New rules have program integrity implications for Medicare, Medicaid stakeholders

CMS in recent days issued a pair of final rules designed to improve aspects of program integrity in Medicare and Medicaid.

The Medicare rule was published Sept. 27 and finalized proposals that were published in early July after CMS became aware of significant potential billing fraud involving a specific type of urinary catheter. Premier, Inc., one of the organizations that flagged the issue, said the increase amounted to a 20-fold spike in Medicare claims for the item.

“CMS determined that the beneficiaries did not receive catheters and were not billed directly, physicians did not order these supplies, and supplies were not needed,” the agency stated in the rule.

The corresponding surge in billing by the durable medical equipment suppliers that allegedly perpetrated the scheme could have had repercussions for participants in the Medicare Shared Savings Program, most notably in terms of financial reconciliation for performance year 2023.

Adjustments being made

HCPCS codes A4352 and A4353 were affected by the anomalous billing. Any 2023 payments for those codes will be removed from spending and revenue calculations for MSSP participants.

Specifically, those payments will be removed from determinations of:

• 2023 performance-year expenditures
• The national-regional blended update used in financial reconciliation for 2023 and in setting the benchmark for 2024, 2025 and 2026

CMS noted the rule is part of a larger strategy to address “significant, anomalous and highly suspect [SAHS] billing” in the MSSP. Similar regulations to address any future instances of the 2023 situation were included in the 2025 proposed rule for Medicare physician payments.

An important step

“Accountable care arrangements such as this cannot function if the ACO may be held responsible for all SAHS billing activity that is outside of their control,” CMS states in the rule. “Holding an ACO accountable for substantial losses due to SAHS billing activity, such as that observed in connection with the increase in billing for intermittent urinary catheters, is not only inequitable but would dramatically increase the level of risk associated with participation, making the Shared Savings Program unattractive.”

Commenters on the proposed rule lauded CMS for taking action. Some commenters prodded the agency to consider making similar accommodations for other codes that they thought have exhibited suspect activity, including those for glucose monitoring, laboratory services, telemedicine, ventilators, diabetic supplies and collagen dressings.

However, CMS said any issues with those services did not meet the definition of SAHS billing, in some cases because they were too broad and did not involve individual codes.

The agency also clarified that the proposed changes “do not impose new rules or requirements related to provider billing and payment” but rather are designed to address the specific situation arising from the 2023 catheter billing.

Implications of a new Medicaid rule

A final rule published Sept. 26 for the Medicaid Drug Rebate Program (MDRP) was drafted to implement 2019 legislative provisions seeking to address instances when manufacturers incorrectly report or classify drugs in the program.

The rule includes Medicaid managed care provisions that affect the 340B Drug Pricing Program, requiring plans to assign and exclusively use a Bank Identification Number/Processor Control Number combination and group number on Medicaid beneficiary cards. The impetus for that requirement, which begins in November 2025, is to make it easier for plans to avoid giving duplicative discounts in the MDRP and 340B.

“While the use of Medicaid-specific BIN, PCN and group-number identifiers does not assist in identifying claims for drugs purchased under [340B], it may help states and their managed care plans avoid invoicing for rebates on 340B drugs by identifying which plans are covered under Medicaid,” CMS wrote.

A clarification to the definition of covered outpatient drug in the context of the MDRP likely will affect which drugs are subject to rebates. It will allow drugs to fall under the definition even when payment is bundled with associated items and services, as long as the payment includes an amount directly attributable to the drug.

CMS declined to say whether a similar change should apply to eligibility for payment under 340B, saying such considerations were outside the scope of the MDRP rule.

The rule also attempts to bring transparency to the practice of spread pricing by pharmacy benefit managers (PBMs), saying Medicaid managed care organizations and so-called prepaid health plans must require PBMs and other subcontractors to report certain data for covered outpatient drugs. Specifically, the subcontractor’s payment to providers and pharmacies for those drugs must be reported along with the administrative costs incurred by the subcontractor.