New CMS CMP Methodology Provides Few Clear Answers

By Derek Frye
Thu, Mar, 23, 2017

The Centers for Medicare and Medicaid Services (CMS) has issued its final methodology or “blueprint” for calculating Civil Money Penalty (CMP) amounts it will levy against Medicare Advantage (MA) plans and Prescription Drug Plans (PDPs) for deficiencies uncovered during audits. But plan sponsors that had hoped this document would help them better estimate the costs of non-compliance upfront are likely disappointed.

CMS released its final nine-page blueprint on how it will calculate CMP fines for deficiencies identified during audits conducted in 2017 and beyond to include some revisions to its initial draft document, as suggested by health plan sponsors. For example, CMS agreed to cap certain CMP amounts for small and mid-sized plans – including lowering the maximum penalty amounts that can apply to plan sponsors with fewer than 250,000 lives. The agency further revised that the caps for plan sponsors with fewer than 500,000 enrollees be calculated based on seven enrollment bands, instead of two enrollment bands as initially proposed.

Some Medicare plan sponsors had hoped CMS would be able to provide additional guidance regarding how CMP amounts levied against plan sponsors for deficiencies could potentially negatively impact plans’ Medicare Star Ratings. However, CMS was not able to provide this in the final guidance because this was outside the scope of the methodology issue. The agency did say, however, that it had forwarded the issue to other officials within CMS for consideration.

So while the final document would appear to provide greater transparency into how to calculate CMS CMP fines, it doesn’t provide enough specifics to allow plan sponsors to do any kind of accurate cost-benefit analysis when determining how many resources to invest in compliance activities. There is still a lot of gray area and wiggle room afforded to CMS that allows them to assess larger penalties than what appears in print – if they so choose. There is always room for interpretation that would allow CMS, for example, to multiply fines based on aggravating factors. One example of an aggravating factor: if CMS determines unnecessary member costs were incurred in their analysis of the offense (for example, members paid higher than “necessary” to receive medications at point of sale), the offense can quickly double or triple to be hundreds of thousands of dollars depending on the affected enrollees.

Why so murky? CMS knows that if Medicare plan sponsors knew exactly what they would be fined for specific deficiencies, some organizations simply wouldn’t bother to comply or make internal improvements. Instead, they would just eat these fines as a cost of doing business with the federal program. CMS would much rather plans put the effort into complying, rather than allow plans to precisely calculate the cost of the fine with the intention of avoiding complying altogether.

The bottom line: Medicare plan sponsors always need to do their due diligence as part of the audit process to minimize potential deficiency citings by CMS and the possibility of CMPs, which can range as high as hundreds of thousands of dollars. This is one reason why plan sponsors are strongly encouraged to perform mock CMS audits using an outside independent third party review firm.

The final CMS CMP methodology, along with a summary of industry comments and responses, are available for download from the CMS website here.

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