Dorsey Health Law
Proposed CMS Rule Ramps Up Potential Medicare Fraud Administrative Remedies
On July 6, 2026, the Centers for Medicare & Medicaid Services (“CMS”) proposed a rule that would expand its administrative remedies to combat potential fraud. The proposed rule is the latest in a round of administrative actions that signal CMS’s intent to aggressively pursue allegations of Medicare and Medicaid fraud and heighten the risk of fraud enforcement against even well-intentioned Medicare and Medicaid providers and suppliers. The proposed rule includes several changes to regulations that govern Medicare billing privileges. Providers and suppliers should be aware that these changes dramatically expand the flexibility afforded to CMS in enrollment and revocation actions, potentially leading to harsh consequences for ministerial and administrative errors. If finalized, moreover, the proposed rule could have material implications for providers and suppliers facing threatened revocation, including heightened risk of overpayment liability and increased hurdles to challenging revocations and denials of enrollment. Added Flexibility to Existing Revocation Grounds CMS has proposed to remove a number of factors that the regulations list as relevant to a determination of whether a provider has engaged in “abuse of billing privileges.” While acknowledging that the inclusion of these factors in the regulations was permissive (requiring consideration only where “as appropriate or applicable”), CMS stated that it must be afforded “the maximum flexibility to address all possible . . . scenarios without the rigid constraints of our existing factors.” CMS provided little guidance as to the outer bounds of what conduct could constitute an “abuse of privileges” that merits revocation of Medicare billing privileges. Instead, CMS noted that a “pattern of practice” of abuse of billing privileges might be established “by a simple finding that several of a provider’s claims do not meet Medicare requirements.” Similarly, CMS has proposed to expand the regulatory provision that permits revocation of enrollment if a provider certifies as “true” false or misleading information in Medicare enrollment application or renewal forms to include any scenario in which a provider submits “false or misleading information on or associated with any CMS Medicare enrollment-related form,” including materials submitted to Medicare contractors. CMS stated that it interprets this expanded rule to include anything related to Medicare enrollment, and not only those submissions that are “intended to gain or maintain Medicare enrollment.” If finalized, the proposed rule would add significant flexibility to CMS’s ability to pursue revocation of a provider’s enrollment. While CMS has assured providers that it would “invoke [the revised regulations]. . . only when legitimately warranted under the facts and circumstances and not as a matter of course,” such expanded flexibility threatens unpredictability in the event of even administrative or ministerial errors in submissions and claims. These changes would, moreover, make it more difficult for providers to challenge a revocation action. Expanded Revocation Grounds In addition to adding flexibility to existing grounds for revocation, CMS’s proposed rule adds to and expands CMS’s already broad authority to revoke provider and supplier enrollment. Such proposed changes include adding the following grounds for revocation: Denial of Enrollment Application. Where CMS could previously revoke a provider’s other enrollments if one enrollment is revoked, CMS would also be able to revoke a provider’s existing enrollments if an application for enrollment submitted by the provider is denied. High-Risk Enrollments. CMS would be able to revoke enrollment if it determines the provider or supplier (including owning/managing employees or organizations) poses a high risk of fraud, waste, or abuse due to “. . . an affiliation under [42 C.F.R.] § 424.519” or “the provider’s or supplier’s location within a limited geographic area that has an excessive number of providers and suppliers.” Certain Misdemeanor Convictions. CMS would be able to revoke enrollment if a provider or supplier—or its owners, managing employees, managing organizations, officers, or directors—are convicted of a “misdemeanor related to sexual assault or financial misconduct within the past 10 years that CMS deems detrimental to the best interests of the Medicare program and its beneficiaries.” Ownership Changes (HHA, Hospice, DMEPOS). CMS would have broad authority to revoke enrollment of home health agencies, hospices, and DMEPOS suppliers who do not comply with the regulations governing provider changes of ownership. These proposed, expanded grounds for revocation are