backOIG Announces Results of Hospital Transfer Payment Policy Audit
On Friday, October 6, 2023, OIG announced the results of an audit performed on the Medicare Part A hospital transfer policy for discharges to post-acute care (PAC). The hospital transfer policy, which was established in 1998, reduces hospital payments for discharges from hospitals to PAC settings that are made sooner than a Medicare-established average length of stay.
The audit was motivated in part by a 2022 report of the Trustees of the Part A Hospital Insurance Trust Fund that projected a Medicare Part A deficit of $7.3 billion, and the objective of the audit was to determine whether changes in the hospital PAC policy would affect that projected deficit if CMS were to expand the PAC transfer policy to cover all Medicare Severity Diagnosis Related Groups (MS-DRGs).
In performing the audit, OIG reviewed a sample of 100 random acute-hospital inpatient claims for Medicare enrollees from 2017 through 2019 that were billed with MS-DRGs not currently subject to CMS’s transfer policy for PAC discharges. Using those sample inpatient claims, OIG then calculated the savings that Medicare would have realized had the transfer policy been applied to those claims. OIG also compared the reduced payments that would have been made under the expanded transfer policy to the hospitals’ costs of providing care.
OIG found that expanding the PAC transfer policy would result in significant savings to Medicare. Of the 100 sample claims, 99 would have yielded cost savings as compared with current policy, for a net Medicare savings of $1 million. On the basis of this sample, OIG estimated that Medicare could have saved approximately $694 million, or an average of $6,407 per claim, had the expanded PAC discharge policy been in effect from 2017 through 2019. OIG also estimated that, although this policy change would result in reduced revenue to hospitals, the transfer payments would nevertheless exceed hospital costs for an estimated 65 percent of all hospital claims submitted to Medicare.
Based on this audit, OIG has recommended that CMS conduct its own analysis of the transfer payment policy for discharges to PAC and expand the policy as necessary. In written comments to the draft OIG report, CMS did not state whether it concurred with OIG’s recommendation but said that it will examine the data and potentially identify additional MS-DRGs to which to apply the policy in future rulemaking.
OIG’s announcement of the audit results can be found here. The complete audit report can be found here.
Reporter, David Tassa, Los Angeles, + 213 443 4335, dtassa@kslaw.com.
CMS Publishes Final Rule Regarding CMPs for Late Reporting by Medicare Secondary Payers
On October 11, 2023, CMS published a final rule (the Final Rule) regarding how and when CMS will impose civil monetary penalties (CMPs) for Medicare secondary payers (MSPs) that untimely report required information. The Final Rule applies to both group health plan (GHP) and non-group health plan (NGHP) responsible reporting entities (RREs). The CMPs for late reporting for both GHP and NGHP RREs is calculated on a daily basis for each calendar day of noncompliance in excess of a year for each individual for which the required information was required to be submitted, with a maximum penalty of $365,000. The Final Rule outlines two specific safe harbors that would preclude the assessment of CMPs. RREs that are not compliant with their MSP reporting obligations are subject to CMPs beginning October 10, 2024, when the Final Rule becomes effective.
Background
In 1980, Congress added Section 1862(b) to the Social Security Act (the Act), which defines when Medicare is the secondary payer to certain primary plans. The MSP provisions of the Act prohibit Medicare from making payment if payment has been made, or can reasonably be expected to be made, from GHPs or workers’ compensation plans, liability insurance (including self-insurance), or no-fault insurance (collectively, NGHPs). Medicare can make conditional payments for NGHPs, subject to reimbursement from the primary plans.
In 2007, Congress enhanced enforcement of the MSP provisions by enactment of Section 111 of the Medicare, Medicaid, and SCHIP Extension Act of 2007 (MMSEA), which established new mandatory reporting requirements regarding Medicare beneficiaries who have coverage under GHP arrangements, as well as when NGHPs provide settlements, judgments awards, or assume rother payment responsibility for Medicare beneficiaries’ care. Today, almost 1,000 entities are registered as GHP RREs, with the majority estimating in excess of 1,000 individual Medicare beneficiaries to be reported annually, and over 21,000 entities are registered as NGHP RREs, with almost all of them estimating fewer than 500 individual Medicare beneficiaries to report annually upon initial registration. RREs are required to electronically submit coverage information for Medicare beneficiaries on a quarterly basis, including reporting of when coverage begins or ends and when a judgment award, settlement, or other payment is made.
Following the passage of the Medicare IVIG Access and Strengthening Medicare and Repaying Taxpayers Act of 2012 (the SMART Act), the MSP reporting provisions were amended to provide that GHPs and NGHPs that fail to comply with the MSP reporting requirements are subject to CMPs. For GHPs, which tend to be larger, the penalty amount is $1,000 for each calendar day of non-compliance, but for NGHPs, which tend to be smaller, the penalty amount is up to $1,000 for each calendar day of non-compliance. The SMART Act also included a revision to make clear that CMS had discretion with regards to the imposition of CMPs as to NGHPs.
In December 2013, CMS published an advance notice of proposed rulemaking to solicit comments on the practices for which CMS may impose CMPs under the MSP rules. Then, in February 2020, CMS published its proposed rule (the Proposed Rule) for the imposition of CMPs related to MSP reporting.
