New Realities: The Section 111 Connection to Conditional Payments and Claim Outcomes

Section 111 reporting historically has been viewed as an abstract technical Medicare compliance obligation and the responsibility of an IT department, because it involves the electronic transmission of data to Medicare. In the last year and a half, however, the situation has changed.

What's Changed

Now, the Commercial Repayment Center's (CRC) recovery for conditional payments is triggered by a primary payer's Section 111 reporting of Ongoing Responsibility for Medicals (ORM). Moreover, Medicare is increasingly relying on Section 111 data to coordinate benefits and potentially deny payment in secondary payer situations. So, Section 111 has a direct downstream impact on compliance, recovery, and coordination of benefits.

Because the primary payer is chiefly responsible under the Medicare Secondary Payer (MSP) Act for the unintended consequences of misreporting through Section 111, insurance carriers and self-insureds ultimately bear all of the Section 111 reporting exposure-not a third-party administrator (TPA), vendor, or reporting agent. Further, before settlement in ORM recovery with the CRC, the insurance carrier or self-insured-and no other entity-is viewed as the debtor and bears this conditional payment responsibility.

Errors in Section 111 reporting can also negatively affect claims outcomes by causing delays and increased costs. All of these point to why it's critical to get the reporting right.

Section 111 Reporting Elements and Considerations

ICD Injury Codes

ICD injury codes are reported by the primary payer to indicate what injuries, conditions, and/or body parts are related to an underlying claim. The CRC uses these codes to determine if Medicare made conditional payments that it may have the right to recover from the primary payer. Medicare also uses the codes to coordinate benefits (that is, to determine if Medicare should pay or deny treatment in a secondary payer situation). Incorrectly reporting ICD injury codes can result in many undesired results. The most common are as follows:

• Recovery for Unrelated Charges - Unintentionally reporting incorrect ICD codes can result in delays and additional costs to dispute or appeal the charges, as well as additional MSP exposure.

• Denial of Benefits - Because Medicare also uses reported ICD codes to coordinate benefits, treatment may be inappropriately denied when codes unrelated to the claim are reported.

Identification of Claims Reported

Tracking claims where assumption of ORM has occurred is also critical for primary payers, since that's the triggering event to initiate recovery by the CRC. If ORM reporting occurs and the CRC identifies claims Medicare paid that it contends are related to the underlying claim, the CRC will issue a Conditional Payment Notice (CPN) to the primary payer (insurance carrier or self-insured). A CPN must be contested within 30 days of issuing; otherwise, it will convert to a demand for repayment. Since the CRC began recovery in this fashion, many primary payers have been unaware of recovery against them. As a result, the following can occur:

• Interest Accrual - If a CPN converts to a demand and the demand isn't repaid within 60 days, interest will accrue on the debt. This can increase costs, adding to existing exposure.

• Missed Appeals Time Frames - The CRC allows 120 days from the date of the demand to bring an appeal. If an appeal is brought after that, the CRC may dismiss it. A primary payer may then have to continue the appeals process, potentially to no avail. Missing the applicable time period to bring an appeal can cause major delays and considerable exposure.

• U.S. Treasury Department Collections - Medicare can refer a delinquent debt to Treasury for collection and intercept federal funds owed to a primary payer or attempt debt collection through a private collection agent. Handling Treasury collections is a complicated and protracted process that brings with it costs, delays, and increased exposure.

• Federal Court Lawsuit - While not often exercised, Medicare does have the right to initiate an action for double damages to recover conditional payments. With this option in Medicare's recovery arsenal, insurers face an incredible amount of exposure.

ORM Termination

It's vital to report ORM termination accurately. Notwithstanding Section 111 reporting compliance, reporting the correct ORM termination date will ensure that no errant recovery occurs beyond the date for which the primary payer is responsible.

• Unwarranted Recovery - If ORM termination occurs but the event is not reported, it's possible that the CRC could continue to seek recovery for Medicare conditional payments that were made after MSP responsibility ended. Moreover, if the incorrect date is reported-for example, a year beyond the actual ORM termination date-unnecessary exposure may exist.

Critical Link

The critical link between Section 111 reporting and conditional payments and claims outcomes makes it vital for primary payers to properly execute on MSP compliance.