Healthcare Vendors and Vendor Compliance

Vendor Compliance

Am I a vendor?

If you partner with a healthcare organization to deliver goods or services, you are a vendor.

Healthcare delivery in the U.S. is a massive industry that relies heavily on partnerships, contracts, and supply chains. At nearly every turn, health systems and other provider organizations (skilled nursing facilities, home health organizations, surgery centers, etc.) join forces with local and national vendors to deliver care and meet operational needs. In this post, we’ll explore the definition of healthcare vendors and explain how VendorProof helps healthcare organizations and vendors of all types demonstrate compliance with federal regulations and keep people safe. 

Healthcare Vendors: The Definition

The OIG defines healthcare vendors as “any providers, suppliers, manufacturers, and any other individual or entity regardless of the service the vendor provides (e.g., cleaning service, vehicle maintenance, decorating service, any healthcare service).”

The factors that do not affect whether a person or entity counts as a vendor are: whether they interact with patients or patient data, whether they interact with a facility, whether they have a contract agreement with the healthcare provider.

Since this definition is so far-reaching, healthcare organizations must institute thorough compliance requirements for all individuals and entities they work with to avoid potential liability for fines and penalties. Within this definition, however, are subsets of vendors that must be held to even higher standards of compliance. These subsets are referred to as First Tier, Downstream, and Related Entities, or as FDRs, collectively. 

Why is this definition so broad?

Compliance Matters

Since this definition is so far-reaching, healthcare organizations must institute thorough compliance requirements for all individuals and entities they work with to avoid potential liability for fines and penalties. Within this definition, however, are subsets of vendors that must be held to even higher standards of compliance. These subsets are referred to as First Tier, Downstream, and Related Entities, or as FDRs, collectively.

First Tier, Downstream, and Related (FDR) Entities

First Tier, Downstream, and Related Entities (FDRs) are defined by CMS as any party that enters into a written arrangement with a Medicare Advantage organization or Part D plan sponsor to provide administrative services or healthcare-related services. Examples of First Tier, Downstream, and Related Entities (FDRs):

  • Physicians and Hospitals
  • Pharmacies
  • Claims Processing Vendors
  • Patient Management Vendors
  • Credentialing Companies
  • Field Marketing Organizations
  • Call Centers

Healthcare provider organizations can be held responsible for an FDR’s non-compliance, which could jeopardize the organization’s ability to deliver care.

Compliance Requirements for FDRs

To ensure FDR entities are trustworthy and not engaging in fraudulent activities, these vendors are required to demonstrate proof of: 

  1. Code of Conduct
  2. Exclusion Screening
  3. Offshore Operations Reporting
  4. Monitoring and Auditing FDRs


VendorProof provides an easy way for vendors to deliver and update these requirements to their healthcare clients. 

Healthcare Providers and Vendor Compliance

According to Section 1128(a)(8) of the Social Security Act (SSA), HHS Office of Inspector General (OIG) has the authority to exclude individuals and entities from federally funded health care programs for a variety of reasons, including a conviction for Medicare or Medicaid fraud. 

Those that are excluded can receive no payment from Federal healthcare programs for any items or services they furnish, order, or prescribe. Anyone who hires an individual or entity on the LEIE may be subject to civil monetary penalties (CMP). 

To ensure they do not rely on an excluded or fraudulent vendor, healthcare provider organizations must develop thorough vendor compliance requirements. These requirements help protect providers from risk and fines, control healthcare costs, and keep patients and communities safe. A main component of vendor compliance is ongoing exclusion monitoring of the vendor and any associated owner holding a 5% or larger stake. 

Enrolling Your Organization with VendorProof

Each healthcare provider organization that relies on VendorProof determines their own custom requirements, which you will see when completing your online forms. If you work with more than one participating healthcare provider organization, you will need to complete the requirements for each organization. 

Enrolling in VendorProof is a simple way to help healthcare work better. If you have questions about the enrollment process or the forms you’re asked to complete, see our FAQs.

Ready to get started in VendorProof?