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3 Things Hospitals Should Know About . . . Complying with the Deficit Reduction Act


On January 1, 2007, new rules went into effect implementing a provision of the Deficit Reduction Act of 2005 (DRA) affecting all healthcare entities which receive $5 million or more in annual Medicaid reimbursement. State Medicaid plans must now require, as a condition of receiving Medicaid reimbursement, that all covered providers establish new compliance policies and communicate them to employees, contractors and agents. While many questions remain unanswered about how the new rules will be applied (and most state Medicaid agencies have yet to amend their own plans to accommodate the new rules), according to the Centers for Medicare and Medicaid (CMS), there is no grace period for the enforcement of the new rules.

Here are three important things every affected provider should do now to comply with the DRA.

1.    Review your policies and procedures for any revisions needed to comply with the law. If you have an employee handbook, make sure it is revised to include the required information.

Your policies and procedures must describe:

  • the federal False Claims Act and related laws and regulations
  • state false claims laws, including any civil and criminal penalties for violating the law
  • protections under these state and federal laws for whistleblowers
  • how these laws address detection and prevention of waste, fraud and abuse for protecting the rights of employees who are whistleblowers
  • your own processes for detecting and preventing waste, fraud and abuse and for protecting the rights of employees who are whistleblowers

2.    Identify your contractors and agents who are covered by the new rules.

According to CMS representatives, all of your contractors and agents are subject to the new law. Those who are covered:

  • furnish or otherwise authorize furnishing of Medicaid health care items or services on your behalf 
  • perform billing or coding functions; or 
  • are involved in monitoring health care you provide

CMS’s current stance is that physicians on your medical staff are not likely to be considered contractors or agents (but those with medical director or other services agreements probably are covered by the DRA requirements). Your copying and document shredding company is not currently considered a contractor.

3.  Communicate your new policies and procedures to your employees, contractors and agents.

Make sure your policies and procedures are readily available to employees, contractors and agents. Consider using the following communication techniques:

  • add the policies and procedures to your web page for access by employees, contractors and agents 
  • revise your fraud and abuse compliance plan and incorporate these changes into your compliance training 
  • confirm access by employees, contractors and agents to policies and procedures by using signed acknowledgments (either on paper or electronic) for documentation of access 
  • amend existing contracts with contractors and agents to include confirmation of their acknowledgment of access to your policies and procedures and require confirmation in all new contracts.

Compliance with the DRA is a moving target as CMS fine tunes its interpretation of the law and state Medicaid agencies amend their plans by no later than March 31 to incorporate its requirements and begin enforcement activities. Consult with your advisors regarding any changes and be prepared to adjust polices and your compliance activities to address these new developments.

The foregoing is provided as general information rather than legal advice. Questions about individual situations should be addressed to the attorney of your choice.

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