It is half-way through the year, but it is never too late to make sure your First Tier, Downstream or Related Entity (FDR) Oversight Program is fully functional and meeting CMS requirements. As a reminder, Plan Sponsors are fully responsible for fulfilling the terms and conditions of their contracts with CMS and thereby meeting each of the Medicare program requirements. If a Plan Sponsor delegates Medicare services to another entity, it is also responsible for the oversight of that entity for both operational and compliance requirements. Below are the key components of a successful FDR oversight program. Take some time to assess your program today!

You can begin by verifying your organization has consistent and appropriate criteria used to identify an FDR. Not all vendors or subcontractors are FDRs. To be an FDR, the entity must provide administrative or health care services to a Medicare beneficiary. This will easily eliminate services such as facility cleaning or lawn care. Status of services such as printing, off-site record storage or consulting provided by another entity may not be as easy to determine. Additional factors to consider are included in available Medicare guidance. It is important to develop and document the criteria used at your organization to identify an FDR and apply it consistently.

Once you have validated the criteria used to identify your FDRs, you should determine if the appropriate contractual agreements are in place. For example, Plan Sponsors need a Business Associate Agreement (BAA) with each First Tier entity. In addition, there are regulatory requirements that must be included in every contract between a Plan Sponsor and a First Tier entity. In your FDR Oversight Program, you will also need to verify that your First Tier entities have these contractual obligations in place with their First Tier entities, which are your Downstream entities. These regulatory requirements are often called “Medicare Flow-down Language,” reflecting how the requirements flow down from the Plan Sponsor to its First Tier entities and then to their Downstream entities.

On an annual basis, Plan Sponsors are required to develop and use an auditing and monitoring plan for their FDRs. Audits should consist of both on-site and desk reviews to determine compliance with operational and compliance requirements. These audits should include a comprehensive review of Medicare requirements and other best practices that are important to your organization. It is important that this monitoring is done on a regular basis — as often as weekly, but at least quarterly. Monitoring can be achieved through weekly meetings, reporting of operational metrics, dashboards, and other methods. This process is usually done by the business owners associated with the FDR.

If there are too many FDRs to audit each year, a risk assessment must be completed to determine which entities to audit. This risk assessment is to identify the FDRs that are most likely to impact the Medicare beneficiaries and/or Plan Sponsor. It is important to use the monitoring results from the previous year in the risk assessment process. Those FDRs with the highest risk should be included in the auditing program for the current year. When determining how many entities to audit, there is no set number or percentage indicated within Medicare guidance. Each Plan Sponsor must determine the appropriate amount of auditing needed, related to the organization’s size and the amount of risk determined.

Finally, every Plan Sponsor needs some dedicated resources to oversee its FDR Oversight Program and, preferably, establishing an FDR Oversight Committee. An FDR Oversight Committee would include the compliance department, business owners associated with the FDRs and representatives from other relevant internal departments. The FDR Oversight Committee is often a subcommittee of the Medicare Compliance Committee and is responsible for approving the FDR Risk Assessment and the annual auditing and monitoring plan, as well as reviewing monitoring reports, etc. In some organizations, FDR Oversight committees meet as frequently as weekly, and in other organizations they meet on a quarterly basis.

These tips are offered to provide a quick overview of the basic components of an FDR Oversight Program. If you are concerned with any component in your program, Visante can help. We assist clients in creating or modifying their programs. We can also customize a program to match the size and structure of your organization. For more information, review our information sheet or you can contact us at

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