By: Matthew Fischer
The Centers for Medicare & Medicaid Services (CMS) contracts with private companies also known as sponsors to provide Medicare services and benefits under Parts C and D. However, when a sponsor fails to comply with program and/or contract requirements, sponsors are subject to a wide range of enforcement action by CMS. Enforcement and contract actions available to CMS include intermediate type sanctions (i.e., suspension of payment, marketing or enrollment), termination, and most notably, civil monetary penalties (CMPs). Historically, the majority of enforcement action taken involve the imposition of CMPs. Thus, plan sponsors are strongly encouraged to adopt an aggressive compliance plan that includes mock periodic audits in order to prevent potential deficiency findings by CMS.
Generally, CMS has the authority to take enforcement action when it has determined: 1) a sponsor has substantially failed to comply with program and/or contract requirements; 2) a sponsor is conducting itself in a manner inconsistent with Medicare’s program requirements; or 3) a sponsor no longer substantially meets the applicable conditions for participation of the Medicare Part C and D program. If CMS makes one of these determinations, a referral is made to the Medicare Parts C and D Oversight and Enforcement Group (MOEG).
CMS calculates a CMP amount for each determined deficiency and applies a standard formula. Under this formula, CMS applies a standard penalty amount to the deficiency and adjusts it based on aggravating (e.g., prior offense, missed adjudication time, high prevalence of failed sample cases) or mitigating factors (e.g., issue correction on same day, missed adjudication deadline by 24 hours or less). This penalty is applied in two ways either on a “per enrollee basis” or “per determination basis.” If on a per enrollee basis, the penalty amount is multiplied by the number of affected enrollees. In contrast, if on a per determination basis, the amount is multiplied by the number of affected contracts. The determination of which applies hinges on whether a quantifiable number of enrollees have been adversely affected and if so, then a per enrollee basis is used. Under the CMP related regulations, CMS has the authority to issue a CMP of up to $25,000 for each affected enrollee or determination.
Plan sponsors have a right to appeal a CMS determination. If a Notice of Imposition is received from MOEG, the determination can be challenged by filing a request for review with the Departmental Appeals Board within the U.S. Department of Health & Human Services. A written request for a hearing must be sent within 60 days of receipt of the Notice of Imposition.
As Medicare requirements continue to change and become more complex, it is important for plan sponsors to be vigilant and do their due diligence. The bottom line: plan sponsors should engage counsel experienced in performing independent audits to ensure compliance in order to minimize the potential for CMPs, which can range into the hundreds of thousands of dollars.