MACRA: Program Integrity and Fraud and Abuse Provisions

by Mintz Levin - Health Law & Policy Matters

On Thursday April 16th, President Obama signed into law the Medicare Access and CHIP Reauthorization Act of 2015 (“MACRA”). Pub.L. 114-10. In two previous posts, we discussed MACRA’s repeal of the Sustainable Growth Rate formula (the “SGR”) and physician payment reform, and the payment provisions and offsets established by MACRA. This third post will detail the Program integrity and fraud and abuse provisions of MACRA.

Section 101(e)(7): Promoting Alternative Payment Models – Study and Report on Fraud Related to Alternative Payment Models under the Medicare Program

Buried within Section 101, which is the provision repealing the SGR and authorizing various reforms to physician reimbursement, Subsection (e)(7) includes a required study and report on fraud related to alternative payment models under the Medicare Program. This study will be conducted by the Secretary of the Department of Health and Human Services (the “Secretary”) and examine the applicability of Federal fraud prevention laws to the items and services furnished to Medicare beneficiaries for which payment is made under an alternative payment model defined by MACRA. In addition, this study will identify aspects of those same alternative payment models that are vulnerable to fraudulent activity and consider the implications of waivers of federal fraud prevention laws in support of such alternative payment models.

Within two years of the enactment of MACRA, the Secretary is required to submit to Congress a report providing the results of this study, which will include recommended actions to reduce the identified vulnerabilities of the alternative payment models and, as appropriate, recommendations from the Inspector General of the Department of Health and Human Services (“HHS”) regarding possible changes in Federal fraud prevention laws to reduce those vulnerabilities.

Section 104: Empowering Beneficiary Choices Through Continued Access to Information on Physicians’ Services

Section 104 requires that beginning in 2015, the Secretary make publicly available on an annual basis, through a searchable database, information regarding physicians and, as appropriate, other eligible professionals (which are defined to include physicians, physical or occupational therapists, qualified speech-language pathologists, qualified audiologists, physician assistants, nurse practitioners, clinical nurse specialists, certified registered nurse anesthetists, certified nurse-midwives, clinical social workers, clinical psychologists, and registered dietitians or nutrition professionals) on items and services furnished to Medicare beneficiaries.

Section 104 of MACRA requires the Secretary to provide at least the following types of information:

  1. The number of services furnished to beneficiaries of Medicare Part B by physicians or other eligible professionals (which may include information on the most frequent services furnished or groupings of services);
  2. Submitted charges and payments for services; and
  3. A unique identifier for the physician or eligible professional that is available to the public (e.g., NPI number).

Additional requirements of Section 104 include that the information made available under this Section must be searchable by at least:

  1. The specialty or type of physician or other eligible professional;
  2. Characteristics of the services furnished (e.g., volume or groupings of services); and
  3. The location of the physician or other eligible professional.

Beginning in 2016, the Secretary is required to integrate the information made available under this section on the Physician Compare website hosted by the Centers for Medicare & Medicaid Services (“CMS”).

This required publication of data will be similar to the 2012 Medicare Provider Utilization and Payment Data information made public by the Secretary in April 2014. As we discussed in a previous post dated April 10, 2014, HHS’s original and historic release of Medicare payment data last year was the result of multi-year litigation, which resulted in a federal judge overturning an injunction that had been in place since the late 1970s prohibiting HHS from disclosing information about Medicare payments to individual physicians.

Even recognizing the general merits of annual publication of this type of data, the information has the potential to cause confusion. For example, certain physicians, notably oncologists and retinal surgeons, dispense drugs through their practices. Because Medicare pays these physicians directly for these drugs, without a detailed look at the CPT codes in the published data, it appears at first glance that these physicians receive disproportionately large incomes from treating Medicare patients.

Another example of problems caused by this data is the publication of charges. Only those who follow reimbursement closely understand that charge data is almost meaningless. This is because very few patients pay providers based on charges, but rather payment is typically based on a fee schedule set by third party payors. As a result, providers set their charges based on a variety of measures. In some cases charges are very close to the payment rates, and in some cases they are set well above payment rates in order to recoup from a small number of charge-paying patients losses the provider incurs from private payor reimbursement. All this appears to have been irrelevant to Congress as it has now mandated annual publication of providers’ charge data.

Section 505: Reducing Improper Medicare Payments

Section 505 of MACRA requires each Medicare Administrative Contractor (“MAC”) to establish an improper payment outreach and education program under which the MAC “through outreach, education, training, and technical assistance or other activities” will give providers located in its jurisdiction certain information suggested by MACRA (with priority placed on activities that will reduce improper payments in certain areas).

To help MACs in carrying out these education and outreach activities, the Secretary will give each MAC a list of the types of improper payments identified by recovery audit contractors (“RACs”) with respect to providers and suppliers located in the MAC’s jurisdiction. Examples of information to be provided by RACs include: providers and suppliers that have the highest rates of improper payments, items and services furnished in the region that have the highest rates of improper payments, and items and services furnished in the region that are responsible for the greatest total dollar amount of improper payments, among others.

