Medicare Requirements for Reporting Bad Debts

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Medicare Requirements for Reporting Bad Debts

• HomeTown Health, LLC
• Medicare Webinar
• 11-28-07

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Medicares Bad Debt policy

• Medicares policy regarding the reimbursement of
  uncollected Medicare deductible and coinsurance. 
  Medicare allows reimbursements for these amounts
  if the provider claims them and follows
  Medicares Regulations and Policy.  These
  Regulations and Policies are found at 42 CFR
  Section 413.89 and Provider Reimbursement Manual
  (PRM) 15-1, section 300

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Changes in Medicares Bad Debt policy

• Effective for fiscal years ending in 2007
  Medicare has clarified its interpretation of
  allowable bad debts.
• Many bad debts will be disallowed!
• Every i must be dotted and every t crossed in
  order to be reimbursed.

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Medicares Bad Debt policy

• Medicares policy regarding the reimbursement of
  uncollected Medicare deductible and coinsurance. 
  Medicare allows reimbursements for these amounts
  if the provider claims them and follows
  Medicares Regulations and Policy.  These
  Regulations and Policies are found at 42 CFR
  Section 413.89 and Provider Reimbursement Manual
  (PRM) 15-1, section 300

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Medicares Bad Debt policy

• Reimbursement for bad debts is done through the
  settlement of a providers cost report. 
• Interim payments for bad debts are made on a
  pass-through basis for PPS providers. 
• Critical Access Hospitals (CAHs) receive payment
  as part of their overall Medicare claim interim
  rate.

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Non Allowable Bad Debts

• Medicare Regulations and policy do not allow
  reimbursement for all bad debts and these bad
  debts should not be claimed on a providers cost
  report.   

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Non Allowable Bad Debts

• The following are bad debts that cannot be
  claimed
• Services to enrollees of Medicare Advantage Plans
  
• Services not covered by Medicare, including
  patient convenience items. (Non-covered services)
• Services to non-Medicare beneficiaries
• Services related to direct patient care by a
  physician or physician extender.
• Services not related to deductible and/or
  coinsurance.
• Services reimbursed on outpatient fee schedules
  such as
• Physical, Occupational, Speech Therapy
• Durable Medical Equipment and Supplies
• Prosthetics and Orothoics
• Ambulance Services
• Screening Mammography
• CRNA services not paid on a cost basis.   

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Allowable Bad Debts

• Medicare will to the extent of its regulations
  and policies reimburse for bad debts if all of
  the following criteria are met.  These bad debts
  are termed allowable bad debts.     

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Allowable Bad Debts

• The criteria for allowable bad debts are
• The debt must be related to covered services and
  derived from deductible and coinsurance amounts.
• The provider must be able to establish reasonable
  collection efforts were made to collect the bad
  debt.
• The debt was actually uncollectible when claimed
  worthless.
• Sound business judgment established that there
  was no likelihood of recovery at any time in the
  future.      

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Further Discussion on Reasonable Collection
Efforts

• A provider must document a reasonable collection
  effort was made to collect the amounts owed by
  patients, unless the patient is
  Indigent/Medically Indigent or Charity Care. 
• DOCUMENTATION There must be a written and
  approved collection policy consistently followed
  by provider collection staff.      

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Reasonable Collection Efforts Were Made

• Providers collection policy must
• State the minimum dollar amount that will be
  pursued for collection.
• State the minimum number of contacts made to
  collect the amount owed.
• show evidence the provider is making a genuine
  effort to collect the amount owed.  
• FI expects these efforts to be the same for all
  financial classes of patients.    

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Reasonable Collection Efforts Were Made

• A reasonable collection effort also requires a
  bill be sent to the Medicare beneficiary on or
  shortly after discharge. 
• In a Medicare Secondary Payer situation, the
  liability may not be known until another
  contractor has processed the claim.  
• As a general rule, we expect the provider to
  issue a bill to the Medicare beneficiary within
  its normal billing cycle once the Medicare
  beneficiarys liability is known.  

