CMS Announces Intent to Issue Notice of Proposed Rulemaking on Section 111 Reporting Penalties
Heather Sanderson
December 12, 2018

The Centers for Medicare & Medicaid Services (CMS) has issued yet another abundantly clear signal that Medicare Secondary Payer (MSP) enforcement will be a priority in 2019. Just last week, we blogged that a Proposed Rule on a voluntary review process for Liability Medicare Set-Asides (LMSAs) would be issued by September 2019.

Now, an additional notice on the Office of Management and Budget (OMB) website has been posted which indicates that CMS will move forward with a Notice of Proposed Rulemaking (NPRM) on “Civil Monetary Penalties (CMPs) and Medicare Secondary Payer Requirements.”  As required by the Strengthening Medicare and Repaying Taxpayers Act of 2012 (SMART Act), CMS is required to establish criteria and practices in which CMPs would be imposed under the Act. The OMB notice provides that this NPRM is of a “Significant” priority level and that it will be issued by September 2019 (note that this is similar to the LMSA NPRM which is also to be issued by this date).

Recall that through the SMART Act, specifically section 42 USC 1395y(b)(8), the regulatory language surrounding CMPs of $1000 per day per claim for non-compliant Responsible Reporting Entities (RREs) was modified to provide that such CMPs/penalties would be “. . . up to $1000 each day of noncompliance with respect to each claimant.” In other words, the SMART Act allowed for CMPs to be discretionary rather than mandatory. In order to set parameters around CMS’ discretion on safe harbors from such CMPs, Medicare would need to lay out such safe harbors for RREs to determine when CMPs should be issued and the monetary amount of such CMP.  Back in late 2013, CMS did issue an Advanced Notice of Proposed Rulemaking (ANPRM) regarding these safe harbors, but for the past five years has taken no further regulatory action until now.

CommentaryFranco Signor has completed Medicare Reporting Compliance Audits of nearly every major Reporting Agent (RA) in the country which includes thousands of separate entities handling millions of Non-Group Health Plan (NGHP) claims since 2012.  If Medicare continues to advance this initiative and eventually begins auditing RREs through their Recovery Audit Contractors (RAC Audits) or other methods, NGHP entities would be wise to revisit the efficiency and accuracy of their current Medicare (Section 111) Reporting platform and process.  While it may take a couple years for regulations to pass and RAC Audits to begin, IT initiatives of this scale are slow moving.  Cleaning up late and/or under reporting of claims from over 8 years of historical claim data can no doubt be a tedious process.  We can be certain that once the NPRM is complete and comments are collected from the industry, CMS will eventually issue a final rulemaking which will then allow for civil monetary penalties against non-compliant RREs.  Based on our audits of many widely used Medicare Reporting platforms by RAs, there are numerous opportunities for CMS to collect far more than the $1.1 billion they promised Senator Grassley to pay for SCHIP back in 2007.

With regard to the criteria and practices in which CMS can issue a CMP, we anticipate that the NPRM will include safe harbors for RREs which can evidence good faith efforts to report or report properly. However, in scenarios where RREs that have failed to register as an RRE, have failed to report reportable claims, or scenarios in which there is improper termination of Ongoing Responsibility for Medical (ORM), these will likely be events which are subject to CMPs.

As one of the original founders of the MARC Coalition and architects of the SMART Act which made Section 111 penalties discretionary, Franco Signor will remain heavily involved in the rulemaking process to facilitate reasonable parameters around CMPs in the NPRM process. We welcome your feedback on this NPRM and Section 111 concerns which you believe should be part of CMS’ consideration in the rulemaking.