What is the Cost of Non-Compliance?

In 2018, the cost of non-compliance to Plan Sponsors was more than $2 million dollars in civil money penalties (CMPs). While this is a precipitous drop from 2017’s cumulative assessment to the industry of $6 million dollars, the Centers for Medicare & Medicaid Services (CMS) has made it clear they do not intend to back down. On March 16, 2019, CMS released the Revised Civil Money Penalty Calculation Methodology for comment via HPMS Memo. Comments are due to CMS by 11:59 PM ET on April 15, 2019.

CMS announced its intent to bring Medicare-Medicaid Plan (MMP), Medicare Cost Plan, and Programs of All Inclusive Care for the Elderly (PACE) plan methodology in line with how Medicare Advantage Organizations (MAOs) and Part D Sponsors are assessed. By doing so, CMS is remediating gaps in prior methodology to be consistent in its statutory and regulatory authority.

For MAOs and Part D Sponsors, CMS is proposing changes to aggravating factors, which permit CMS to increase the standard penalty amount under specific circumstances, and the addition of a new aggravating factor.

Most importantly, CMS has proposed to add a factor for enrollees who never received their medical service or medication. Previously the aggravating factors only addressed delays or denials. This emphasizes the importance of real-time monitoring and remediation to ensure beneficiaries receive their care.

CMS is providing clarity around the aggravating factor addressing the delay or denial of prescription drugs by changing the nomenclature of requiring access within “24 hours” to “one day.”

Additionally, there is a proposal to revise the aggravating factor related to untimely or inaccurate plan benefit information. The new citation eliminates mention of the “Evidence of Coverage/Annual Notice of Change/Errata documents,” instead citing a simple “Annual Notice of Coverage/Errata documents.” The reason being is the Annual Notice of Change and Evidence of Coverage have become two standalone documents that have differing delivery requirements and flexibilities.

Plan Sponsors will also be pleased to see the proposed elimination of the aggravating factor for violation of common conditions listed in the Annual Part C and D Program Enforcement Report. While it doesn’t mean CMS will reduce the focus on these common conditions, it is just likely that these violations will be addressed by assessment of other applicable aggravating factors or through application of the standard penalty.

Finally, CMS is proposing an increase in the 2019 per enrollee penalty amount to $12, depending on the factor, an increase from current penalties of $10. CMS indicated the increase adjusts for inflation.

One of the best ways for Plan Sponsors to mitigate their risk for CMPs is to perform ongoing internal auditing and monitoring of plan operations, particularly of the measures included in the Audit Protocols. If your plan needs assistance in the development of auditing and monitoring methodology, or if you would like to put your plan through its paces in a mock audit scenario, Gorman Health Group’s (GHG’s) subject matter expert consultants are available to help.

GHG conducts mock audits and supports process improvement initiatives related to compliance program effectiveness, including auditing and monitoring methodology. Contact us today for more information.


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Melissa Bailey
Melissa Bailey

Melissa Bailey is a Senior Consultant at Gorman Health Group (GHG). In this role, she offers our clients assistance and leadership in executing compliance activities while providing insight on regulatory requirements and industry best practices. Melissa brings GHG more than 15 years of healthcare experience.

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