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Reasonable Collection Efforts Were Made

• Medicare policy requires a bill be sent to the
  estate of a deceased Medicare beneficiary. 
• If extenuating circumstances do not allow billing
  within the provider's normal billing cycle, the
  FI expects documentation explaining the reason(s)
  why a bill could not be generated within the
  normal billing cycle.  

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Reasonable Collection Efforts Were Made

• In addition to these general documentation
  requirements, we as FI expect to find the
  following documentation in the individual
  patient's file.  This documentation supports a
  reasonable collection effort was made to collect
  the individually owed amount. 
• Copies of bills sent to the patient.
• Copies of letters sent to the patient.
• Summary of phone contacts with patient.
• Responses from the patient.
• Other information relevant to the collecting of
  the amount owed
•  

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Further Discussion onCollection Agencies

• Medicare regulations and policy allow providers
  to use collection agencies in lieu of or as part
  of the providers reasonable collection effort.
• the provider must have a written, consistently
  followed policy concerning the use of collection
  agencies.
• Written documentation between the provider and
  the collection agency outlining the activities
  and service levels between both parties must
  exist.
•  

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Further Discussion onCollection Agencies

• In addition to the above documentation, the
  provider must be able to document the following
• The amounts referred to the collection agency are
  the same for all financial classes of patients.
• The efforts made by the collection agency are
  genuine and the same for all financial classes of
  patients.
• Collection agency fees are an allowable cost, but
  must be reported in an Administrative and General
  cost center and not claimed as an allowable bad
  debt. 

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Further Discussion on Bad Debts Uncollectible
When Claimed Worthless

• No Likelihood of Recovery  
• After a reasonable collect effort has been made,
  a provider may presume the uncollectability of
  the amount owed. 
• At this point, the amount owed becomes a bad
  debt.  FI expects presumption to be made no
  sooner than 120 days from the date of the first
  bill for which the Medicare beneficiary liability
  is known.

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Exceptions to the 120 Day Rule

• Exceptions to the 120 day timeframe for
  indigent/medically indigent patients/charity
  care.
• If other circumstances exist that allow
  presumption of uncollectibility before 120 days,
  those circumstances need to be documented in the
  Medicare beneficiary's file.  An example is when
  a deceased patient leaves no estate with assets
  to pay final bills. 
• This documentation and decision regarding
  uncollectibility is subject to review acceptance
  by the Audit and Reimbursement staff.

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Uncollectible When Claimed Worthless

• If a provider uses a collection agency, the
  presumption of uncollectability cannot be made
  until the collection agency has ceased their
  efforts to collect and notified the provider. 
• The provider should document this notice in the
  Medicare beneficiary's file.

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Indigent/Medically Indigent/Charity Care

• A provider may presume the uncollectability of a
  bad debt if the Medicare beneficiary is
  determined to be indigent/medically indigent. 
  This presumption allows the provider to claim the
  bad debt without waiting 120 days or making a
  reasonable collection effort.

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Indigent/Charity Care/ Medicaid

• Provider may categorically deem Medicare
  beneficiaries who qualify for Medicaid as
  indigent/medically indigent. 
• Per CMS policy, providers must bill the States
  Medicaid program before claiming Bad Debts for
  Medicare Beneficiaries who are Medicaid
  eligible.  As a Medicare Contractor, we must
  ensure this billing has occurred before allowing
  the reimbursement of the Bad Debt.

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Indigent/Charity Care/ Medicaid

• In addition, the provider must document in the
  Medicare beneficiary's file the following to
  support reimbursement for Bad Debts of Medicare
  beneficiaries who are Medicaid eligible.  All
  documentation is subject to review and acceptance.

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Indigent/Charity Care/ Medicaid

• In addition, the provider must document in the
  Medicare beneficiary's file the following to
  support reimbursement for Bad Debts of Medicare
  beneficiaries who are Medicaid eligible. 
• Evidence the Medicare beneficiary was eligible
  for Medicaid (usually a copy of Medicaid
  insurance card is sufficient).
• Evidence the provider transmitted a valid bill to
  the Medicaid Fiscal Agent requesting payment for
  the amount of the Medicare beneficiary's
  liability. (See above must bill statement)
• Evidence the Medicaid Fiscal Agent processed and
  did not pay any or all of the amount of the
  Medicare beneficiary's liability.  Such evidence
  is a Medicaid RA indicating if no payment or
  partial payment was made.

