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CMS Letter to State Medicaid Directors Offers Much-Needed Guidance on DRA Employee Education Requirements


As most health care providers are by now well aware, Section 6032 of the Deficit Reduction Act of 2005 provides that, by January 1, 2007, every entity that receives or makes annual payments of at least $5,000,000 under a State Medicaid plan must not only (1) establish policies and procedures concerning federal and state false claims and whistleblower laws, as well as the detection and prevention of fraud, waste and abuse, but also (2) update its employee handbooks, if any, to reflect such policies and procedures. On December 13, 2006, via a letter to the State Medicaid Directors, CMS issued long-awaited guidance regarding these employee education obligations. Highlights of the CMS letter include the following clarifications, definitions, and timelines:

  • An "entity" includes governmental agencies, managed care companies and providers (both for profit and not for profit);

  • If an entity furnishes items and services at more than one location or if it submits claims using more than one provider number, the DRA's provisions nonetheless apply as long as the entity annually receives or pays more than $5,000,000 in the aggregate;

  • A governmental entity that merely administers the Medicaid program by, e.g., managing the claims processing system or making eligibility determinations is not considered a DRA entity (the guidance is silent on whether this same exception applies to non-governmental claims administrators);

  • An entity will have met the $5,000,000 threshold as of January 1, 2007 as longs as it received or paid that amount during Federal fiscal year 2006 and subsequent Federal fiscal year receipts and payments will govern thereafter;

  • A "contractor" or "agent" includes those that perform billing or coding functions on behalf of an entity or who monitor the entity's provision of health care;

  • Written policies may be on paper or in electronic form and there is no requirement that an entity create an employee handbook if one does not already exist;

  • CMS is not providing model language for the written policies or the employee handbook but notes that the States may elect to do so;

  • The DRA covered entities, contractors and agents must establish written policies applicable to all employees and management that includes (1) detailed information about the False Claims Act and the other statutory provisions mentioned in the DRA; (2) detailed information about the entity's policies and procedures for detecting and preventing waste, fraud, and abuse, and (3) in the employee handbook a specific discussion of the laws described in the written policies, the whistleblower protections for employees and a specific discussion of the entity's policies on the detection and prevention of fraud, waste and abuse;

  • The DRA provisions must be implemented by January 1, 2007 unless a State seeks a delayed effective date because of the need to enact implementing legislation;

  • The DRA requirements should be incorporated into each State's provider enrollment agreements;

  • Each State must determine by March 31, 2007 how it will ensure DRA compliance and include this in its State Plan along with its methodology and frequency of compliance oversight; and

  • CMS may independently determine compliance through audits or other means.

If you would like additional information regarding the Deficit Reduction Act, its employee education requirements, or compliance with the DRA's other anti-fraud provisions, please contact David O'Brien, John Brennan, or your regular Crowell & Moring attorney.

© 2006 Crowell & Moring LLP. ALL RIGHTS RESERVED
This material was prepared by Crowell & Moring LLP attorneys. It is made available on the Crowell & Moring website for information purposes only, and should not be relied upon to resolve specific legal questions. For more information please contact your regular Crowell & Moring contact.

For more information, please contact the professional(s) listed below, or your regular Crowell & Moring contact.

David W. O'Brien
Partner – Washington, D.C.
Phone: +1 202.624.2850