notably broad, and CMS provides only limited guidance as to what conduct might result in revocation under these grounds. As with the proposed expansion of existing grounds for revocation, the open-ended nature of these proposed grounds for revocation may make it more difficult for providers and suppliers to challenge revocation actions. Expanded Grounds to Deny Medicare Enrollment As with revocations, CMS proposes to expand the grounds under which a provider’s application to enroll in Medicare can be denied. These expanded and additional grounds include many of the grounds added for revocations, but also include: Medicare Debt or Payment Suspension. CMS proposes expanding the ground to deny enrollment based on Medicare debt or payment suspension to include a provider or supplier’s “managing employee, managing organization, or individual or entity with any other form of business or financial relationship with the provider or supplier[.]” Significantly, this expansive definition (called an “associated party” under the proposed regulation) currently contains no material limitations, meaning almost any person or entity with whom an applicant does business could create denial liability. Sharing Locations with Denied/Revoked Providers or Suppliers. CMS would have authority to deny applications where a “provider’s or supplier’s practice location is in the same suite or office as another provider or supplier whose Medicare enrollment has been revoked or denied.” Hospices with Distant Medical Directors or Administrators. CMS would have discretion to deny hospice applications if the hospice’s medical director or administrator serves “multiple other hospices” or practices/is located “at such a distance (for example, in a different state) from the enrolling hospice that the medical director cannot realistically perform all medical director functions,” with a similar provision for administrators. In addition, CMS proposes applications denied for “other program termination or suspension,” may be applied to the provider or supplier in its own name or NPI or that of its owners, managing employees, or managing organization regardless of whether any appeals are pending. Retroactive Revocation CMS proposed to restructure and expand the regulatory grounds for retroactive revocation of billing privileges. Currently, Medicare regulations provide that revocations are, by default, prospective in nature: effective 30 days after CMS or the CMS contractor mails notice to the provider. Under certain circumstances, the regulations provide for revocations to be retroactive, such as when a provider is convicted of a felony, the date a professional license is suspended, revoked, or surrendered, or when a provider submits a false certification in their enrollment application. CMS has proposed to reframe the rule so as to default to retroactive revocation of billing privileges. CMS expressed concern that providers may collect payment from Medicare while remaining so non-compliant with enrollment requirements as to merit revocation. To address this concern, CMS proposed that all revocations be retroactive to the date of determined non-compliance.[1] As a result, providers suspected of misconduct or non-compliance are likely to face claims of retroactive overpayments in addition to the immediate concern no longer receiving Medicare payments while their enrollment is revoked. Reapplication Bar CMS’s proposed rule expands the grounds from which a provider may be prohibited from seeking reapplication as a Medicare provider. Under current regulations, CMS may prohibit prospective providers from enrolling in Medicare for up to 10 years if its enrollment application is denied because the applicant submitted false or misleading information in its application. Under the proposed rule, CMS will have the discretion to prohibit a provider from enrolling in Medicare if their enrollment application is denied for any reason. Conclusion As a part of the federal government’s increasingly aggressive push to combat real or perceived healthcare fraud, the proposed rule both broadens CMS’s authority to revoke and deny Medicare enrollment and raises the stakes for revocation and denial. What the proposed rule does not share is how CMS plans to exercise this expanded discretion: as a result, the proposed rule, if enacted, increases the unpredictability and potential ramifications of even technical noncompliance with CMS rules. As a result, Medicare providers should keep a close eye on potential revisions to these rules and their potential implementation and consider proactively evaluating their compliance under CMS standards. [1] In the proposed rule, CMS identifies, with respect to each ground for revocation, what it will consider to be the effective date of revocation.
