Michigan Health Law Link : Michigan Health Care Lawyer & Attorney : Smith Haughey Rice & Roegge Law Firm : Ann Arbor, Grand Rapids, Traverse City

On May 26, 2010, CMS officials finally clarified one of the outstanding issues for insured health care providers relative to the mandatory reporting requirements contained in Section 111 of the Medicare, Medicaid, and SCHIP Extension Act of 2007. Section 111 imposes an affirmative duty on certain “reporting entities” to make reports to the Centers for Medicare & Medicaid Services (CMS) of personal injury claims settled with Medicare beneficiaries.

For some time now, insured health care providers have been in a holding pattern as they wait for promised guidance from CMS as to whether a common practice by some health care providers to offer something of value to a patient as a risk management tool triggers a Section 111 reporting obligation. Typically, in these instances, a Medicare beneficiary does not retain legal counsel, does not come in making a demand for anything per se, but will have a complaint. And occasionally a provider will attempt to resolve the complaint with the Medicare beneficiary by, for instance, giving him/her a gift certificate for the hospital cafeteria.

CMS had previously indicated that it considers at least some write-offs of charges and other offers of items of value to Medicare beneficiaries to be a form of “self-insurance” that may trigger Section 111 reporting obligations. CMS' recent Alert, which addresses risk management write-offs, clarifies that reductions in the amount due on a medical bill and other efforts at offering something of value, constitutes self-insurance for the purpose of the Medicare Secondary Payer provisions. CMS notes, however, that the specific factual scenario will determine whether reporting under Section 111 is required. According to the Alert:

• No Report Required. In instances where the entity is a physician, provider or supplier and has reduced its charges or written-off a portion of the charge to a Medicare beneficiary as a risk management tool, the provider, physician or other supplier is expected to submit a claim to CMS reflecting the unreduced permissible (e.g., limiting charge) charges and showing the amount of the reduction provided or write-off as a payment from liability insurance (including self-insurance). CMS indicates that its interests are protected through this billing procedure and no Section 111 reporting is required.

• Reporting Required. In instances where a provider, physician, or other supplier has provided property of value to a Medicare beneficiary as a risk management tool when 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, the entity shall report the write-off or value of the property provided as a TPOC from liability insurance (including self-insurance). Significantly, CMS states in the Alert that if the value of the property provided is less than the TPOC reporting threshold, it need not be reported under Section 111.

With respect to the first instance, providers, physicians and other suppliers should assess internal practices to determine whether claims submitted to CMS reflect the unreduced permissible charge and also show the amount of the reduction provided or write-off. Per CMS’ Alert, deductions or discounted services must be reflected in the provider's original billing and are therefore not subject to reporting.

In instances where a provider, physician or other supplier provides property of value to a beneficiary, the critical inquiry in evaluating whether a report will be required concerns whether there is a “reasonable expectation the individual has sought or may seek medical treatment as a consequence of the underlying incident giving rise to the risk.” Providers should take to care to develop plans to internally document the basis for this conclusion.

Finally, CMS officials also disclosed that they plan to issue an updated Version 4.0 of the User Guide in July 2010.

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In the face of Section 111 and the industry's effort to comply with same, some good news for a change!

On July 29, 2009, the Second Circuit ruled that the Medicare Secondary Payer Statue does not permit a private individual to file a qui tam action on behalf of the federal government.  In this case, the plaintiff tried to file suit against an insurance company alleging that the company had failed to meet its obligations to ensure that it, and not the Medicare program, paid for certain claims for medical care from its insureds or others it was obligated to cover.  See Woods v. Empire Health Choice, Inc.  No. 07-4208-cv (2d Cir. July 29, 2009).

While this is a great result for health care insurers and self-insured providers who have more than enough to worry about right now, it is also a good reminder of something to be mindful of as more and more individuals are becoming aware of the new lottery game that is the qui tam lawsuit.  For those outside the jurisdiction of the Second Circuit, remember that this decision is something to hope for but not binding on your federal courts.  Good faith efforts to comply with the MSP (and Section 111) reporting obligations is very important both in the context of your interaction with the Medicare program but also in your interaction with your employees and other individuals who may be watching and questioning your conduct and your commitment to do what is right. 

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I have read Section 111 and all of the guidance put out by the Centers for Medicare and Medicaid Services ("CMS"), listened to most of the the teleconferences sponsored by CMS on the subject and had the opportunity to talk to different clients and stakeholders about the new requirements and what they are hearing from various consultants and legal advisers about the new reporting requirements.  And, what I have concluded from all of this reading, listening and talking is the following:

• There are lots of attorneys and consultants out there scaring and confusing hospitals and hospital insurers about Section 111 and what CMS is going to do with this new reporting system;
• The Medicare Secondary Payer system and these new reporting requirements are a much greater burden for workers' comp and no fault carriers than other NGHP liability insurers (and I never appreciated that until recently);
• CMS keeps saying that this new reporting system is, for them, at least for now ... about collecting data and NOT about trying to find liability insurers who they can make "pay twice" for a Medicare beneficiary's medical expenses;
• As it relates to what goes on in health care, with respect to patient complaints and disputes and the settlement of those disputes, there is A LOT that CMS is still trying to understand and figure out so, there is A LOT we don't know yet about what does and does not have to be reported;
• If you are a self-insured hospital ... if you are "first dollar" self-insured ... unless your excess carrier is telling you that they will act as your reporting agent, it is probably a good idea to register with CMS some time over the next month or two and test your system so that you can report if you have to;
• CMS has said on numerous occasions that you don't have to register if you don't think you will have anything to report so, for now, if you are an insured hospital that doesn't expect to "settle" a dispute with a Medicare beneficiary outside of your insurance policy, for more than $5,000, you can relax a bit ... let's wait and see what CMS does;
• If you are an insured hospital and you have a "deductible" your insurer can and probably will work with you to establish a system so that you don't have to report anything ... talk to them and if they say there is nothing they can do ... might be time to shop for insurance; 
• CMS is still learning and thinking about health care providers and the little patient related settlements you enter into from time to time with your patients when they are unhappy ... they understand that they don't need to know about all of those, despite the way the current guidance reads and there will likely be better guidance in the future to carve some of that out of the reporting requirements; and
• CMS is not, in this particular instance, looking for the "gotcha" moments ... i.e. this is not about CMS looking for opportunities to slap $1,000 per day fines on insurers and self-insured providers.  If you make a good faith effort to understand what you have to report and if you try to report correctly, you will get a chance to learn how to do it right.

Bottom line, if you are a liability insurer or a TPA for a self-insured health care provider, you have to register and you should get working on that right away ... developing the appropriate procedures and working through the IT issues will take time so don't delay.  If you are a self-insured hospital or other health care provider, you have two options: (1) register and set up the internal systems to begin reporting, or (2) hire a Section 111 reporting agent (a new cottage industry ... part of the federal stimulus plan!!!).  If you are an insured health care provider, take a breath and sit tight, there is more to come on what if anything you might have to report and since the registration deadline has been extended to September 1 and you don't have to report any settlements that occur before January 1, 2010, lets just wait and see what CMS does.   CMS may clarify some of the confusion over the next few months and things might not be so bad after all.

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