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On Jan. 1, 2007, Section 6032 of the Deficit Reduction Act of 2005 (DRA) quietly went into effect.

Section 6032, entitled "Employee Education About False Claims Recovery," is yet another mechanism aimed at curbing Medicaid fraud. Under Section 6032, large healthcare companies (receiving $5 million or more in annual Medicaid reimbursement) are now required to establish written policies to inform all employees, contractors, and agents about false claims, false statements, and whistleblower protections under applicable state and federal fraud and abuse laws.

Importantly, although the Centers for Medicare and Medicaid Services (CMS) has not issued any formal position statement, "off the record" statements from CMS officials have suggested that the $5 million amount will be based on the aggregate payments received by an entity or organization, even if that organization has more than a single provider number. In other words, if the same entity operates a hospital, a nursing home and an outpatient surgery center and collectively receives $5 million annually in Medicaid reimbursement, Section 6032's mandate will likely apply.

Under Section 6032, affected organizations must now include in written policies "detailed information" about (1) the False Claims Act and any comparable state antifraud statutes, as well as what whistleblower provisions are available in those laws; and (2) the company's policies and procedures for preventing fraud and abuse. In addition, every affected organization must describe in its employee handbook the employees' rights to be protected as whistleblowers and must restate the company's policies regarding fraud and abuse and the internal process for preventing such conduct.

Aside from the requirements that these policies be in writing, be detailed and specific, and be restated in the employee handbook, there is little guidance from CMS as to the format needed. Practically speaking, affected organizations would be well advised to incorporate these compliance policies into existing corporate compliance plans or human resource policies, using the same format and style as is found in those documents. Nothing in Section 6032 prohibits the policies from being maintained in electronic format only.

Somewhat surprisingly, although the original Senate bill required training of all employees on these new policies, the final, approved version of Section 6032 does not impose any such requirement. However, as a practical matter, every affected organization should give careful consideration to the likely impact of the required policies on its employees. One obvious effect of Section 6032 could be to increase the number of whistleblower actions brought against healthcare companies by their own employees. While one healthcare entity might determine that the release of these policies with no training could be misinterpreted to suggest the entity is not meeting its legal obligations, another entity might conclude that training would only call more attention to what otherwise would pass as a minor revision to its existing written policies. In short, as to training, each organization should consider its particular workforce dynamic and develop the strategy that best ensures that it complies with the requirements without encouraging employees to bring unmerited whistleblower actions.

So, if you haven't complied with the new requirements imposed by Section 6032, (or if this is the first you've heard of Section 6032), what do you do? First, if your entity receives Medicaid reimbursement, you must determine if you meet the $5 million threshold. If you do, Section 6032 does apply and you should review existing policies to determine whether your entity may already comply with the "new" requirements, and update or amend those policies (or have additional policies drafted) as appropriate. This entire process should be documented.

The DRA makes compliance with Section 6032 a condition of receiving Medicaid payment. Failure to meet its requirements could result in the forfeiture of all Medicaid payments received during the period of noncompliance. In addition, if the government concludes that the organization knew or should have known of its noncompliance with Section 6032, it may assert that all Medicaid claims submitted were "false claims" and subject to the very stiff penalties provided for under the False Claims Act.

In closing, it is worth pointing out that no state has yet promulgated amendments to its state plan to reflect these new requirements or to provide for enforcement methods. Those amendments must be completed by March 31, 2007, by direction from CMS which was given in December 2006. Regardless, it appears that the requirements of Section 6032 may be enforced immediately (post-January 1, 2007) — even in the absence of state regulations.

The bottom line, therefore, is this: Make sure your entity is either outside the application of Section 6032, or make sure it is in compliance, posthaste. Time is not just "a-wasting" — time is up.



Kate Gilchrist and David Donnell, attorneys with Adams and Reese LLP in Jackson, may be reached at Katie.Gilchrist@arlaw.com and David.Donnell@arlaw.com, respectively.




March 2007

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