By Andrew B. Wachler, Esq. and Jesse Adam Markos, Esq.



The Patient Protection and Affordable Care Act (the Affordable Care Act) has made a number of changes to the Medicare program as part of an effort to ensure that the providers, physicians, and other suppliers participating in the Medicare program bill accurately for their services and supplies.


Among these changes are additional documentation requirements on referrals to programs at high risk of waste and abuse. Rendering compliance with these requirements may result in increased cost and inconvenience to providers. In addition, failure to comply with the new requirements may limit a provider’s ability to assert the “waiver of liability” defense in a future Medicare audit.


When overpayments are identified in Medicare cases for the reason that services were not “medically necessary,” or for certain custodial care or homecare determinations, the “waiver of liability” defense can be used. The statutory authority for the “waiver of liability” defense is set forth in Section 1879(a) of the Social Security Act, which relieves a provider of liability for an overpayment if the provider “did not know and could not reasonably have been expected to know that payment would not be made.” If successful, the provider will be reimbursed for the services even if they were determined not to be medically necessary.


Asserting Waiver of Liability


To effectively assert the “waiver of liability” defense, it is important that providers be aware of, and in compliance with, relevant Medicare requirements. Several federal cases illustrate the importance of compliance with documentation requirements. In these cases, suppliers of durable medical equipment (DME) appealed a Medicare contractor’s determination that the motorized wheelchairs they provided were not medically necessary. The suppliers asserted the waiver of liability defense. However, they had failed to retain certain documentation substantiating their equipment claims, as required by Medicare. The failure to comply with these retention requirements proved fatal to the suppliers’ waiver of liability defense, and the court held that the suppliers knew or should have known that their claims were deficient.


On July 6, 2010, the Centers for Medicare and Medicaid Services (CMS) implemented a provision of the Affordable Care Act that adds requirements for providers, physicians and other suppliers to provide documentation on referrals to programs at high risk of waste and abuse.


Previously, 42 C.F.R. § 424.516(f) required a provider or supplier of durable medical equipment, prosthetics, orthotics and supplies (DMEPOS) to maintain ordering and referring documentation received from a physician or eligible professional for seven years after the date of service. Physicians and eligible professionals also were required to maintain such written ordering and referring documentation for seven years.


Affordable Care Act: Additional Documentation


Provisions of the Affordable Care Act expanded the existing documentation requirements to include orders and referrals for covered home health, laboratory, imaging and specialist services, in addition to the documentation requirements for DMEPOS. As a result, a provider or supplier who furnishes these ordered services is required to maintain documentation for seven years after the date of service and, upon the request of CMS or a Medicare contractor, to provide access to that documentation. Likewise, physicians and eligible professionals who order or refer items of DMEPOS or laboratory, imaging, and specialist services also are required to do the same.


The documentation required includes both written and electronic documents relating to written orders or requests for payment for items of DMEPOS and home health, laboratory, imaging and specialist services. The documentation requirements also include the NPI of the physician who orders home health services and the NPI of the physician or eligible professional who orders or refers the DMEPOS, laboratory, imaging or specialist services.


Many providers of ordered or referred services affected by these new requirements are not positioned to determine whether services are medically necessary and payment will be made.  In these cases, the determination of medical necessity rests with the referring or ordering physician.


As a result, the performing providers and suppliers have a strong waiver of liability defense if overpayments later are identified. However, the failure to comply with the Affordable Care Act’s additional documentation requirements or other regulatory requirements may prevent them from effectively asserting this defense on appeal.


About the Authors



Andrew B. Wachler is the principal of Wachler & Associates, P.C.  He graduated Cum Laude from the University of Michigan in 1974 and was the recipient of the William J. Branstom Award. He graduated Cum Laude from Wayne State University Law School in 1978. Mr. Wachler has been practicing healthcare and business law for over 25 years and has been defending Medicare and other third party payer audits since 1980.  Mr. Wachler counsels healthcare providers and organizations nationwide in a variety of legal matters.  He writes and speaks nationally to professional organizations and other entities on a variety of healthcare legal topics.



Jesse Adam Markos is an attorney at Wachler & Associates, P.C.  He graduated Magna Cum Laude, from Wayne State University Law School in 2008 where he served on the Wayne Law Review and was nominated to the Order of the Coif.  He attended law school on a full academic scholarship as a Dean’s Scholar and Lombard Leadership Fellow and graduated fifth in his class.  Mr. Markos graduated with distinction from Western Michigan University in 2004.  Mr. Markos practices in all areas of healthcare law and devotes a substantial portion of his practice to representing providers in the Medicare and other third party payer audit appeals process.  He also provides assistance to clients with transactional, corporate, and regulatory compliance matters.  He is admitted to the State Bar of Michigan as well as the United States District Courts for the Eastern District of Michigan.


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