Yesterday, we learned CMS intends to publish its proposed Civil Monetary Penalty (CMP) rules for Section 111 Medicare & Medicaid SCHIP Extension Act reporting on 2/18/2020.  The Notice of Proposed Rule Making (NPRM) is the first step toward implementing a final rule that will impose penalties of up to $1,000 per day, per claim against Non-Group Health Plans (NGHPs) for failure to report.  Once filed in the Federal Register, the public will have 60 days to offer comments.  At the expiration of the comment period, CMS will digest the comments, and then issue the Final Rule which will be effective upon Federal Register publication.

The deadline for the public to offer comments will be Monday, April 20, 2020.  Franco Signor will be preparing comments and welcome any suggestions you may have for us to consider.  If you choose to submit your own comments, please reference file code CMS-6061-P.

In 2007, Section 111 of the Medicare & Medicaid SCHIP Extension Act (MMSEA) required Non-Group Health Plans to submit information electronically about workers’ compensation, no-fault and liability claims involving Medicare beneficiaries to CMS.  The data sent would be used by CMS to coordinate benefits and identify conditional payment reimbursements.  NGHPs responsible for reporting under this law are called Responsible Reporting Entities (RREs).  CMS began accepting data from RREs on January 1, 2011.  However, no Civil Monetary Penalty has issued since inception because regulations were necessary for its implementation.  That now changes, and NGHPs must exercise care in the claims data being submitted or face significant monetary exposures with the announcement of proposed rules.

The proposed rules are comprehensive.  CMS intends to impose CMPs for:

  • Failure to timely report TPOC information within the required timeframe. Maximum penalty per claim, per year is $365,000.
  • Discrepancies between MMSEA data and information submitted in response to CMS recovery efforts. Maximum penalty per claim, per year is $365,000.
  • Exceeding significant error tolerances preventing MMSEA records to process because of poor data. If more than 4 periods in the last 8 exceed the tolerance a penalty is applied to all claims in the submission.  The per penalty maximum can be as low as $22,500 but if all 8 periods exceeded the tolerance, the maximum increases to $90,000 per claim in the submission.  More importantly, the penalty is applied to all claims in the submission file – financially catastrophic as files can contain hundreds, if not thousands of records for the RRE.
  • Failure to timely report if no good faith was exercised to identify Medicare status. Good faith requires:  1) Mailing two requests to beneficiary for information; 2) One phone call or email requesting the information; 3) Certification by NGHP that it has not received a response; and 4) Efforts are documented by the NGHP.  Maximum penalty is $365,000 per individual, per year and calculation starts at point in time when claim was required to be submitted for reporting.

NGHPs are not subject to CMPs if the RRE complies with any TPOC reporting thresholds or any other reporting exclusions published in CMS’s MMSEA Section 111 User Guide.  Additionally, no CMPs will issue, if the NGHP does not violate any of the above listed scenarios. That makes sense.

What’s interesting about the proposed rule is how CMS will issue a CMP for failure to report ORM.  First, if the NGHP has failed to identify a Medicare beneficiary, then the calculation of the penalty starts at the point in time when the claim was required to be submitted.  Most claims, in particular workers’ compensation and no-fault claims, so the maximum CMP of $365,000 will run over a longer period.  Secondly, CMS will step up its review of Section 111 data and make certain that it accurately reflects what NGHPs submit as evidence to resolve or dispute conditional payments.  If it does not match, a CMP will issue.  Thus, timely reporting of ORM and ORM termination dates are critical.

In developing these rules, CMS referenced comments it received as part of the Advanced Notice of Proposed Rule Making (ANPRM) issued in 2013.  These comments are important to understand the breadth and scope on which CMS base enforcement of CMPs.  Of note are the following:

