According to a Ropes & Gray press release, on December 8, 2005, the United States Attorney’s Office for the Northern District of Illinois reached a settlement with Rush University Medical Center in Chicago, under which Rush agreed to repay approximately $1 million to the federal and state governments for inappropriate clinical trials charges submitted to Medicare and Medicaid.  About a quarter of the $1 million payment represents a fine for the improper billing of these federally-funded health care programs. Clinical trials sites that inappropriately bill Medicare could face potential False Claims Act liability, Civil Monetary Penalties Law liability, and exclusion from Federal health care.

New Proposed Regulation

YESTERDAY February 16, 2012, DEPARTMENT OF HEALTH AND HUMAN SERVICES Centers for Medicare & Medicaid Services issued CMS-6037-P, proposing changes to 42 CFR Parts 401 and 405, Medicare Program; Reporting and Returning of Overpayments.  The Affordable Care Act established a new section 1128J(d) of the Act entitled "Reporting and Returning of Overpayments."  Under this act Clinical Trials Sites could face potential False Claims Act liability, Civil Monetary Penalties Law liability, and exclusion from Federal health care programs for failure to report and return an overpayment.  In other words, if the clinical trial site bills Medicare and subsequently becomes aware that they should have billed the sponsor they are responsible for reimbursing Medicare or facing significant penalties and / or fines.

Under 42 C.F.R. PART 401—GENERAL ADMINISTRATIVE REQUIREMENTS, CMS proposes establishing a new subpart D in Part 401 and §401.303  includes “Receipt of Medicare payment when another payor had the primary responsibility for payment.”

Penalties for Not Reporting Overpayment

Section 1128J(d) of the Act provides that any overpayment retained by a person after the deadline for reporting and returning the overpayment is an obligation for purposes of 31 U.S.C. 3729. Any person who "knowingly conceals or knowingly and improperly avoids or decreases an obligation to pay or transmit money or property to the Government" may be found liable under the False Claims Act. (See 31 U.S.C. 3729 et seq.) Proposed §401.305(f) contains a similar statement. Additionally, any person who "knows of an overpayment [as defined in section 1128J(d)(4) of the Act] and does not report and return the overpayment in accordance with such section" may be found liable under the Civil Monetary Penalties Law (section 1128A(a)(10) of the Act) and accordingly could be excluded from participation in Federal health care programs (section 1128A of the Act).

Statute of Limitations is Ten Years

Encourage and Support Clinical Trials Sponsors Section 111 Reporting

Medicare Consul Services provides reporting services for major pharmaceutical trials sponsors and disturbingly, few of the hundreds of trials sites we have contacted appear to be aware of which trials subjects are enrolled in Medicare.  If the site is not cognizant of that basic fact, it follows that they are at risk of finding themselves in the same position as Rush University.  Clinical trials sites should include this facet in their compliance plan, but fortunately Medicare has stepped up to help out.

Under the Section 111, Mandatory Insurer Reporting (MMSEA), the trial sponsor is responsible for reporting injuries (e.g., Adverse Events and Serious Adverse Events)  and paying for the treatment under 42 U.S.C. § 1395y(b)(2)(A)(ii).  Liability for ongoing treatment (e.g., payment of medical claims) and reporting is similar another injury-oriented type of insurance -- workers’ compensation.  When a trial sponsor reports their obligation, Medicare posts the information on the Common Working File (CWF) and denies medical payments for treatment related to the injury -- enforcing the Medicare Secondary Payer statute that Medicare is always the secondary payer when another plan has an obligation (e.g., consent form) to make payment.

Reduce Risk and and Cost of Compliance

We were asked to consult on an interesting Medicare Secondary Payer case the other day.  A “working aged” employee (Medicare’s name for an employed beneficiary) covered by a workers’ compensation claim in a lifetime medicals state was injured on a loading dock by falling cargo.  The workers’ compensation carrier paid lost wages and medical bills arising from the incident and the claimant filed a tort suit against the trucking firm.

The problem is that the beneficiary claims that he must have shoulder surgery.  He plans to file a claim for the surgery with the workers’ compensation carrier.  The carrier states that the proposed shoulder surgery is unrelated to the incident.  They are going to deny the claim.  The trucking firm’s insurer plans to settle the claim.  As part of that settlement, the insurer is going to pay a lien filed by the workers’ compensation carrier.   What are the reporting and MSP obligations of the trucking firm’s insurance company arising from the liability payment?

Workers Compensation Carrier's Obligation

Let’s start by describing the WC carrier’s obligations.  Under Centers for Medicare and Medicaid Services, Section 111, Mandatory Insurer Reporting or MMSEA the carrier must report their “Ongoing Responsibility for Medicals” or ORM beginning from the “CMS Date Of Incident” or DOI.  Since this is a state with lifetime medicals, they are going to be responsible for all related medical payments until they can procure a letter from a physician that the claimant requires no further treatment or they settle the case.  Any medical bills paid by Medicare that the Medicare Secondary Payer Recovery Contract (MSPRC) determines to be associated with the injury are going to be sent to the WC carrier for reimbursement, which could include the shoulder surgery.  The WC carrier is on the hook for past and future medical payments.

Liability Insurer's Obligation

So, where does that leave the trucking firm and their insurance company?  Their first concern was the payment for past medical costs to the WC carrier.  According to CMS reporting rules, they do not have to report the payment of the lien as a TPOC and the logic here is pretty straightforward: the WC carrier is responsible for all medical costs arising from the injury and CMS is not interested in whether or not the WC carrier is recompensed for those costs by a liability settlement.  Their second concern was about the claimant’s WC claim for the shoulder surgery.  If the WC carrier denies the claim, will Medicare demand reimbursement from the liability settlement?  Is a Medicare liability set-aside required?

Having established that the WC carrier is responsible for payments related to the injury why would the liability insurer assume the claim?  Further, in this situation, the insurer has testimony from three physicians, two of which reject the hypothesis that the claim is related to the injury.  If the insurer has settled for past medical costs and has no obligation to compensate the claimant for any future medical costs, then the insurer can settle the case for pain and suffering without medicals.  If medicals are not included (aside from those funds used to pay the WC lien) in the settlement, the settlement should not be reported under Section 111 and there is no reason to consider a set-aside.

Engage Medicare Consul Service as your Section 111 Mandatory Insurer Reporting Agent and receive the benefit of expert advice at no additional cost.