This week, the Centers for Medicare & Medicaid Services (CMS) issued a final rule specifying how and when the agency will calculate and impose civil monetary penalties (CMPs) against responsible reporting entities (RREs) that fail to comply with the Medicare Secondary Payer (MSP) reporting obligations (the Final Rule). Among other applications, this final rulemaking has implications for those pharmaceutical and medical device manufacturers that sponsor clinical trials that include Medicare beneficiaries, especially where those beneficiaries experience an injury or complication while participating in the manufacturer’s sponsored clinical trial.
The Final Rule is effective as of 60 days following the date of publication in the Federal Register (December 11, 2023) but is not applicable until one year after publication (October 10, 2024), meaning RREs not compliant with their MSP reporting obligations by October 10, 2024, may be subject to CMPs.
The MSP law defines specific situations where Medicare is the secondary payer to certain primary plans in an effort to shift costs from Medicare to the appropriate private source of payment. The law prohibits Medicare from making payment if payment has been made, or can reasonably be expected to be made, by any of the following primary plans: (i) group health plans, (ii) workers’ compensation plans, (iii) liability insurance (including self-insurance), and (iv) no-fault insurance. CMS considers promises to pay by sponsors of clinical trials for study subject injuries or complications arising out of such clinical trials to constitute a primary plan or policy of liability insurance.1 As such, clinical trial sponsors that make such a promise to pay through their clinical trial agreement, informed consent form, or otherwise are subject to the MSP law.
Through the enactment of Section 111 of the Medicare, Medicaid, and SCHIP Extension Act of 2007 (the MMSEA) and the Medicare IVIG Access and Strengthening Medicare and Repaying Taxpayers Act of 2012 (the SMART Act), Congress established mandatory reporting requirements for primary plans that are obligated under the MSP law to cover Medicare beneficiary costs primary to Medicare (referred to as RREs). These reporting provisions include authority for CMS to impose CMPs against entities that fail to comply with the requirements and require the agency to promulgate regulations to that effect.
In December 2013, CMS published an advance notice of proposed rulemaking (ANPR) to solicit public comment on specific practices for which CMPs may or may not be imposed under the MSP rules, and, in February 2020, CMS published the corresponding proposed rulemaking. Now, a decade after the issuance of the ANPR, with this most recent rulemaking, CMS is finally issuing regulations to specify how and when it will calculate and impose CMPs under the MSP law.
Key provisions relevant to clinical trial sponsors include the following:
CMPs Applicable to Reporting of Ongoing Responsibility for Medicals (ORM)
Under the MSP law, clinical trial sponsors that have assumed responsibility for covering the cost of Medicare beneficiary subject injuries or complications in a trial must report an initial ORM when a Medicare subject injury arises. Specifically, under the Final Rule, non-group health plans (NGHPs) may be subject to CMPs if they fail to report a beneficiary record within one year from the date of the settlement, judgment, award, or other payment or the effective date where ongoing payment responsibility for medical care has been assumed by the NGHP. Therefore, a clinical trial sponsor who does not submit an initial ORM to CMS within one year of the date when payment responsibility commences may be subject to CMPs.
CMS Random Audits
To identify potential noncompliance, CMS intends to conduct random audits of 1,000 records per calendar year across all RRE submissions, divided evenly among each calendar quarter and proportionately among group health plan (GHP) and NGHP records.
For any noncompliant ORM, CMS will impose a tiered approach to penalties, as follows:
- $250 (as adjusted annually for inflation) for each calendar day of noncompliance where the record was reported more than one year but less than two years after the required reporting date,
- $500 (as adjusted annually for inflation) for each calendar day of noncompliance where the record was reported two years or more but less than three years after the required reporting date, or
- $1,000 (as adjusted annually for inflation) for each calendar day of noncompliance where the record was reported three years or more after the required reporting date.
For NGHP RREs, the maximum penalty that may be imposed for noncompliance associated with any one given record is $365,000 (as adjusted annually for inflation).
The Final Rule provides a few “safe harbors” for situations in which a CMP will not be imposed, including two that are potentially relevant to clinical trial sponsors:
- First, there is a safe harbor for situations where an NGHP fails to report required information as a result of the plan’s inability to obtain an individual’s last name, first name, date of birth, gender, Medicare Beneficiary Identifier, Social Security number (SSN), or the last five digits of the SSN, and the plan has made a good faith effort to obtain such information.
Most clinical trial sponsors, however, should already have this information (or easily be able to obtain it) from clinical trial participant enrollment records, potentially limiting the applicability of this safe harbor to clinical trial sponsors.
- Second, there is a safe harbor where the noncompliance is associated with a reporting policy or procedural change on the part of CMS that has been effective for less than six months following the implementation of that policy or procedural change.
Informed Notice Process
CMS intends to communicate with RREs informally before issuing formal notice regarding the imposition of a CMP. This informal notice will provide RREs with a 30-day window to present mitigating evidence to CMS prior to the imposition of a CMP. Mitigating evidence may include technical issues or errors or system issues caused by CMS or its contractor. But CMS expressly declined to enumerate all circumstances that may mitigate liability, in order to preserve flexibility for RREs and encourage dialogue with the agency.
Statute of Limitations
A five-year statute of limitations applies from the date when the alleged noncompliance occurred, as required by 28 U.S.C. § 2462.
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Clinical trial sponsors should use the issuance of the Final Rule as an opportunity to evaluate their compliance with the MSP reporting obligations and ensure they have appropriate policies and mechanisms in place to timely report beneficiary records to CMS. Please contact your Sidley attorney or the authors below for more information on the MSP law or implementation of the Final Rule.
1See CMS, Section 111 NGHP User Guide, at Ch. III, 6-27, available at https://www.cms.gov/files/document/mmsea-111-august-7-2023-nghp-user-guide-version-73-chapter-iii-policy-guidance.pdf (“When payments are made by sponsors of clinical trials for complications or injuries arising out of the trials, such payments are considered payments by liability insurance . . . and must be reported”) (hereinafter “User Guide”); see also Ltr. From G. Walters (CMS, Office of Financial Management) to H. Lutz (Apr. 13, 2004) (advising that clinical trial sponsors that promise to pay for subject injuries must pay primary to Medicare).
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