May 22, 2022

Volume XII, Number 142


May 20, 2022

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New York State Extends Amnesty Program for Unpaid HCRA Surcharges to December 31, 2011

New York’s Health Care Reform Act (HCRA) requires payors and providers to pay surcharges and assessments on bills for certain inpatient and outpatient services. HCRA surcharges are applicable to:

  • PAYORS: third party payors, including health insurers, managed care plans, selfinsured employer plans or a third party administrator (TPA) acting on behalf of a self-insured employer, automobile insurers and workers compensation coverage, or any other non-government payor that pays health benefit claims.
  • PROVIDERS: hospitals, ambulatory surgery centers, hospital and clinic-based laboratories, comprehensive clinics, hospital-based extension clinics, extension clinics affiliated with comprehensive clinics.

As part of the 2011 budget, the New York State Legislature enacted an extension of the HCRA amnesty program through December 31, 2011. Under this amnesty program, HCRA surcharges and assessments that are due and owing for any period of time prior to January 1, 2011, and that are paid and accompanied by the required reports, will not be subject to penalties or interest. If insurers, plans, hospitals and other providers that have underpaid HCRA surcharges do not take advantage of this amnesty prior to December 31, 2011, they will lose this extraordinary opportunity to save themselves interest and penalties on those underpayments. Depending upon the size of the underpayments, this could be a significant amount of money.

The HCRA Amnesty Program

1. To whom does the amnesty program apply?

The amnesty program applies to any entity that is obligated to pay HCRA assessments. This includes health insurers and plans, self-insured employers (or a TPA acting on behalf of a self-insured employer), other insurers that pay health benefit claims and have HCRA obligations (e.g., automobile and workers compensation insurers). The amnesty program also applies to providers such as hospitals, ambulatory surgery centers, clinics, and hospital and clinic-based clinical laboratories. It is important to note that providers have HCRA surcharge payment obligations for claims paid by non-electing payors.

2. What is the relevant time period?

The amnesty program applies to any periods of time for which an entity has not finalized a HCRA audit. The amnesty program does not apply to any periods for which a HCRA audit or a settlement with the Department has been completed. In addition, anything already collected by the Department cannot be re-opened through the amnesty program. An audit is considered “final” when the Department (not KPMG or other auditor) issues its final audit report to the audited entity. For example, if an entity has finalized an audit for calendar years 2002 and 2003, the amnesty would not apply to payments due in connection with that audit.

In considering whether to participate in the amnesty program, it is important to understand that any payments and reports are “deemed final and not subject to further adjustment or reconciliation” six years after the close of the calendar year in which such payments and reports are due. Thus, if the Department has not commenced an audit of calendar years 2004 or earlier, no amnesty payments need be made for those years. However if the Department has commenced a HCRA surcharge audit of calendar years 2004 or earlier, and that audit is not yet final, the audited entity should consider taking advantage of the amnesty program.

3. Who should consider making an amnesty payment?

An insurer, plan, hospital, or other provider should consider making an amnesty payment if it thinks it may have underpaid its HCRA surcharge obligations for any period of time prior to January 1, 2011, and as long as DOH has not completed a HCRA audit for that period.

It should also consider making an amnesty payment if it believes that the Department’s auditors may determine that it underpaid because there was not sufficient source documentation to validate the HCRA payments that were made. For example, most HCRA auditees have been assessed additional amounts because they could not document that payments to certain private physician groups or faculty practice plans met HCRA’s exception for private practicing physicians billing discretely.

If an entity is currently being audited but the audit is not final, it is eligible for the amnesty program. However, it must send a notification to the Department as soon as possible that it is making an amnesty payment to reduce its audit liabilities. Please note that an entity need not be subject to an audit in order to avail itself of the amnesty program.

