Reporting Risk Management Activities to CMS Under the MMSEA

23 September 2010 Publication
Authors: C. Frederick Geilfuss II Brian W. McGrath

Legal News Alert: Health Care

On May 26, 2010, the Centers for Medicare and Medicaid Services (CMS) released long-awaited guidance (Alert) regarding the reporting obligations of hospitals, physicians, providers, and suppliers under Section 111 of the Medicare, Medicaid, and SCHIP Extension Act of 2007 (MMSEA) relative to risk management write-offs and other payments to Medicare beneficiaries. In order to avoid substantial penalties, hospitals, physicians, and other providers should become familiar with the new guidance.

Background

Under the Medicare Secondary Payer Program (MSP), CMS does not assume primary payer obligations for health services provided to Medicare beneficiaries if such services are covered by liability insurers or other primary payers. The longstanding goal of the MSP is to shift primary payer responsibility from CMS to these other payers. For example, if a patient is injured in a slip and fall in a hospital, CMS expects the hospital or the hospital’s liability insurer to cover the costs of claims for health care services related to the incident. In an effort to provide CMS with access to needed information about the existence and identity of other potential payers (such as liability insurance, no-fault insurance, and workers’ compensation), the U.S. Congress enacted Section 111 on December 29, 2007. Under Section 111, certain entities must register with CMS and report to the CMS Coordination of Benefits Contractor (COBC) specified information related to payments made to or on behalf of a Medicare beneficiary using the COBC’s electronic reporting system.

Until recently, it was unclear whether Section 111 required hospitals, physicians, and other providers to register and report certain risk management activities involving Medicare beneficiaries to the COBC. It is not uncommon for hospitals, physicians, and other providers to reduce the amount due for services, write-off a portion of the patient’s bill, or provide something else of value (e.g., cash, gift card, etc.) in order reduce the probability of a liability claim or promote good will. CMS indicated previously that such reductions, write-offs, and other offers of items of value, when used as a risk management tool, could be deemed a form of liability “self-insurance” triggering Section 111 reporting obligations. CMS’ recent Alert affirms CMS’ position that risk management reductions in charges and write-offs constitute liability self-insurance payments for the purposes of MSP provisions and clarifies CMS’ expectations regarding the reporting of such risk management activities. Generally, CMS must be informed of such risk management activities in one of two ways: (1) the provider/entity must submit a claim to Medicare reflecting the unreduced charges and indicating the reduction or write-off as a payment from liability insurance; or (2) the provider/entity must register with the COBC and report the reduction, write-off, or item of value to the COBC as a Total Payment Obligation to the Claimant (TPOC).

Registration and Reporting Not Required, But Must Submit Claim

According to the Alert, if a provider, physician, or other supplier reduces its charges or writes off a portion of a Medicare beneficiary’s bill as a risk management tool (i.e., to “lessen the probability of a liability claim against it and/or to facilitate/enhance customer goodwill”), the provider, physician, or other supplier must consider the reduction or write-off as a form of self-insurance. The provider, physician, or other supplier is expected to submit a claim to Medicare reflecting the unreduced permissible charges and describing the amount of the reduction or write-off as a payment from liability insurance (which includes self-insurance). Thus, CMS’ interests are protected and a separate report to the COBC is not required. Providers who do not currently submit claims to Medicare for services subject to reductions and write-offs will need to change their processes.

Registration and Reporting Required

If an entity other than a provider, physician, or supplier (i.e., an entity that does not submit claims to CMS), reduces its charges or writes off a portion of a Medicare beneficiary’s bill as a risk management tool and (1) there is evidence, or a reasonable expectation, that the individual has sought or may seek medical treatment as a consequence of the underlying incident giving rise to the risk, and (2) the amount of the reduction and/or the write-off exceeds the then-current TPOC reporting threshold (see below), the entity must register with CMS and report the amount of the reduction and/or write-off to the COBC as a TPOC from liability insurance (including self-insurance).

If an entity, including a hospital, physician, or other provider or supplier, provides property of value (e.g., cash, gift card, etc.) to a Medicare beneficiary as a risk management tool and (1) there is evidence, or a reasonable expectation, that the individual has sought or may seek medical treatment as a consequence of the underlying incident giving rise to the risk, and (2) the value of the property exceeds the then-current TPOC reporting threshold (see below), the entity must register with CMS or report the value of the property provided to the COBC as a TPOC from liability insurance (including self-insurance).

TPOC Reporting Thresholds

In the CMS “MMSEA Section 111 Medicare Secondary Payer Mandatory Reporting Liability Insurance (Including Self-Insurance) No-Fault Insurance and Worker’s Compensation User Guide” (Version 3.1) dated July 12, 2010, CMS provides guidance regarding TPOC reporting requirements and thresholds. The TPOC reporting threshold for liability insurance (including self-insurance) gradually diminishes to $0 in accordance with the schedule below. If there are multiple TPOCs reported by the same entity (e.g., a hospital reimburses travel expenses and provides a gift card), the combined TPOC amounts must be considered in determining whether or not the reporting exception threshold is met. In addition, according to CMS, these thresholds are “interim thresholds.” CMS reserves the right to change these thresholds with appropriate advance notification.

Date of Last TPOC Exempt From Reporting
Prior to January 1, 2012 TPOC Amounts totaling $0.00 – $5,000.00
January 1, 2012 – December 31, 2012 TPOC Amounts totaling $0.00 – $2,000.00
January 1, 2013 – December 31, 2013 TPOC Amounts totaling $0.00 – $600.00
January 1, 2014 and subsequent TPOC Amounts totaling $0.00 (no threshold)

 

Next Steps

Hospitals, physicians, providers, and suppliers should carefully review current risk management processes and ensure compliance with CMS’ updated guidance. If a hospital, physician, provider, or supplier does not currently submit claims to Medicare reflecting unreduced charges and describing risk management reductions and write-offs, such entities or providers will need to revise their processes. In addition, if an entity or provider offers items of value to Medicare beneficiaries as a risk management tool, the threshold below which an entity need not report to the COBC will be reduced to $0 by January 1, 2014. Therefore, any entity or provider contemplating providing items of value (including cash or gift cards) to a Medicare beneficiary as a risk management tool should anticipate the need to register with and report to the COBC.

Reprinted from Journal of Health Care Compliance, Volume 12, Number 5, September – October 2010, pages 57-59, with permission from CCH and Aspen Publishers, Wolters Kluwer businesses. For permission to reprint, e-mail permissions@cch.com.


Legal News Alert is part of our ongoing commitment to providing up-to-the-minute information about pressing concerns or industry issues affecting our health care clients and colleagues. If you have any questions about this alert or would like to discuss this topic further, please contact your Foley attorney or any of the following individuals:

C. Frederick Geilfuss
Milwaukee, Wisconsin
414.297.5650
fgeilfuss@foley.com

Brian W. McGrath
Milwaukee, Wisconsin
414.297.5508
bmcgrath@foley.com

Maureen F. Kwiecinski
Milwaukee, Wisconsin
414.319.732
mkwiecinski@foley.com

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