Are section 111 fines and penalties around the corner?


By Scott Huber Senior Vice President of Technology

In the ten years following the introduction of mandatory insurer reporting, we have yet to see any evidence of enforcement in the form of the imposition of dreaded civil money penalties.  Could changes be on the horizon?  Here’s a primer on the civil money penalties provisions of mandatory insurer reporting.

What are the rules of the road?

The reporting act - section 111 of the Medicare/Medicaid SCHIP Extension Act (MMSEA) of 2007 - originally mandated that failure to comply with the reporting requirements “shall be subject to a civil money penalty of $1,000 for each day of noncompliance” for each individual for which the information should have been submitted.  The statutory language left no discretion for Medicare – it described a scheme where noncompliance mandated a $1,000 per day civil money penalty.  With the threat of severe penalties, the insurance industry quickly responded, obtaining Responsible Reporting Entity (RRE) IDs and implementing claims system updates and section 111 compliance programs as quickly as possible.  Simultaneously, the penalty language raised the ire of the entire industry; considering the Centers for Medicare and Medicaid Services (CMS) mandated that claims be reported on a quarterly schedule, failure to report one claim on-time would result in a $90,000 fine, for each claim that wasn’t reported.

Enter the SMART Act.  On January 10, 2013, President Obama signed into law the Medicare IVIG Access and Strengthening Medicare and Repaying Taxpayers Act of 2012.  Title II of that law included several important changes to Medicare secondary payer provisions.  The SMART Act, among other things, softened the language relative provide CMS with discretion not only to the imposition of the penalty but also into the amount of the penalty.  Now, civil money penalties “may be subject to a civil money penalty of up to $1,000 for each day of noncompliance with respect to each claimant.”  The SMART Act also required the Secretary to quickly solicit proposals determining “specified practices for which such sanctions will and will not be imposed” via the regulatory process. 

About a year after the SMART Act was signed into law, CMS kicked off the rulemaking process with an advance notice of proposed rulemaking (ANPRM).  The ANPRM sought comment on: what types of practices “would or would not” result in the imposition of civil money penalties; methods to determine the dollar amount of civil money penalties; and ways in which CMS may define what constitutes “good faith efforts” to identify a Medicare beneficiary.  CMS received thirty four written comments to the ANPRM, but has done little since issuing the ANPRM.   

What might a fair civil money penalty structure look like?

Section 111 reporting requires a highly coordinated approach incorporating both claims and technology staff.  The law, at its most basic level, requires insurers and self-insureds to both identify Medicare beneficiaries with whom they pay benefits or settlements associated with workers’ comp, no fault or liability claims and – once identified – report data to Medicare as directed by the Secretary of Health & Human Services.  CMS’ approach was complicated from the beginning.  Although most companies have settled into a reporting rhythm, guidance is still complicated and more-and-more reporting entities are employing a specialized and flexible approach to the program.  

With that in mind, many in the industry have advocated that CMS adopt a simple standard – that of good faith efforts.  The SMART Act mandates essentially a safe harbor for cases where the reporting entity makes a “good faith effort to identify a Medicare beneficiary.”  By extending that concept to other aspects of reporting – good faith effort to report ongoing responsibility for medical, good faith effort to report settlements, etc. – CMS can adopt a fair and reasonable approach to civil money penalties.  This suggestion is not new.  It’s a broad theme that can be found in many of the comments posted in response to the ANPRM on this topic, over four years ago.

So, where are the fines and penalties?  While no fines have been levied as yet, there are a few areas to watch for possible CMS activity in this area.  Why?  Because:

  • CMS continues to stress the importance that “clean data” be submitted via section 111. CMS reviews claims that contain errors, even if a quarterly claim input file does not exceed the 20% error threshold.  CMS’ data quality reviews focus on data hygiene; not fines and penalties.  However, the focus on clean data is something that both CMS and industry veterans continue to preach.
  • It’s been nearly five years since the SMART Act passed. CMS’ regulations in the area of civil money penalties are just about the last remaining obstacle to fully implementing the SMART Act.  Now, there is (justifiably), not a major clamor for CMS to implement fines and penalties.  Nor, for that matter, is this the only thing on CMS’ plate.  However, this is an area that CMS will address sooner or later.  Luckily, most reporting entities that we talk do are well aware that a robust enforcement regime could kick in any time.

 What can claims organizations do about it now?

“Clean data” has become a vital tenet of section 111 as CMS continues to institute additional processes and controls pertaining to the reported data.  While the parameters for what constitutes a penalty won’t be outlined until CMS takes further regulatory steps, the idea that CMS is monitoring rejected claims could give reason to take a strategic pause. 

“Clean data” concepts mean that claims are reported that are error free and otherwise accepted by CMS through section 111 reporting.  Errors are returned in most instances when a claim is not accepted by CMS – requiring the reporting entity to clean that data, rinse and repeat.  By virtue of reporting a claim via section 111, CMS has the information needed to coordinate benefits and has the information needed to seek reimbursement of existing conditional payments.  Inaccurate section 111 data could result in CMS improperly denying treatment to the injured party.  It could also cause CMS to expect a higher reimbursement amount.  So, it’s not merely throwing a claim over the wall to Medicare, but it’s also making sure the data is in fact accurate.

Those same concepts also apply to claims that are held back because they would create an error under CMS’ reporting rules.  It’s hardly the case that an entity is “in the clear” because it has held back claims likely to be rejected by CMS’ data quality rules.  The goal should always be to get it right the first time, ensuring that no claims are left unreported.  So, even as companies support the provision of clean data by ensuring that only error-free claims are reported, so too must those companies ensure that they have a strong process of that allows them to get it right the first time.

When considering the best response to these obligations, it’s important to keep in mind that flexibility, program oversight and responsiveness are critical to ensuring that you stay ahead of the section 111 curve.  Programs like our MIR Service not only provide all of these key attributes, but it is a completely customizable program that can be built to adapt to your compliance goals, rather than force your claims systems and personnel to achieve compliance through only one pre-scripted process.

These goals can be met – but they require engagement, training and well-designed systems that are flexible enough to quickly adapt to changes outlined by Medicare.  And, until penalties are unveiled, the best defense against possible future enforcement is to stay on top of the reporting requirements and remain engaged by developing a culture of compliance. 

About Scott Huber

Scott Huber is the Senior Vice President of Technology, overseeing the technology and software solutions for ExamWorks Clinical Solutions.  Scott brings two decades of IT experience in large-scale technology initiatives, including teleradiology and ERP/CRM.  Scott is an award-winning IT executive combining project management and leadership skills to manage multi-million dollar software implementations and infrastructure improvements. 


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