Dot the ‘I’s, Cross the ‘T’s to Avoid Anticipated Costly Medicare Penalties

Nancy Grover

Sarasota, FL ( – Forgetting to report the date of a workers’ compensation settlement for a Medicare beneficiary can result in a fine of $365,000. That’s part of a proposal to ensure proper reporting to the Centers for Medicare and Medicaid Services.

Right now, CMS can’t impose such penalties because it has not issued a final rule. But with the agency’s proposed rule in February and comments accepted through April 20, it’s only a matter of time before the final rule is announced and implemented. Organizations need to ensure they understand and take proper precautions, as actions now could potentially lead to penalties down the road.

“If you ask me, there probably won’t be a lot of changes [in the final rule]. It’s probably a good baseline, but CMS may modify them a bit,” said Daniel Anders, chief Compliance Officer for Tower MSA Partners. “The biggest thing is understanding these penalties levels and it’s not necessarily going to be on every claim $1,000 per day, because that is very, very high.”

The Penalties

The statute originally called for a mandatory penalty of $1,000 per claimant per day for failing to properly report information to CMS. The language was modified in 2012 to say the penalties could be ‘up to’ $1,000 per day per claimant. Several months ago, CMS issued its proposal for penalties to organizations that fail to meet their Section 111 reporting responsibilities.

The reporting is required to ensure Medicare does not pay for medical care when it should be the responsibility of a different primary payer, such as workers’ compensation. It also gives Medicare the ability to recover monies that it has paid unnecessarily.

CMS requires reporting several times during the claim, such as when the injured worker is initially identified as a Medicare beneficiary; when the payer is accepting Ongoing Responsibility for Medicals; when ORM terminates; and when the claim is closed. Errors made during any reporting could lead to penalties.

During a recent webinar, Anders identified several scenarios in which penalties may be imposed:

  • Failure to Report at All. The closing of a claim, through a settlement, judgement, award, etc., must be reported within one year. The reporting is done through quarterly reporting to CMS. As an example, let’s say a workers’ compensation claim is settled on April 1, 2020, meaning the information would be reported to CMS on the next quarterly report, or June 1, 2020. If it instead is not reported for another year, on June 1, 20201, CMS could apply the maximum penalty of $365,000.
  • Contradictory Information. This can be the result of a simple mistake. For example, if a Medicare beneficiary has a work-related injury on his right shoulder but an error is made on a diagnosis code indicating it is for a right knee, CMS would have conflicting information. Even if the error is subsequently corrected, CMS could still impose a penalty of up to $365,000.
  • Exceed Error Tolerance. CMS will allow only a certain percentage of errors, especially significant ones, such as a person’s date of birth. “On a rolling quarterly basis over 8 quarters, Medicare says in any four quarters are you reporting data that exceeds in error 20%,” Anders said. “If so, they issue penalties … make sure you have correct data going in before you report it to Medicare.”

Accuracy in reporting ICD codes is among the recommendations for avoiding CMS penalties, Anders said. Understanding and adhering to the time frames for reporting is another. It is also important to demonstrate a “good faith effort” if certain information is unavailable, such as a Medicare beneficiary’s Social Security number.

CMS has outlined a series of steps that must be documented in order to demonstrate a ‘good faith effort.’ They include:

  • Communicating the need for, and requesting the information to the individual and/or attorney or other representative at least twice by mail and at least once by phone or other means of contact, such as email.
  • Certifying that the organizations has not received a response in writing, or has received a response in writing that the individual will not provide the information, or even the last 5 digits of the Social Security number.
  • Documenting its records to reflect its efforts to obtain the information and the reason for the failure to do so.

These good faith efforts should be maintained for 5 years.

Avoiding the potentially hefty CMS penalties can be accomplished through proper training of claims professionals, quality assurance, and working with a qualified reporting agent.

“Ensure that you have the training you need, and staff has the training if you are involved in the reporting process,” Anders said. “Ensure you are checking the accuracy of data and noting any omission of data, such as are diagnosis codes being used correctly. And ensure you have a reporting platform that is identifying potential errors and [the reporting agent] is working with you … to resolve errors and avoid penalties.”

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