New Laws: Civil Monetary Penalties Get More Expensive—and Easier to Dish Out

One aspect of the Affordable Care Act (ACA) that is not likely to be repealed is the enhancement of penalties for Medicare and Medicaid fraud and abuse. That includes the new Regulation on civil monetary penalties (CMPs) that the OIG adopted on Dec. 7. Here is a quick overview of the new rules and their potential impact on business.

How CMPs Work
The Civil Monetary Penalties Law (CMPL), which dates back to 1981, allows the government to impose CMPs on providers for various offenses. CMPL violations can also get providers excluded from Medicare, Medicaid and other federal health care programs.

In 2010, Congress upped the ante by putting language in the ACA authorizing the OIG to impose CMPs for "false and fraudulent claims and similar misconduct." As if potential penalties under the False Claims Act, Anti-Kickback Statute and/or Stark Law were not already tough enough, such violations would now expose labs to the risk of tack-on CMPs. But the ACA changes were not self-actuating. The OIG had to adopt specific regulations to put its new CMPs powers into effect. And that is what the Dec. 7 Regulation does.

4 Ways the New CMP Rules May Impact You
Here are the four aspects of the new rules that labs and other diagnostics providers should be concerned about, listed in order of importance.

1. More Ways for OIG to Sock Labs with CMPs
Change: Current rules authorize CMPs for six basic offenses; the new rules nearly double that total to 11, as summarized in the table below.

Offenses Justifying Imposition of CMPS—Before & After

Practical Impact: Labs will be at greater risk of CMPs, particularly by the new overpayment offense. Under the new rules, failure to report and return overpayments within 60 days of identifying them can result in CMPs of up to $10,000 per item or service overpaid. The "per-service" language is especially scary for labs and other diagnostics providers that submit a high volume of low-value claims.

But it could have been much worse. In its Interim Rule, the OIG proposed penalizing providers $10,000 per day for each day they fail to report and return an overpayment. Fortunately for labs, the daily penalty did not make the final cut. However, the OIG did suggest that long delays in failing to report and return overpayments could be an "aggravating factor" justifying higher CMPs.

Overpayment is hardly the only concern. Other key new CMP offenses potentially affecting labs include:

• Not giving the OIG access to requested records;

• Use of false records or statements in false claims; and

• Accepting test orders from excluded providers.

2. CMPs Will Be Higher
Change: Not only will it become easier to get fined but fine amounts will be higher. You need a little context to understand why.

The U.S. Department of Health and Human Services (HHS) is only one of many federal agencies that impose CMPs to punish violations of the laws under their jurisdiction. Some of these agencies have not done a good job of keeping their CMP schedules in line with inflation. So last year, Congress passed a law called The Bipartisan Budget Act of 2015 (BBA) mandating that federal agencies adjust their CMPs for inflation. The so-called "catch-up adjustment" had to be based on the difference between the CPI in October 2015 and the month the agency last increased its CMPs. Thereafter, agencies had to adjust their CMPs annually for inflation

Practical Impact: HHS had not adjusted its own CMPs in decades. As a result, its "catch-up adjustments" were significant—as high as 150% in some cases. The table below shows key CMP adjustments that HHS made in the initial 2015 adjustment.

2015 CMP Adjustments

And because BBA mandates annual inflation adjustments, HHS had to increase the 2015 numbers again in 2016.

3. Risk of CMPs for Labs that Deal with Medicare Advantage and Part D Plans
Change: CMPs can be assessed against Medicare Advantage (MA) or Part D contracting organizations that:

Practical Impact: Enrollment and marketing of health plans are not activities in which labs typically get directly involved. But the "employ or contract" offense may be broad enough to cover labs that do business with MA or Part D plans.

4. Clear Factors for Setting CMP Amounts
Change: The OIG has discretion to set the amount of CMPs. The Regulation adds transparency by listing the five factors the OIG will use to make such determinations, including:

Practical Impact: Knowing the aggravating and mitigating factors can help you manage CMP risks. For example, one insight that is especially worthy of noting is the OIG's acknowledgement that in assessing "degree of culpability," it will treat "appropriate and timely" corrective action as a mitigating factor. To get credit, though, the provider must disclose the violation under the OIG Self-Disclosure Protocol.

Takeaway: Three Ways to Protect Yourself. The new CMPs Regulation does not change the substance of your compliance obligations; but it does make the potential consequences of not living up to those obligations more costly. Some of the specific things to put on your to-do list:

1. Minimize risk of CMPs for overpayments by ensuring your lab meets the requirements of the Feb. 2016 CMS Final Rule on complying with the 60-day deadline for returning Medicare overpayments (G2 Compliance Advisor, April 2016)

2. Take advantage of the new "degree of culpability" mitigating factor for CMPs by familiarizing yourself with and, if necessary, implementing the OIG Self-Disclosure Protocol (G2 Compliance Advisor)

3. Avoid CMPs for employing or contracting with excluded providers by performing background checks on job applicants, current employees and referring physicians (G2 Compliance Advisor, Oct. 2016)