CMS Finally Preparing to Issue Section 111 Civil Money Penalties

The Centers for Medicare and Medicaid Services (CMS) is expected finally to begin enforcing the Medicare reporting obligations pursuant to Section 111 of the Medicare and Medicaid SCHIP Extension Act of 2007.  The industry needs no reminder that Section 111, as originally enacted, carried the threat that noncompliant entities “shall be subject to a civil money penalty of $1,000 for each day of noncompliance with respect to each claimant.”  However, Section 111, as originally enacted, did not carry any specific provisions outlining practices for which penalties would (and would not) be imposed.  Naturally, the original text raised concerns that the penalty could end up being applied in an unpredictable and Draconian manner without regard to legitimate defenses, such as an insurer’s inability to comply with Section 111 despite due diligence and good faith efforts.

The Strengthening Medicare and Repaying Taxpayers Act of 2012 (SMART Act) reform bill was signed into law in January 2013.  Section 203 of the SMART Act modified the penalty provision by adding a discretionary element to the penalty’s application and amount.  Specifically, Section 203 replaced “shall be subject” with the language “may be subject to a civil money penalty up to $1,000 for each day of noncompliance with respect to each claimant.”

In addition, Section 203 required CMS to solicit proposed regulations “for which sanctions will and will not be imposed…including not imposing sanctions for good faith efforts to identify a [Medicare] beneficiary” for Section 111 purposes not later than 60 days after the SMART Act’s enactment. From there, CMS was required to publish notice in the Federal Register proposed practices for which sanctions would be imposed, subject to public comment.  Accordingly, in December 2013, CMS released an Advance Notice of Proposed Rulemaking (ANPRM) seeking public comment and input toward developing Section 111 penalties. This ANPRM did not contain any specific penalty proposals from CMS; rather, it simply sought industry comment.  All then fell silent, and CMS withdrew the ANPRM.

A notice has now been published advising the public that CMS expects to issue a Notice of Proposed Rulemaking (NPRM) this month with its proposed rules regarding the imposition of Section 111 penalties.  The industry should be on alert for release of the NPRM because the opportunity to submit comments and responses to CMS’s proposals should be afforded as part of the normal rulemaking process.

One way or the other, CMS intends to begin penalizing parties for Section 111 noncompliance.  Thus, this is a good time for the industry to review and audit its Medicare compliance program.

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