July 13, 2026
Healthcare Fraud and Abuse
The False Claims Act and the Anti-Kickback Statute: Causation, Materiality, and the Connection Between the Two
Violations of the federal Anti-Kickback Statute (the “AKS”)[1] have long served as a basis for liability under the federal False Claims Act (the “FCA”).[2] Recently, however, there has been increasing uncertainty regarding how far a violation of the AKS sweeps to render claims “false” under the FCA. Courts are currently at odds with each other regarding the appropriate causation standard—how directly an AKS violation must cause submission of a claim—in order for that claim to be false under the FCA. Because FCA defendants are liable for up to treble damages, plus substantial fines and penalties, for every false claim, this current state of flux has significant implications for the scope of damages in FCA cases predicated on violations of the AKS. In its 2016 decision in Universal Health Services v. United States ex rel. Escobar, the U.S. Supreme Court confirmed that a defendant could be liable under the FCA for what are commonly referred to as “legally false” claims; or, claims that, despite being factually accurate, are rendered false due to an underlying non-compliance with law that is material to the government’s decision to pay a claim.[3] In the healthcare industry, non-compliance with the AKS became a quintessential predicate for FCA liability, with courts accepting that compliance with the AKS is material to the government’s decision to pay a claim. Less settled, however, was the requisite nexus between the AKS violation and a given claim for the claim to be considered false. Some courts have accepted a broad “taint theory,” under which the entire relationship between two parties is considered tainted by a violation of the AKS. Under this theory, any claim for services referred between the parties would be grounds for liability under the FCA. Other courts have required that the AKS violation touch, with differing degrees of directness, the claims at issue. In such cases, an FCA defendant would be liable only for claims that had the requisite degree of connectedness to an AKS violation. Then, in 2010, the Affordable Care Act codified in statute (the “ACA Amendment”) that a claim that includes items or services “resulting from” an AKS violation constitutes a false or fraudulent claim under the FCA.[4] This “resulting from” language has proven to be a major point of disagreement among courts, creating significant confusion regarding whether and to what extent an AKS violation must cause submission of a claim in order for such submission to violate the FCA. To further complicate matters, courts have far from settled the question of whether the same causation standard applies whether or not the government relies on the ACA Amendment’s per se falsity to plead that a defendant violated the FCA. This is to say that it remains largely unsettled whether the causation standard that applies to pleadings that invoke the ACA Amendment also apply where the government instead (or also) invokes Escobar and pleads that compliance with the AKS is material to the government’s decision to pay a claim. So, what standard applies? Currently, it depends on the court. The Third Circuit has held that the ACA Amendment requires only some “link” or “connection” between the alleged kickback and the subsequent claims. In S. ex rel. Greenfield v. Medco Health Sols., Inc.[5], the court acknowledged that the Supreme Court had previously interpreted the plain meaning of the nearly identical phrase “results from” in the context of the Controlled Substances Act as requiring actual, or but-for causation.[6] However, without stating whether the plain meaning of “resulting from” was unclear, the court looked to legislative intent, finding that such a strict causation requirement would require proof that a kickback “actually influenced a patient’s or medical professional’s judgment,” which would be inconsistent with Congress’ apparent intentions to reach a “broad swath” of fraud and abuse.[7] The Sixth and Eighth Circuits have adopted a strict but-for causation standard, requiring that the government establish that the items or services would not have been submitted for payment if not for the AKS violation.[8] In Cairns, the court asserted that the “resulting from” language in the ACA Amendment is “unambiguously causal”, requiring but-for causation in accordance with the Supreme Court’s holding in Burrage.[9] Acknowledging that the Third Circuit came out differently on this issue in Greenfield, the court in Cairns rejected the Third Circuit’s approach, stressing that when the plain meaning of a term or phrase is unambiguous, review of legislative history is improper. The court further noted that it is not enough for the government to show that the defendant failed to disclose the AKS violation when submitting the claims at issue.[10] In S. ex rel. Fesenmaier v. Cameron-Ehlen Grp., Inc., the U.S. District Court for the District of Minnesota clarified that, under Cairns, but-for causation only applies to claims that rely on the ACA Amendment to show falsity.[11] Conversely, where the government had pled that compliance with the AKS was material to a decision to pay the claim, the District Court required that the government show only proximate causation (established if the misconduct was a substantial factor in submission of the claims and such submission was reasonably foreseeable or anticipated as a natural consequence of the misconduct).