Medicare Bad Debt
As the economic recession continues and with the rise in unemployment, hospitals and health systems must deal with accelerated growth in bad debts in addition to the myriad of other financial and operating challenges presented during the downturn. While all bad debts cannot be recovered, 70% of allowable Medicare bad debt claims, including Medicaid cross-over balances, can be salvaged through the filing of a hospital’s Medicare cost report.
CMS defines allowable bad debt in Provider Reimbursement Manual, Part I, Section 308 as debt that meets the following criteria:
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The bad debt must be related to covered services and derived from deductible and coinsurance amounts.
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The provider must establish that reasonable collection efforts were made.
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The debt was actually worthless at the time of write-off.
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There is no likelihood of recovery of the debt in the future.
Recent CMS rulings provide some clarification regarding these criteria. If the services of an outside collection agency or clearing house are used by a facility, those bad debt claims must be returned to the facility and collection efforts discontinued before the debt is deemed “worthless”. The rulings also suggest that outside collection agencies or clearing houses must treat Medicare and non-Medicare claims in a similar manner.
To mitigate any potential adjustments or reductions in Medicare reimbursement during the annual audit of the Medicare cost report, hospitals should take the time beforehand to carefully review and analyze their bad debt logs. If you have any questions or concerns about your bad debt listings and would like more information on PYA’s bad debt review services, please contact the experts listed below at (800) 270-9629.
