Flagship Services Group Blog

A Closer Look at Proposed Section 111 CMPs: Poor Quality of Reported Data

Mar 31, 2020 6:29:00 PM / by Robert J. Finley

There is a season for every purpose.  Are you reporting as required?  Is your reporting data accurate?  Do the errors matter?  What is your error tolerance level today, and what are its historical tendencies?  Is your data transparent and timely?  When do repayment and reporting intersect?  Who can reliably audit your current compliance level to determine whether you even have a reporting issue?  How can our current reporting procedure undergo a risk evaluation?


This is our second of a three-part series taking a closer look at each of the key pillars in CMS’ new proposed rules for Civil Monetary Penalties (CMP).  Our first part looked at Failing to Register and Report, A Closer Look at Proposed CMPs: Registering and Reporting.  The final part will cover Recovery Information Contradicting Reporting.


On February 18, 2020, CMS published new proposed rules,  Medicare Program: Medicare Secondary Payer and Certain CMPs, for calculating and imposing CMPs, 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.  The proposed rules result from CMS’ analysis and discussion of common issues raised by December 2013 ANPRM.  Again, this is a proposed rule, CMS is soliciting comments which is scheduled to end April 20, 2020, and the final rule is not yet published.


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.

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 CMPs for group, non-group plans).


How are CMPs determined? Though CMS “is not relying on the intent of the NGHP entity reporting,” there appear to be 3 factors guiding CMS’ determination if CMPs apply.


CMP amounts are “based on the number of times, meaning individuals, a particular entity fails to report, or fails to report correctly.” CMS intends for this tolerance to be applied as an absolute percentage of the records submitted in a given reporting cycle.  GHP and NGHP entities will continue to have penalties assessed for each reporting period, until the entity submits a file that does not exceed any error tolerance(s).

Regarding proposed ‘‘Safe Harbors’’, CMS is looking at “submissions that contain certain types of errors or mistakes…and to only consider performance against those tolerances over time, so that a few poor submissions do not necessarily result in the imposition of a CMP.”

As to proposed “Good Faith Efforts”, CMS considers the RRE’s “ability to obtain all of the required information for reporting and requested safe harbors for non-compliance due to non-cooperation on the part of the reportable individual.”

What “errors” result in poor quality?  These promise to be defined in the final rule and later published in Section 111 User Guide.  However, here are some clues:


CMS would only consider “significant errors which prevent a file or individual beneficiary record from processing, such as failure to provide an individual’s last name or valid date of birth, or failure to provide a matching Tax Identification Number.”

Whereas “less serious errors, such as internal CMS processing errors,” will not be considered in determining compliance.

CMS explains “exceeding thresholds within four of eight consecutive reporting periods.”


Illustrating ‘‘any 4 out of the most recent 8 consecutive reporting periods’’:



Explaining “exceeding error tolerances in any 4 out of 8 consecutive reporting periods’:



Why 20% threshold?  CMS explains that an evaluation of the historical error rates from RRE submissions found the vast majority of submitters are able to meet or exceed this initial minimum acceptable performance level. “The 20 percent per file tolerance for errors would only include those errors and condition flags that are within the entities’ direct control and cause CMS to be unable to process the individual beneficiary records or entire file submissions.”


The Act indicates that CMPs are calculated based on the number of days of RRE noncompliance, but RREs do not report on a daily basis.  How can nonconformance be assessed given this situation?


On balance, CMS’ proposal favors the practice of reporting over the explicit statutory words.  RREs are considered “out of compliance” for the entire 90-day period/quarter reporting if exceeding the error tolerance threshold.


You can read about penalty assessment here: https://www.federalregister.gov/d/2020-03069/p-73.


Where is the “Safe Harbor” and what is a “Good Faith Effort”?


CMS would not impose a CMP under these four (4) circumstances where all conditions are met:


One-Year Grace Period.  “If a RRE reports any GHP beneficiary record that is reported on a quarterly submission timeframe within the required timeframe (not to exceed 1 year after the GHP effective date), or any NGHP beneficiary record that is submitted within the required timeframe (not to exceed 1 year after the TPOC date).”