4. What are the advantages of the amnesty program?

The biggest advantage of the amnesty program is the potential to reduce or eliminate the penalties and interest that would otherwise be assessed upon audit. Under the HCRA law, if the monthly payment is less than 90% of what the Department determines was due, interest must be paid on the difference. Interest is calculated from the due date of the payment until the date of the audit’s exit conference, and the interest rate is set at 12% by law. Additionally, a penalty may be imposed on payments of less than 70% of what the Department determines was due. Although penalties begin at 5% and increase by 5% each month until the cap of 25% is reached, the 25% cap rate is virtually always reached because penalties are only applied upon the completion of an audit, which is usually several years after the payment was due. Under this new amnesty program, amnesty payments which are paid on or before December 31, 2011, and which are accompanied by all required reports will not be subject to penalties and interest. That could mean considerable savings.

If an entity makes an amnesty payment, and a subsequent audit reveals that it made an overpayment, the overpayment will be applied to its future HCRA obligations. Thus, an entity will not lose funds that may eventually be determined to be overpayments. (Note, however, that the State does not pay interest on any overpayment.)

5. How do we file reports if we don’t know for certain in which periods we may have underpaid?

The amnesty program allows an entity to file reports based on an estimate of the amounts owed. Therefore, an entity is permitted to make lump sum payments as long as the payment is accompanied by the required reports.

6. How does one apply for the amnesty program?

To make an amnesty payment, an entity should file a prior period adjustment report. The prior period can be any time before January 1, 2011, and must be for a period for which no final audit or settlement applies. Even if the payment is for multiple months or years, the entity can put the amnesty payment into one report, with a notification of the calendar years to which the amnesty payment should be applied.

The amnesty payment must be made and the Department must receive the funds on or before December 31, 2011, the date on which the amnesty program expires.

The Department recognizes that prior period adjustment reports currently require a certification, and that entities may be hesitant to certify payments that are based on an estimate. The Department’s practice has been to add some language onto the certification page entity to represent that the amnesty payment is based upon an estimate.

 7. What is not covered by the amnesty program?

 The amnesty program does not apply to the following:

  • 1% Statewide Assessment Program
  • Any interest and penalty amount which has been paid to, or collected previously by, the Department
  • Any underpayments which are discovered during the course of the Public Goods Pool audit conducted by the Department or its designee
  • Any delinquent amounts that have been referred for Medicaid recoupment or collections proceedings to the New York Attorney General’s Office

If you know or suspect that you have a HCRA under-payment problem, please contact us as soon as possible for advice and assistance. Few firms have our depth of experience in HCRA matters, and this amnesty will expire at the end of this year.

©2022 Greenberg Traurig, LLP. All rights reserved. National Law Review, Volume I, Number 123

About this Author

Francis Serbaroli, Greenberg Traurig Law Firm, New York, Healthcare and Litigation Attorney

Francis J. Serbaroli is a shareholder in the Health Care & FDA Practice of Greenberg Traurig's New York office. Frank has three decades of experience in the health care industry. His clients include health insurers and managed care plans; hospitals, nursing homes, clinics, ambulatory surgery centers and home health agencies, clinical laboratories, renal dialysis providers, faculty practice plans, pharmaceutical companies, and medical device and equipment manufacturers. He handles a wide range of corporate, regulatory, compliance, reimbursement, corporate governance,...

Tricia Asaro, Greenberg Traurig Law Firm, Albany, Healthcare Law Attorney

Tricia A. Asaro concentrates her practice in the areas of health care and governmental affairs. She has broad experience representing health plans in business negotiations, regulatory compliance matters and corporate governance issues. She also has wide-ranging experience handling health care transactions, particularly regulatory approval of changes in control of health care entities.

Harold Iselin, Greenberg Traurig Law Firm, Albany, Government Policy, Health Care and Insurance Litigation Attorney

Harold N. Iselin is an attorney in the firm's Albany office. He focuses his practice on governmental affairs and health care matters, representing diverse clients before the executive branch and state legislature. Additionally, he handles complex civil litigation matters, litigating a broad range of civil cases.

Prior to joining the firm, Harold was a trial attorney in the U.S. Department of Justice from 1984 to 1986, following which he became Assistant Counsel to the Governor of New York with responsibility for transportation, education,...