives notice of the overpayment, unless the denial is appealed within those first 30 days. If the denial is appealed but upheld, the refund must be made to the beneficiary within 15 days after the date the supplier receives the notice of the unfavorable decision. Suppliers who knowingly and willfully fail to make a refund within these time limits may be subject to civil monetary penalties or exclusion from the Medicare program. So how does this work in real situations? The following vignettes of potential refund situations illustrate the Medicare rules: Provider A is a participating supplier under Medicare who provides a prosthetic limb to Beneficiary 1. Because Provider A is a participating supplier, it must submit the claim and accept assignment. The DME MAC determines that the prosthetic limb was not medically necessary and demands repayment. The claim was assigned, so payment was made directly to Provider A, and the DME MAC recoups the overpayment from other pending Medicare reimbursement due to Provider A. Provider B is a non-participating supplier who provides silicone socket liners to Beneficiary 2. Provider B refuses to accept assignment of the claim and bills Beneficiary 2 directly for the Medicare-allowed payment amount. Provider B also submits the claim to Medicare on behalf of Beneficiary 2, who receives payment from the DME MAC for 80 percent of the Medicare allowed amount. Later, the DME MAC determines that the socket liners were not medically necessary. Rather than request repayment from Beneficiary 2, the DME MAC recoups 80 percent of the Medicare-allowed payment amount directly from Provider B. Provider B must refund the remaining 20 percent to Beneficiary 2. Provider B provides an AFO to Beneficiary 3 and refuses to accept assignment of the claim. Provider B submits the claim to Medicare on behalf of Beneficiary 3 but also bills Beneficiary 3 directly for $200 more than the Medicare-allowed payment amount for the orthosis. Beneficiary 3 receives payment from the DME MAC for 80 percent of the Medicare-allowed amount. Later, the DME MAC determines that the orthosis was not medically necessary. Again, rather than request repayment from Beneficiary 3, the DME MAC recoups its payment of 80 percent of the Medicare-allowed amount from Provider B. Provider B is responsible for refunding the remaining 20 percent plus the additional $200 to Beneficiary 3. Conclusion As the previous examples illustrate, even non-participating O&P providers who refuse assignment remain liable for any overpayment determinations made by the DME MAC. In fact, the refund obligations in such circumstances can get complicated. The major benefit of taking such steps is to avoid audits, and even that is not guaranteed. As noted previously, anecdotal evidence suggests that audits of unassigned claims have been rare, if not nonexistent. There is no guarantee this will remain the case, however, and O&P providers should keep that in mind when choosing whether to become a non-participating supplier. Beyond refusing assignment, there are a number of other tactics some O&P providers may pursue in seeking to limit their Medicare audit risk. These tactics raise questions, such as the following: Can I just not enroll in Medicare at all? What about issuing ABNs on a routine basis? What if the patient agrees not to submit a claim to Medicare? These are more extreme measures that have their own unique considerations and warrant further discussion. Part 2 of this article will address these questions and continue to discuss potential ways of limiting Medicare audit risk and denials. Peter W. Thomas, JD, is general counsel for the National Association for the Advancement of Orthotics and Prosthetics (NAAOP). Christina Hughes, JD, MPH, is an associate with Powers Pyles Sutter & Verville, Washington DC.

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Clarifying Medicare Participation and Assignment Rules

This article is part one of two articles that will review ways that may help to limit Medicare audit risk.

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