The Final Rule
Civil Monetary Penalties. In response to comments, under the Final Rule, unlike under the Proposed Rule, the only basis for imposing CMPs will be untimely reporting of required information. Contradictory reporting or reporting containing excessive errors is not a sufficient basis for imposing CMPs. Rather, CMPs for GHPs and NGHPs are as follows:
- For GHPs, the CMP is calculated as “$1,000 as adjusted annually under 45 CFR part 102 for each calendar day starting the day after 1 year (365 days) from the first instance of noncompliance, as defined in paragraph (b)(2)(i) of this section,” based on the number of beneficiaries whose records were reported late.
- For NGHPs, the CMP is calculated in tiers, with the penalty amount for each calendar day of noncompliance being $250 for late reporting in excess of one year but less than two years, $500 for late reporting in excess of two years but less than three years, and $1,000 for late reporting in excess of three years. The foregoing amounts are all subject to adjustment annually under 45 CFR part 2.
- The maximum penalty per individual is $365,000.
Random Audits. To motivate proper reporting and maintain compliance with existing statutes and regulations, CMS is adopting an audit approach whereby CMS will audit a randomized sample of 250 new beneficiary records received each quarter, rather than undertaking an automated review of all records submitted, as previously proposed. The audited records will be split between GHP and NGHP records in accordance with the pre-rate count of recently added records for both types of coverage over the calendar quarter under evaluation.
Safe Harbors. The Final Rule contains two express “safe harbors” for when a CMP will not be imposed:
- CMS will not impose a CMP when an RRE fails to report required information as a result of an inability to obtain “to obtain an individual’s last name, first name, date of birth, gender, Medicare Beneficiary Identifier (MBI), Social Security Number (SSN), or the last 5 digits of the SSN” and the RRE has requested the information in question from the individual at least three times.
- CMS will not impose a CMP when “[t]he incident of noncompliance is associated with a specific reporting policy or procedural change on the part of CMS that has been effective for less than 6 months following the implementation of that policy or procedural change (or for 1 year, should CMS be unable to provide a minimum of 6 months’ notice prior to implementing such changes).”
Statute of Limitations. Lastly, in response to comments, CMS affirmed that a five-year statute of limitations applies from the date when the alleged noncompliance occurred, as required by 28 U.S.C. § 2462.
The Final Rule is available here.
Reporter, Christopher C. Jew, Los Angeles, + 1 213 443 4336, cjew@kslaw.com.
Sen. Bernie Sanders Releases Report Alleging Non-Profit Hospital Systems Are Not Meeting Charity Care Requirements
On October 10, 2023, Sen. Bernie Sanders (I-Vt.), Chairman of the Senate Health, Education, Labor, and Pensions (HELP) Committee, released a report alleging that certain non-profit hospital systems may not be providing the community benefits required by their tax-exempt status. The report calls on Congress and the IRS to strengthen requirements impacting charity care and financial assistance programs.
Under current IRS rules, non-profit hospitals that provide “benefits to a class of persons that is broad enough to benefit the community” may qualify for certain tax exemptions. IRC § 501(c)(3). As a condition of receiving tax-exempt status, the federal government requires non-profit hospitals to provide a set of community benefits, including free or discounted health services for certain low-income individuals—a practice known as “charity care.” The Patient Protection and Affordable Care Act enacted an array of additional community benefit requirements, among which is maintenance of a publicly-available financial assistance program.
Nearly half of American hospitals enjoy non-profit status, but the HELP Committee’s report alleges many are not providing the community benefits required of them. The report claims that non-profit hospitals spent an estimated $16 billion on charity care in 2020, which is equal to about fifty-seven percent of the value of their tax breaks in the same year.
The report examines sixteen of the largest non-profit hospital systems in the U.S. Per the report, each of these systems earns more than $3 billion in annual revenue, but twelve spend less than two percent of their revenue on charity care. The report further alleges that of those twelve, six dedicate less than one percent of their total revenue to charity care. The report claims that in recent years, non-profit hospitals have provided even less charity care even as they experienced a marked increase in revenue and operating profits.
In addition to denying care, the report challenges what it describes as “aggressive debt collection tactics” by non-profit hospitals to seek payment on unpaid medical bills. These include wage garnishment and liens on personal assets.
The report calls on Congress and the IRS to take certain steps aimed at ensuring that non-profit hospitals provide the required community benefits, including:
- Ensure hospitals are offering appropriate levels of charity care;
- Establish clear and enforceable standards for non-profit hospital financial assistance programs, including requiring hospitals to determine whether a patient is eligible for such assistance and provide it regardless of whether the patient proactively requests information on financial assistance programs or charity care;
- Impose further restrictions on debt collection processes;
- Define the community engagement necessary to justify a hospital’s non-profit status, such as requiring non-profit hospitals to specifically address the needs raised by underserved, low-income, and marginalized communities through community health needs assessments; and
- Increase transparency in reporting of community benefit data to identify the scope of the problem by requiring community benefit data to be reported on a hospital-by-hospital basis, rather than the total for a hospital system.
The HELP Committee’s full report is available here.
Reporter, Elizabeth Key, Sacramento, +1 916 321 4821, ekey@kslaw.com.