  • Good faith efforts where the RRE can demonstrate that the claimant refused to provide their MBI/SSN would be a situation where CMS would not impose CMPs. CMS could simply audit the documentation regarding how/why the claimant refused to provide this information.
  • CMS generally agrees that “noncompliance” with CMS’s reporting requirements include failure to–(1) report when an entity is required to report; (2) report all Medicare beneficiaries who are/were plan participants (GHP) or claimants (NGHP); and (3) report when medical care was either claimed or released (as a part of a settlement, judgment, award, or other payment).
  • CMS believes that CMP amounts should be based on the number of times, meaning individuals, a particular entity fails to report, or fails to report correctly.
  • Regarding appeals of CMPs, CMS states “We would expect that this proposed rule, once finalized, would comport with the appeals process as prescribed by 42 CFR 402.19 and set forth under 42 CFR part 1005. In broad terms, parties subject to CMP would receive formal written notice at the time penalty is proposed. The recipient would have the right to request a hearing with an Administrative Law Judge (ALJ) within 60 calendar days of receipt. Any party may appeal the initial decision of the ALJ to the Departmental Appeals Board (DAB) within 30 calendar days. The DAB’s decision becomes binding 60 calendar days following service of the DAB’s decision, absent petition for judicial review.”
  • CMPs will only applied prospectively after this rule is finalized. CMPs only issued based upon files submitted by the RRE on or after the effective date of any final rule.
  • Regarding a SOL for CMPs, “Under 28 U.S.C. 2462, we may only impose a CMP within 5 years from the date when the non-compliance was identified by CMS.”
  • “We would expect to communicate with the entity informally before issuing formal notice regarding a CMP. Informal communications would depend upon the nature of the non-compliance. Regarding the potential imposition of CMPs on other grounds, CMS anticipates utilizing an informal (that is, prior to formal enforcement actions) written “pre-notice” process that would allow the RRE the opportunity to present mitigating evidence before the imposition of a CMP. Once we determine that a CMP will be imposed, we would provide formal notice to the entity in writing in accordance with 42 CFR 402.7, which would contain information on the reason for the assessment of a CMP, the amount of the CMP, and next steps for the entity, including appeal rights.”
  • If a CMP may be imposed for lack of timely reporting, CMS would issue an informal written notice of non-compliance, identifying the nature of the non-compliance and the determination of the potential amount of the CMP. The RRE would again have 30 calendar days to respond with mitigating information before the issuance of a written notice in accordance with 42 CFR 402.7.
  • Recovery demand letters would be revised to include information regarding the potential for CMPs should an RRE contradict its own reporting in the recovery process. If an RRE submits a dispute or redetermination request in response to the recovery process that appears to directly contradict its own reporting, an informal written notice of non-compliance identifying the nature of the non-compliance and the determination of the potential amount of the CMP would be issued to the RRE. The RRE would again have 30 calendar days to respond with mitigating information before the issuance of a written notice in accordance with 42 CFR 402.7.
  • Commenters suggested that CMS not impose CMPs when CMS has been able to coordinate benefits correctly or CMS has otherwise been able to recover. The obligations to report under section 1862(b)(7) and (b)(8) of the Act are separate and distinct from any other obligation with respect to MSP. The fact that we may be able to correctly coordinate benefits and pursue recovery does not negate the obligations established under section 1862(b)(7) and (b)(8) of the Act.
  • Following publication of the final rule, we will enhance monitoring of recovery process disputes and appeals that contradict reported data, as well as monitoring of the reported data and performance over time to identify reporting that exceeds error tolerances.

Franco Signor Commentary:

The Final Rule will more than likely issue in the Summer of this year after comments from the industry are reviewed.  Responsible Reporting Entities (RREs) should start now to make certain Section 111 data is accurate.  No solace should be taken in that CMPs will be prospective in nature.  That’s because if an RRE disputes a recovery claim by taking the position that ongoing medical benefits were terminated, and that information is not congruent with an RRE’s Section 111 Reporting, a CMP will be applied.

To illustrate:  An RRE receives Conditional Payment Notice from Commercial Repayment Center for $3,500.  Per notice, treatment took place after NGHP closed claim 3 years prior; however, the RRE did not properly terminate ORM in its Section 111 reporting.  If Section 111 MMSEA data does not include this information, then the NGHP could win the dispute, but be responsible for failing to timely submit ORM termination information.  The potential penalty would be $2,895,000 for not reporting that information for 3 years earlier.  Thus, it is important to make certain Section 111 data is accurate to not only win the dispute but avoid significant CMPs.

The CMPs will force NGHPs to accurately identify Medicare beneficiaries involved in claims.  This is not an issue for workers’ compensation matters where an SSN is available but continues to be a challenge for No-Fault and Liability claims because beneficiary cooperation is necessary to obtain this information.  The proposed rule requires good faith to identify Medicare beneficiary status in that it requires two letters asking for information (an email or phone call to follow-up, certification and documentation of the file).  Without such documentation, a Medicare beneficiary claim will subject the NGHP to a maximum of $365,000 for every claim missed.  RREs will have to be proactive in securing SSNs to promptly identify Medicare beneficiaries.

Another important issue raised is regarding the timely report of TPOCs.  CMS requires TPOCs to be reported within 45 days of when it is established (settlement, judgment, award or other payment date).  If that occurs in a quarter after the assigned reporting period for the RRE, then timely reporting occurs in the next Quarter.  We recommend that you regularly audit your Section 111 data to make certain TPOCs are reported timely.

In the coming weeks, Franco Signor will be putting together comments to file for CMS consideration as it prepares for the Final Rule.  We will look for unintended consequences and provide information that may assist CMS in moderating the rule.  To illustrate, a CMP should not issue when a Section 111 record is updated because of Court, Board or Arbitration decision.  These rulings take time and can retroactively change what was once the ongoing responsibility to pay medical benefits.  Adding that date should not result in a CMP, but CMS in Section 111 does not track effective dates of these rulings, only TPOC Date and ORM Termination Date.

A final note, the proposed CMPs are significant and will present for NGHPs potentially catastrophic financial exposure.  It is likely NGHPs will need to increase investment in their MSP compliance to meet this exposure. Contact us with questions; we will be continuing to analyze this Proposed Rule and provide updates as they arise.

To contact one of our Medicare compliance experts about this important announcement, click here.


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