The Centers for Medicare and Medicaid Services ("CMS") has issued long-awaited guidance for reporting to the federal government certain bill write-offs and goodwill gestures made to Medicare beneficiaries.  These so-called "Section 111" Medicare Secondary Payer Reporting requirements are not limited to healthcare providers.  Failure to report can result in a $1,000 per day, per claim penalty regardless of the payment or write-off amount. 

As noted in prior alerts, beginning January 1, 2011, entities that settle certain claims with Medicare beneficiaries must report details of the settlement (including the amount) to the federal government, as required by Section 111 of the Medicare, Medicaid, and SCHIP Extension Act. CMS considers certain bill write-offs, goodwill gestures, and clinical trial medical payments to be similar to monetary settlements with Medicare beneficiaries for purposes of the Section 111 program.  Accordingly, such actions may need to be reported to the federal government.  

Write-Offs and Goodwill Gestures

• A provider, physician, or other supplier's reduction of a charge to a Medicare beneficiary as a risk management tool does not have to be reported. Rather, the provider, physician, or other supplier "is expected to submit a claim to Medicare reflecting the unreduced permissible charges and showing the amount of the reduction provided or write-off."  CMS did not provide additional guidance for these billing procedures.



• A provider, physician, or other supplier must report the value of any property (i.e, "goodwill gestures") provided to a Medicare beneficiary as a risk management tool when "there is evidence, or a reasonable expectation, that the individual has sought or may seek medical treatment as a consequence of the underlying incident giving rise to the risk."  



• Any other entity (i.e., non-healthcare providers) that reduces its charges or provides property of value to a Medicare beneficiary as a risk management tool must report the write-off or property value if "there is evidence, or a reasonable expectation, that the individual has sought or may seek medical treatment as a consequence of the underlying incident giving rise to the risk."  

Several practical considerations related to the goodwill gesture and write-off reporting obligations are discussed below.  Prior alerts and articles by Nelson Mullins attorneys provide guidance on general Section 111 compliance, logistics, and privacy considerations.

• The goodwill gesture/write-off requirements expand Section 111's scope.  The responsibility for reporting monetary settlements attaches to either the insured or its insurer following settlement.  Since insurance is unlikely to cover goodwill gestures or write-offs, the risk management reporting duties directly apply to the insured entity. These duties exist regardless of whether a claim or lawsuit is subsequently initiated.   



• Healthcare providers that write off medical bills for risk management purposes do not need to report such actions under Section 111, but must disclose the discounts through Medicare billing procedures.



• "Property of value" could include, but is not limited to, product swaps or replacements.  Manufacturers, retailers, and other entities that provide replacements to customers allegedly injured by existing products must determine if such actions are reportable. The obligations may similarly implicate discounts on existing accounts by non-healthcare providers.  CMS requires entities that have a reasonable expectation of having reportable actions to timely register and prepare for reporting, which begins in the first quarter of 2011.  



• Property valued below the Section 111 reporting thresholds (below $5,000 until December 31, 2011; $2,000 between January and December 2012; and $600 between January and December 2013) do not need to be reported.  Entities should document a good faith valuation of the property provided to the beneficiary.  Failure to report due to an inaccurate estimate of the property's value could result in the $1,000 per day non-compliance penalty.



• Entities subject to the write-off/goodwill reporting requirements must develop a consistent and objective system to identify potential reportable events; determine if there is evidence or a reasonable expectation that the underlying incident has or will give rise to medical treatment; and value the goodwill gesture, if applicable. These obligations are in addition to existing Section 111 compliance considerations. 

Payments by Clinical Trial Sponsors

CMS has indicated that forthcoming guidance will clarify that payments made by clinical trial sponsors for a Medicare beneficiary's complications or injuries arising out of the clinical trial are reportable under Section 111.