Deficit Reduction Act of 2005 ("DRA")

(PYA Alert dated August 14, 2006)


A new federal act, signed in February 2006, is going into effect on January 1, 2007, which imposes new requirements on mid-sized to large Medicaid providers: The federal Deficit Reduction Act of 2005 (“DRA”). The provisions of DRA must be adopted into state medical assistance plans, and were set forth to reduce any abuse of Medicaid claims processing from healthcare providers receiving annual Medicaid payments of $5 million or more. The DRA requires providers to revise and improve their policies, as well as re-educate staff members on Medicaid compliance and enforcement in accordance with the DRA’s directives. If you are a provider receiving $5 million or more in annual Medicaid payments, the DRA will impact your organization as outlined below.

• All management, employees, contractors, and/or agents must establish written contracts, which must include factual and all-inclusive information on the following items:
  • The federal (and any state) False Claims Act ("FCA"), including the role of such laws "in preventing and detecting fraud, waste and abuse."
  • Whistleblower protections.
  • Policies and procedures for detecting fraud, waste, and abuse.

Although not an immediate requirement, providers must take steps to update current and newly hired employee handbooks to include this information. Providers falling under these guidelines should also initiate monitoring of developments taken by their respective state governments.

• Encouragement of individual states to create their own false claim act, which will allow a state to receive an additional ten percent (10%) of any funds recovered as part of the Medicaid enforcement actions for false claims. Providers should consider enforcing standard guidelines to ensure that the proper employed individuals, contractors, or agents obtain and abide by the updated employee handbook. This provision is to be comparable to the federal FCA, intended to provide strong incentives for states to pursue and recover fraudulent Medicaid claims.
  
• Initiation of a new program to increase Medicaid fraud enforcement, called the Federal Medicaid Integrity Program. This program allows the federal government to contract with outside entities to review Medicaid claims for payment, reimbursement, and identify overpayments. The Program is designed to drastically improve the statutory foundation for Medicaid fraud prevention and detection.

The exact requirements under the DRA currently remain subject to interpretation. Nevertheless, providers with annual Medicaid revenues of at least $5 million should evaluate policies and handbooks and determine the necessary changes for compliance with the new provisions by January 1, 2007.

PYA’s Revenue Cycle professionals can assist you in establishing or refining policies, handbooks, and processes, to address the DRA and many other challenges. Please contact Mark Cameron or Vijay Madyastha at (800) 270-9629 if you are interested in learning more about how PYA can help you improve revenue cycle operations.

The information provided via PYA Alert, Tax Planning Alert, or Audit and Accounting Alert should not be construed as accounting, auditing, consulting, or legal advice on any specific facts or circumstances. The contents are intended for general information purposes only.  Please contact us at (800) 270-9629 to discuss your specific situation or to discuss any specific questions you may have.

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