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Indigent/Charity Care/ Medicaid

• Medicare beneficiaries who do not qualify for
  Medicaid or qualify for Medicaid spend down
  amounts, may also be deemed indigent/medically
  indigent/charity care.  To do so, providers may
  apply their own indigent/charity care test. 
  Medicare does not dictate the specifics of these
  tests, but the tests must meet the following
  criteria.

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Indigent/Charity Care/ Medicaid

• Medicare does not dictate the specifics of these
  tests, but the tests must meet the following
  criteria
• Tests and indigent/charity care determinations
  must be applied uniformly to all financial
  classes of patients.
• Determination of indigent/charity care must be
  made by provider, not patient.
• Patients total resources, not just income should
  be part of indigent/charity care test, but,
  emphasis may be placed on liquid assets and
  living expenses.
• Documentation of determination must be contained
  in patients file.

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Indigent/Charity Care/ Medicaid

• Some providers receive payments from foundations
  or community organizations on behalf of Medical
  Indigent/Indigent/Charity Care patients. 
• If these payments are applied to individual
  patient liabilities, we as FI, expect the
  application of payments to be uniform for all
  financial classes of patients. 
• Any payments applied to Medicare beneficiarys
  liability for deductible/ coinsurance cannot be
  claimed as a Medicare Bad Debt.

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CMS Form 339

• CMS Form 339 must be filed with a providers cost
  report.  Exhibit 5 of the CMS Form 339 supports
  the bad debts amount claimed on the cost report. 
  
• Providers may file their own schedule(s) of bad
  debts in lieu of Exhibit 5 as long as the
  substituted schedules duplicate the required
  information.  Failure to file Exhibit 5 or
  providers substituted schedules may result in
  disallowing some or all of the bad debts claimed
  on the cost report. 
• A provider's pass through payments or interim
  claim rate may be impacted by the failure to file
  Exhibit 5 or providers substituted schedules.

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CMS Form 339

• If Exhibit 5 is used, there are 10 columns. 
  Providers should complete each column as
  appropriate for the individual bad debts claimed
  on the cost report. 
• Exhibit 5 or providers substituted schedules,
  serves as the basis for Audit and Reimbursement
  staff to review/audit bad debts claimed on the
  cost report.

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Medicare Bad Debts

• The Top Ten Issues You Need to Know!

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Medicare Bad Debts - Top Ten List

1. Only uncollectible deductibles and coinsurance
   for covered services can be considered a bad debt.

1. Accounts in collection agency are not considered
   uncollectible until agency stops collection
   activity and notifies hospital.

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Medicare Bad Debts - Top Ten List

1. The date of writeoff is the date the account is
   written off of the general ledger accounts
   receivable.

1. You must pursue reasonable collection efforts
   for at least 120 days, unless the account is
   considered indigent.

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Medicare Bad Debts - Top Ten List

• The 120 day count, according to Blue Cross of
  Ga., is 120 days from date of last payment.
• If no activity then 120 days from the date
  of invoice

1. You must seriously demand payment from the
   patient shortly after discharge and send
   subsequent requests if not paid.

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Medicare Bad Debts - Top Ten List

1. You must bill Medicaid on dual eligible patients,
   even if you know that Medicaid will not pay. You
   need the Medicaid denial (remittance) in order to
   claim as Medicare Bad Debt.

1. You must prove indigent status of patient,
   through test of assets and income. At a minimum,
   test indigent status using the patients Social
   Security income. KEEP PROOF!

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Medicare Bad Debts - Top Ten List

1. ALL payer classes must be treated consistently
   regarding collection efforts. This includes
   internal and external collection activity.

1. Do not wait until year end to compile bad debt
   list!

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What do you need to do

• Analyze and revise collection procedures.
• Analyze what is in the collection agencies.
• Develop new collection agency referral strategies.