Official Release of CMS Proposed Rule on Section 111 Civil Monetary Penalties

Picture of a gavel

February 18, 2020 –

As anticipated, the proposed rule outlining when CMS would impose civil monetary penalties or as they are now referred to as CMPs, was officially published today in the Federal Register.  The text of the proposed rule can be found here

The proposed rule impacts both Group Health Plan entities (GHP) and Non-Group Health Plan entities (NGHP).  Highlights of the proposed rule for NGHPs are as follows:

  • CMPs would not be assessed against NGHPs where there has been “good faith efforts” to obtain required Section 111 Reporting information from individuals who are unwilling or unable to provide it. Specifically, the text of the proposed rule provides as follows:

(iv) A CMP is not imposed in the following situations:

If a non-group health plan (NGHP) applicable plan fails to report required information as a result of the applicable plan’s inability to obtain an individual’s last name, first name, date of birth, gender, Medicare Beneficiary Identifier (MBI), Social Security Number (SSN), or the last 5 digits of the SSN, and the applicable plan has made a good faith effort to obtain this information by meeting all of the following:

(1) Communicating the need for this information to the individual and his or her attorney or other representative.

(2) Requesting the information from the individual and his or her attorney or other representative at least twice by mail and at least once by phone or other means of contact.

(3) Has not received a response or has received a response in writing that the individual refuses to provide his or her MBI or SSN or a truncated form of the MBI or SSN.

(4) Has documented its efforts to obtain the MBI or SSN (or the last 5 digits of the SSN).

(B) A CMP is not imposed if an NGHP applicable plan complies with any reporting thresholds or any other reporting exclusions.

(C) A CMP associated with a specific policy or procedural change is not imposed for a minimum of two reporting periods following the implementation of that policy or procedural change.

  • Noncompliance with reporting obligations is found when a NGHP:
    1. Fails to report any beneficiary record within 1 year from the date of settlement, judgement, award, or other payment;
    2. When the NGHP contradicts its reporting in response to CMS recovery efforts; and
    3. When the reports exceed error tolerance thresholds established by the Secretary, which are not to exceed 20 percent in any 4 out of 8 (or less) consecutive reporting periods. These errors would prevent 20 percent or more of the beneficiary records from being processed.
  • The amount of penalty is calculated based upon the above noncompliance violations as follows:
    1. On a daily basis based upon the actual number of beneficiary records that the NGHP submitted more than 1 year after the Total Payment Obligation to the Claimant (TPOC) up to $1,000, adjusted annually for each calendar day of noncompliance, up to $365,000, per individual, per year;
    2. When the NGHPs recovery efforts contradict Section 111 Reporting data the penalty is calculated based upon the number of days the entity failed to report updates to the beneficiary records, up to $1,000 per day for a maximum of $365,000 which will be adjusted annually; and
    3. For violations involving error reports, penalties are assessed in various phases. The first tier penalty of $250 per day of non-compliance or 25% of the $1,000 per day penalty is based upon the number of beneficiary records that exceed error tolerances.  If the NGHP fails to comply in the next consecutive reporting period, the penalty would increase to 50%, then 75% up to a $1,000 per day.  Penalties could be reduced by 25% for the next penalty eligible file if the RRE remains below error tolerances for the subsequent quarter.

The Supplementary Information accompanying the proposed rule provides further clarification/comments as follows:

  • CMS expects that the proposed rule, once finalized, would contain an appeals process that comports with 42 CFR 402.19 and 42 CFR part 1005. CMS envisions the appeals process to include a formal written notice to the parties when the penalty is proposed; the RRE would have the right to request a hearing within 60 calendar days of receipt; a party could appeal the ALJ decision to the Department Appeals Board (DAB) within 30 calendar days; and the decision of the DAB would be binding after 60 days following service of the decision, absent additional judicial review.
  • CMS agrees that the rule would be prospective in nature and compliance would be evaluated based upon files submitted after the effective date of the rule.
  • CMS will apply a 5 year statute of limitations as outlined in 28 U.S.C. 2462. A CMP may only be imposed within 5 years from the date “when the noncompliance was identified by CMS.”
  • CMS expects to communicate notice of CMPs informally before issuing a formal notice of penalties. However, this would depend upon the nature of non-compliance. This “pre-notice” process would allow the RRE to present mitigating evidencing before penalties are imposed.
  • Duplicative reporting to other agencies does not relieve RRE of reporting obligations under Section 111.
  • Penalties under Section 111 are separate and distinct from other Medicare recovery efforts. As such, CMS can impose Section 111 penalties in conjunction with conditional lien penalties under the Medicare Secondary Payer Act.

CMS is considering comments to the proposed rule on or before April 20, 2020 at 5 p.m.  NuQuest will be issuing an Official Comment to this Rule and welcome feedback from you to present to CMS on or before April 16, 2020.  We will also be hosting a webinar to review the proposed rule in further detail on Wednesday, March 11, 2020, at 2:00 p.m. eastern standard time. A separate invitation to this webinar will be forthcoming.  In the interim, should you have any questions regarding the above, or for any of your Medicare Compliance needs please do not hesitate to contact us.

Please note communication of information by, in, to or through this article and your receipt or use of it is not provided in the course of and does not create or constitute an attorney-client relationship and is not intended to convey or constitute legal advice.  It is for informational purposes only.