[12] In a seemingly contradictory opinion, the U.S. District Court for the District of Minnesota in S. ex rel. Louderback v. Sunovion Pharms., Inc. held that a plaintiff may not establish FCA liability premised on a violation of the AKS by simply showing that compliance with the AKS was material to the government’s decision to pay the claim (which, under Fesenmaier, requires only proximate causation).[13] In other words, a plaintiff must meet the ACA Amendment but-for causation standard. This holding is similar to the Sixth Circuit’s holding in Cairns, which also found that but-for causation is required to establish FCA liability on the basis of a violation of the AKS (although query whether the Sixth Circuit intended to limit this holding to pleadings that rely on the ACA Amendment). In the First Circuit, the U.S. District Court for the District of Massachusetts has created conflicting case law. In S. v. Regeneron Pharms. Inc. the court mixed concepts, creating an FCA causation standard that starts to merge with notions of intent under the AKS. While the court purportedly adopted the but-for causation standard from Cairns, it then stated that an AKS violation need only be a “substantial factor” in causing referrals, rather than the sole cause, in order for claims resulting from such referrals to be false.[14] Conversely, in U.S. v. Teva Pharms. USA, Inc., the court held that only a “sufficient causal connection” must exist between the AKS violation and a claim in order to render the claim false under the FCA.[15] As a result of these conflicting holdings, the causation standard issue is now under interlocutory appeal with the First Circuit.[16] In addition to being determinative of whether a violation of the FCA occurred at all, a court’s view of the appropriate causation standard can have a significant effect on the scope of damages. If but-for causation is required, the number of affected claims will likely be limited to those claims for which there is evidence that the item or service would not have been referred absent the AKS violation. At the other end of the spectrum, where there is no requirement to show any sort of causal connection between the alleged violation of the AKS and the submission of a purportedly-false claim, damages can grow to include any claim for an item or service referred between parties whose relationship can be said to be “tainted” by a violation of the AKS. In light of the FCA’s liability scheme—which includes treble damages and significant per-claim fines and penalties—the unsettled nature of this causation requirement can lead to significant uncertainty regarding a defendant’s potential exposure in FCA cases. Defendants facing allegations that they are liable under the FCA as a result of non-compliance with the AKS may see potential damages balloon if courts loosen causation requirements. If courts impose stricter causation requirements, on the other hand, the government may find it harder and harder to achieve the mammoth judgments and settlements that we have seen in the past. [1] 42 U.S.C. § 1320a-7b(b). The Anti-Kickback Statute imposes criminal liability upon any person who knowingly and willfully solicits or receives remuneration (i.e., anything of value) in return for, or offers or pays any remuneration to induce, the referrals of items or services for which payment may be made in whole or in part under a federal health care program, including Medicare and Medicaid. [2] 31 U.S.C. §§ 3729-3733. The civil False Claims Act imposes liability upon any person who knowingly submits, or causes to submit, false or fraudulent claims to the government. [3] Universal Health Servs. v. United States ex rel. Escobar, 136 S. Ct. 1989 (2016) (noting that the FCA is not a “vehicle for punishing garden-variety breaches”, and emphasizing the importance of the government’s conduct in determining whether a particular AKS violation was material to the government’s decision to pay the claims). [4] 42 U.S.C. § 1320a-7b(g). [5] U.S. ex rel. Greenfield v. Medco Health Sols., Inc., 880 F.3d 89 (3rd Cir. 2018). [6] See Burrage v. U.S., 134 S. Ct. 881, 887-88 (2014). [7] Id. at 96-97. [8] See U.S. ex rel. Martin v. Hathaway, 63 F.4th 1043 (6th Cir. 2023), cert. denied, 144 S. Ct. 224 (2023); U.S. ex rel. Cairns v. D.S. Med. LLC, 42 F.4th 828 (8th Cir. 2022). [9] Cairns, 42 F. 4th at 834-36. [10] Cairns, 42 F.4th at 834. [11] U.S. ex rel. Fesenmaier v. Cameron-Ehlen Grp., Inc., No. 13-CV-3003, 2024 U.S. Dist. LEXIS 21897, at *8-9 (D. Minn. Feb. 8, 2024). This case is currently on appeal to the Eighth Circuit. [12] Id. at *10, 29 (noting that it was insufficient, by itself, to establish that the claims were submitted within one year of the alleged kickback). [13] No. 17-CV-1719, 2023 U.S. Dist. LEXIS 209990 (D. Minn. Nov. 27, 2023). [14] U.S. v. Regeneron Pharms., Inc., No. 20-11217-FDS, 2023 U.S. Dist. LEXIS 172618, at *31-34 (D. Mass. Sept. 27, 2023) (indicating that it would be sufficient to show that the defendant was giving copay assistance because it knew that patients would not fill prescriptions and/or physicians would not write prescriptions if such copay assistance were unavailable). [15] See U.S. v. Teva Pharms. USA, Inc., No. 20-11548-NMG, 2023 U.S. Dist. LEXIS 122272 (D. Mass. July 14, 2023). [16] See U.S. v. Regeneron Pharms., Inc., No. 20-11217-FDS, 2023 U.S. Dist. LEXIS 191418 (D. Mass. Oct. 25, 2023); U.S. v. Regeneron Pharms., Inc., No. 23-8046, 2023 U.S. App. LEXIS 33107 (1st Cir. Dec. 11, 2023).
July 11, 2024