Threshold Allowances.  “If an RRE complies with any TPOC reporting thresholds or any other reporting exclusions published in CMS’s MMSEA Section 111 User Guides or otherwise granted by CMS. Note that these thresholds are not defined in the regulatory text as TPOC reporting thresholds are currently subject to change on an annual basis per 42 U.S.C. 1395(y)(b)(9)(i). CMS also elects to impose operational thresholds for reporting, such as the current $5,000 threshold for Health Reimbursement Arrangements.”

Under 20/4 out of 8.  “If a GHP entity or NGHP entity does not exceed any error tolerance(s) in any four out of eight consecutive reporting periods.”

Uncooperative Beneficiary.  If an NGHP entity fails to report required information because the NGHP entity was unable to obtain information necessary for reporting from the reportable individual, including an individual’s last name, first name, date of birth, gender, MBI, or SSN (or the last 5 digits of the SSN), and the responsible applicable plan has made and maintained records of its good faith effort to obtain this information by taking all of the following steps:

  1. The NGHP has communicated the need for this information to the individual and his or her attorney or other representative and requested 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 such as electronic mail in the absence of a response to the mailings.


  1. The NGHP certifies that it has not received a response in writing or has received a response in writing that the individual will not provide his or her MBI or SSN (or last 5 digits of his or her SSN).


  1. The NGHP has documented its records to reflect its efforts to obtain the MBI or SSN (or the last 5 digits of the SSN) and the reason for the failure to collect this information. The NGHP entity should maintain records of these good faith efforts (such as dates and types of communications with the individual) in order to be produced as mitigating evidence should CMS contemplate the imposition of a CMP. Such records must be maintained for a period of 5 years.


Notwithstanding, CMS would respond to erroneous files and records to notify submitters about the quality of their performance.  Similar to its current practices, CMS can be expected to “interact with RREs to inform them of errors with file submissions, between response files to email notifications to, in more severe situations, direct telephone outreach.”  Moreover, following publication of the final rule, CMS promises to “implement a monitoring system but would continue to review submissions each reporting period to determine whether the entity has continued to exceed error tolerance(s) and preserve the notification apparatus currently in place.”  In furtherance of “Safe Harbor” station, these notification procedures permit RREs to improve the quality of their data, while avoiding CMPs regardless of the errors within their file submissions.


Statute of Limitations on CMPs.  CMS will apply the 5-year statute of limitations under 28 U.S.C. 2462 which provides, “Except as otherwise provided by Act of Congress, an action, suit or proceeding for the enforcement of any civil fine, penalty, or forfeiture, pecuniary or otherwise, shall not be entertained unless commenced within five years from the date when the claim first accrued if, within the same period, the offender or the property is found within the United States in order that proper service may be made thereon.”  Applying 28 U.S.C. 2462, CMS seems to equate “the date from which the claim first accrued” to mean “we may only impose a CMP within 5 years from the date when the noncompliance was identified by CMS.”  That is, CMS explains, “the noncompliance occurs at the end of the fourth consecutive reporting period over the 20 percent threshold (out of eight consecutive reporting periods): If an RRE exceeds the error tolerance threshold in all four reporting periods of 2023 and then never exceeds the threshold again, it would normally be subject to a CMP. But if CMS fails to impose a CMP for this noncompliance within 5 years (no later than 2028), then no CMP would be imposed for this non-compliance.”  However, an “action, suit or proceeding for the enforcement” under 28 U.S.C. 2462 is not necessarily the same as “impose a CMP.”  In other words, under 28 U.S.C. 2462, CMS would likely have to commence an action to enforce the CMP within 5 years, not merely impose an administrative penalty within 5 years.


Plant the seeds.  Be proactive.  Create winning compliance strategies in line with best claims handling procedures and business judgment rule.


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.



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