Health Law Advisory Bulletin

Urgent Alert: Last Minute CMS Guidance On DRA’s “Employee Education About False Claims Recovery,” Effective January 1, 2007

By Kathy Drummy
[Dec. 2006]

On Dec. 13, 2006, the Centers for Medicare & Medicaid Services (CMS) finally released guidance on the implementation of the Deficit Reduction Act (DRA) provisions regarding “Employee Education About False Claims Recovery,” in the form of a letter addressed to state Medicaid directors. These DRA provisions impose specific compliance program requirements on any health care entity that receives, or pays, in the aggregate, $5 million or more in Medicaid funds in a federal fiscal year (“Covered Entity”) as a condition of receiving such funds from a state Medicaid agency. See DWT April 2006 Advisory Bulletin for a discussion of the DRA compliance program requirements.

January 1, 2007 Deadline

Covered Entities that met the $5 million threshold during federal fiscal year 2006 must meet these DRA requirements by Jan. 1, 2007. Future determinations as to an entity’s status as a Covered Entity will be based on the amount of Medicaid payments received or made during the preceding federal fiscal year.

DRA Policies Must Be Included in the Covered Entity’s Employee Handbook Only if One Already Exists

The requirements include establishing and providing to “all employees, and agents and contractors” detailed written policies regarding the federal and state false claims acts, whistleblower protections and related issues, and the procedures for detecting fraud, waste and abuse by Jan. 1, 2007. Such policies or information are to be included in the Covered Entity’s employee handbook, but the Covered Entity need not create an employee handbook if none already exists.

Covered Entity’s Contractors and Agents Must Both Receive and Adopt DRA Policies

The CMS guidance takes the position that by Jan. 1, 2007, all Covered Entities must establish and disseminate such policies to its contractors and agents who further must adopt those policies. CMS does give some guidance as to who must receive copies of the covered entity’s policies: A “contractor” or “agent” includes any contractor, subcontractor, agent, or other person which furnishes or otherwise authorizes the furnishing of Medicaid health care items or services, performs billing or coding functions, or is involved in the monitoring of health care provided by the Covered Entity. The CMS guidance acknowledges that dissemination of the Covered Entity’s DRA policies by electronic means is permissible. Email dissemination therefore would appear to be an acceptable and efficient method of disseminating the policies. Retention of records of any such electronic dissemination would be helpful in demonstrating compliance. However, CMS provides no guidance as to when the contractors or agents must adopt the policies, what form of “adoption” is required, or the impact of any refusal to adopt the policies. The requirement that the covered entity’s contractors and agents adopt the entity’s policies seems misguided. Contractors or agents could well have policies of their own and may be unwilling to adopt the policies of all of the covered entities with whom they contract.

State Medicaid Agency Oversight Responsibility

CMS directed the state Medicaid programs to incorporate these requirements into each state’s provider enrollment agreements and to determine the process for ensuring a Covered Entity’s compliance with such requirements.

For more information, please contact:

Author Kathy Drummy Los Angeles (213) 633-6870 kathydrummy@dwt.com

Other DWT Contacts:

This Health Law Advisory is a publication of the Health Law Group of Davis Wright Tremaine LLP. Our purpose in publishing this Advisory is to inform our clients and friends of developments in health care law. It is not intended, nor should it be used, as a substitute for specific legal advice as legal counsel may only be given in response to inquiries regarding particular situations.

Copyright 2006, Davis Wright Tremaine LLP.

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