Section 505 also allows the Secretary to retain certain monies recovered by RACs and make them available to CMS’s program management account for purposes of implementing strategies to help reduce the error rate of Medicare payments, among others.

Section 507: Requiring Valid Prescriber National Provider Identifiers on Pharmacy Claims

Another initiative aimed at Program integrity under MACRA is the requirement that, beginning in plan year 2016, a claim for a drug covered under Medicare Part D for a Part D eligible individual enrolled in a prescription drug plan under Medicare Part D or a Medicare Advantage Prescription Drug Plan (“MA-PD”) must include a valid NPI number for the prescriber. Section 507 also requires the Secretary to establish procedures for determining the validity of prescriber NPIs and for properly informing at the point of service individuals whose claims for covered Part D drugs are denied because the claim does not meet this NPI requirement of the reason for the denial.

Section 512: Eliminating Certain Civil Monetary Penalties; Gainsharing Study and Report

MACRA Section 512 contains two important changes related to gainsharing. First, Section 512(a) narrows the so-called Gainsharing Civil Monetary Penalty (“CMP”) Law (Section 1128A(b)(1) of the Social Security Act) so that it only applies to reductions or limitations of medically necessary services: “[H]ospitals or a critical access hospital [may not] knowingly [make] a payment, directly or indirectly, to a physician as an inducement to reduce or limit medically necessary services…[emphasis added].” Previously, the Gainsharing CMP applied to payments that induced physicians to reduce or limit any service – not just those which were medically necessary.

Second, Section 512(b) requires that within 12 months after the date of enactment of MACRA, the Secretary (in consultation with the Inspector General of HHS) submit to Congress a report with options for amending existing fraud and abuse laws and regulations “through exceptions, safe harbors or other narrowly tailored provisions, to permit gainsharing arrangements that would otherwise be subject to existing [CMP laws] or similar arrangements between physicians and hospitals.” In addition to gainsharing arrangements, this report must also consider those arrangements that “improve care while reducing waste and increasing efficiency.”

Section 512(b) also requires that the Secretary’s report:

  1. Consider whether such provisions should apply to ownership interests, compensation arrangements or other relationships;
  2. Describe how the recommendations address accountability, transparency, and quality, including how best to limit inducements to stint on care, discharge patients prematurely, or otherwise reduce or limit medically necessary care; and
  3. Consider whether a portion of any savings generated by such arrangements (as compared to an historical benchmark or other metric specified by the Secretary to determine the impact of delivery and payment system changes under [title XVIII of the Social Security Act] on expenditures made under such title) should accrue to the Medicare program….”

Notably, MACRA is the second effort by the federal government in the last six months to propose changes to the CMP authorities. In its October 2014 Proposed Rule, the HHS Office of Inspector General (the “OIG”) proposed, in part, codifying the Gainsharing CMP in regulations by interpreting terms used in that statute.  The OIG also pointed out that it had proposed regulations in 1994 to interpret the Gainsharing CMP — but that proposal was never finalized.

In addition to its proposal to codify the Gainsharing CMP, OIG suggested in its October 2014 Proposed Rule interpreting certain provisions “in a manner that reflects today’s health care landscape.” The OIG noted that the Gainsharing CMP’s prohibitions were not limited to reductions or limitations of medically necessary items or services and thus could mean that “any change in current medical practice that a hospital might initiate [was] potentially a reduction in care that could trigger CMP liability,” even if that change were actually beneficial by improving care or reducing cost. The OIG determined that without a change in the Gainsharing CMP statute, the OIG could not read a “medically necessary” element into the Gainsharing CMP’s prohibition, but that given changes in the practice of medicine over the years, it was “considering a narrower interpretation of the term ‘reduce or limit services’ than [it had] previously held.” Through MACRA, Congress provided the long sought-after amendment.

This change to the Gainsharing CMP will likely bring new life to gainsharing proposals. The OIG already has indicated that it intends to proceed, as it has done in the past, through the Advisory Opinion process. Although there are advantages to this approach, the OIG should consider reopening its rulemaking from the October Proposed Rule to obtain input on the meaning of the term “medically necessary.” The problem is that if the OIG adopts a broad interpretation of this term, many beneficial gainsharing arrangements potentially will be stifled. Our health system is undergoing fundamental change, and we are seeing substantially slower growth in health care spending as a result. The changes we have seen since the enactment of the Affordable Care Act in 2010, and the changes that will likely continue more vigorously in the coming years have not merely reduced treatment deemed “medically unnecessary.” Inevitably, reduced spending also involves some amount of treatment deemed “medically necessary” care. The challenge is to identify care that, while perhaps technically “medically necessary,” is nevertheless care that provides marginal benefits. Carefully crafted gainsharing proposals should be permitted here to incentivize physicians to reduce wasteful, marginal care, while focusing instead on high quality services with demonstrated outcomes.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Mintz Levin - Health Law & Policy Matters | Attorney Advertising

Written by:

Mintz Levin - Health Law & Policy Matters

Mintz Levin - Health Law & Policy Matters on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.


JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at:

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.