Flagship Services Group Blog

Good Things Take Time

Feb 25, 2020 4:12:41 PM / by Robert J. Finley

Good Things Take Time, as They Should

Legendary college basketball coach John Wooden led UCLA to 10 men’s national championships in 12 years, from 1964 to 1975.  But, becoming a champion did not happen overnight.  Coach Wooden’s coaching career started in 1946 at Indiana State, and then he spent 15 winning seasons at UCLA before he coached the first championship team.  His path to the top, and staying there, was not easy, quick or cheap.  Out of the madness of March tournament basketball springs much needed perspective on the highly-anticipated and newly-unveiled Section 111 proposed reporting rules…and where we go from here.

On February 18, 2020, CMS published new proposed rules (Federal Register: Medicare Secondary Payer and Certain Civil Money Penalties) for calculating and imposing certain civil monetary penalties (CMP), adjusted annually, against group and non-group health plans which fail to meet mandatory Section 111 reporting requirements by failing to register and report; reporting in a manner that exceeds error tolerances; and/or contradicting reported information during CMS repayment recovery processes. 

Similar to these proposed rules which would apply to the insurance industry, civil monetary penalties are already enforced by the CMS against facilities, practitioners, and suppliers for rules noncompliance—e.g. fraud, misrepresentation, and programmatic or regulatory requirements—and are in addition to potential criminal and civil penalties.  CMS is currently accepting public comments on the Section 111 proposed rules which is scheduled to end on April 20, 2020.  The 60-day comment period would indicate this is a significant rule.  Notwithstanding, the rulemaking process has no specific completion date, nor a guarantee the proposed rule will necessarily become the final rule.  At this stage, the public may also request additional time to submit comments, the CMS may consider late comments, and there may be public hearings.  After April 20, 2020, generally the next step in the rulemaking process would expect the CMS to assess the public comments which could result in further changes, modifications, and edits to the current version of the proposed rule.  After scrutinizing the public comments, the CMS also anticipates completing a fresh economic impact analysis based on an “increased array of relevant data” from new monitoring systems to better determine whether future reporting violations and CMP collections are expected to eclipse $100 million or more in any given year.

Let’s take a closer look at the three (3) key pillars of the new proposed rules:

Failing to Register and Report

  • Group Health Plans (GHP) which fail to report within one year of the coverage effective date are subject to CMP of $1,000/day of noncompliance for each individual whose coverage information should have been reported, and up to a maximum of $365,000 per individual per year.
  • Non-group Health Plans (NGHP) which fail to report within one year of the date a settlement, judgment, award or other payment are subject to CMP of $1,000/day of noncompliance for each individual whose information should have been reported, and up to a maximum of $365,000 per individual per year.

Poor quality of reported data

  • CMS proposed an error tolerance that would not exceed a 20% threshold.
  • Reported information that exceeds any of the established error tolerance(s) threshold(s) and exceeds those tolerances for any four out of eight consecutive reporting periods, would be subject to a CMP with the fourth occurrence above the tolerance submission.
  • For GHP entities, the penalty would be $1,000 per day of noncompliance for each individual record for each quarterly reporting period and is standardized to 90 days for a total of $90,000 per individual.
  • For NGHPs, penalties would be similar, but on a tiered approach with an initial $250 penalty per day of noncompliance for each individual; it increases each subsequent quarter of noncompliance by $250 per day to a maximum of $1,000 per day (it is standardized to 90 days for a total of up to $90,000 per individual per reporting period). Penalties reduce by $250 per day for each subsequent quarter of compliance.

Recovery Information Contradicts Reporting

  • Here, entity performs Section 111 reporting as required, but subsequently provides information that contradicts reported information in response to MSP recovery efforts.
  • CMS provides for example: if a responsible reporting entity reported and repeatedly affirmed ongoing primary payment responsibility for a given beneficiary, then responded to CMS repayment efforts asserting that coverage for that beneficiary terminated two (2) years prior to the issuance of the recovery demand letter.
  • Entity is subject to a CMP based on the number of days that the entity failed to appropriately report updates to beneficiary records. Both GHP and NGHP penalties are subject to $1,000/day per individual.  For NGHP entities, the maximum penalty would be $365,000 (365 days) per individual. 

The CMS also proposed safe harbors based on technical errors or mistakes, and claims involving non-cooperative beneficiaries.  The proposed regulation includes a warning period to mitigate penalties prior to an administrative appeals process. Finally, the monetary penalty may only be imposed within 5-years from the date CMS identifies non-compliance (CMS proposes methods to calculate civil monetary penalties for group, non-group plans).

So, now what?  Simply stated, Medicare’s goal pursuant to federal law is to remain secondary to certain primary plans (i.e. group health plans and non-group health plans a/k/a “Applicable Plans” or workers compensation, liability insurance/self-insurance and no-fault insurance).  If you qualify as a primary plan, then use this time wisely to analyze the current state of your compliance program especially with regards to the accuracy and quality of your data (e.g. registration, error reports, diagnosis codes, ongoing responsibility medical, and total payment obligations).  Self-audit or apply a risk analysis to see where you are with these “benchmark” proposed rules.  Check whether your current reporting data “syncs with” your repayment expectations.  Find the regulatory building blocks.  Plant the seeds.  Be proactive.  Create winning compliance strategies in line with best claims handling procedures and business judgment rules because good things take time… as they should.


About Flagship Services Group

Flagship Services Group is the premier Medicare and Medicaid compliance services provider to the property & casualty insurance industry. Our focus and expertise have been the Medicare and Medicaid compliance needs of P&C self-insureds, insurance companies, and third-party administrators. We specialize in P&C mandatory reporting, conditional payment resolution, and set aside allocations. Whether auto, liability, no-fault, or work comp claims, we have assembled the expertise, experience and resources to deliver unparalleled MSP compliance and cost savings results to the P&C industry. To find out more about Flagship, our team, and our customized solutions, please visit us at www.flagshipservicesgroup.com. To speak with us about any of our P&C MSP compliance products and services, you may also contact us at 888.444.4125 or info@flagshipsgi.com.

Disclaimer: This publication is provided for informational purposes only.  It is not intended to constitute, and shall not be construed as, the rendering of legal, accounting, or business advice or opinion or professional services of any type.  Nothing herein constitutes the views of the firm or its clients or the endorsement of any particular case, principle, or proposition.  The contents of this publication should not be viewed as a substitute for the guidance, advice, or recommendations of a retained professional.



Tags: MSA, civil monetary penalties, Robert Finley, Flagship Services, CMP, MSP, Medicare, Medicare Second Payers

Robert J. Finley

Written by Robert J. Finley

Robert J. Finley, a partner with Hinshaw & Culbertson LLP, has litigation and trial practice experience focused in tort, employment and healthcare. He also counsels firm clients under health plans, auto, property/casualty, no-fault, and workers compensation policies on Medicare repayment and Medicaid reimbursement compliance. Robert advises Flagship Services Group on high value matters, in administrative hearings, and with educational solutions involving Medicare Secondary Payer issues. For more information, visit: https://www.hinshawlaw.com