Bad Debt Moratorium

1. Bad Debt Moratorium HomeTown Health University Module Three Presented by: Draffin & Tucker, LLP It’s not enough that we do our best; sometimes we have to do what’s required. Sir Winston Churchill

2. Bad Debt Moratorium • The Centers for Medicare and Medicaid Services (CMS), issued a Moratorium for Bad Debts as part of Section 4008(c) of the Omnibus Budget Reconciliation Act of 1987 (P.L. 100-203).

3. Bad Debt Moratorium • The 1987 moratorium states • if an intermediary was allowing the provider to write-off bad debts at the time they were sent to a collection agency prior to August 1, 1987, then the intermediary must continue applying that same principle when allowing write-offs in the current year.

4. Bad Debt Moratorium • This moratorium is effective only if all criteria set forth in PRM Section 310 are being met, including maintaining collection efforts for at least 120 days from the date of first bill until the write-off date. • It is the provider’s responsibility to document that the provider, prior to August 1, 1987, was allowed to claim bad debts at the time they were sent to a collection agency.

5. Bad Debt Moratorium • Therefore, unless the August 1, 1987 moratorium applies and the provider can document that prior to August 1, 1987 the intermediary was allowing write-off of bad debt at the time the account was sent to a collection agency, PRM section 310 will be applied as written and interpreted by CMS and only allow write-offs at the time a collection agency deems the account uncollectible and not at the time accounts are turned over to collection agencies.

6. Bad Debt Moratorium • In this situation, a bad debt account that has been sent to a collection agency will only be considered allowable in the cost reporting period the agency exhausts its efforts and the account is returned to the provider to be properly classified in its accounts.

7. Bad Debt Moratorium • CMS will not allow the write off of Medicare bad debts sent to a collection agency until the collection agency has pursued collection according to their customary collection practices and has deemed the account uncollectible. • This treatment of not allowing write-offs until after they have been deemed uncollectible is consistent with PRM Section 310.2.

8. Bad Debt Moratorium • Obstacles • Statistics show that during the year beginning 10/1/87, Fiscal Intermediaries were disallowing 40% of providers’ request for bad debt reimbursement.

9. Bad Debt Moratorium • Obstacles • Proof that FI approved the policy in 1987 • Changes in Medicare provider numbers will invalidate approval • Changes in ownership • Restructuring • Changes in provider type (conversion to CAH)

10. Indigent Patients

11. Indigent Patients • Reasonable collection efforts may be waived for Medicare indigent patients. • Charity write-offs for Medicare patients can be reported as Medicare bad debts, including those for Medicare patients who pass away with no estate.

12. Indigent Patients • A Medicare beneficiary who also qualifies for Medicaid (dual-eligible beneficiary) may be presumed indigent automatically as long as the “Must Bill” requirements are met. • Medicaid must be billed for the deductible and coinsurance amount.

13. Indigent Patients • For non-dual-eligible Medicare beneficiaries, the provider should apply its customary practices for determining indigency. PRM Section 312 provides the factors which should be incorporated into the provider’s indigency guidelines.

14. PRM 310.12 • A. The patient's indigence must be determined by the provider, not by the patient, i.e., a patient's signed declaration of his inability to pay his medical bills cannot be considered proof of indigency;

15. PRM 310.12 • B. The provider should take into account a patient's total resources which would include, but are not limited to, an analysis of assets (only those convertible to cash, and necessary for the patient's daily living), liabilities and income and expenses. • In making this analysis, the provider should take into account any extenuating circumstances that would affect the determination of the patient's indigence;

16. PRM 310.12 • C. The provider must determine that no source other than the patient would be legally responsible for the patient's medical bill, e.g., title XIX, local welfare agency and guardian; and

17. PRM 310.12 • D. The patient's file should contain documentation of the method by which indigence was determined in addition to all backup information to substantiate the determination.

18. Indigent Patients • Some providers determine a patient’s indigence using a sliding scale. In this type of arrangement, the provider would agree to deem the patient indigent with respect to a portion of the patient’s account (e.g., a flat percentage of the debt based on the analysis outlined in PRM section 312).

19. Indigent Patients • In the case of a Medicare patient that is determined to be indigent using this method, the amount the hospital decides, pursuant to its policy, not to collect from the patient can be claimed by the provider as Medicare bad debt. • The provider must, however, engage in a reasonable collection effort to collect the remaining balance.

20. Indigent Patient • The bad debt for an indigent patient may be written off and claimed upon discharge or upon the determination of indigency, whichever is later.

21. Indigent Patient • “Must Bill” Policy for “Dual-Eligible” Patients • If a patient is determined by the provider to be indigent or medically indigent, the provider does not need to attempt to collection from the patient. However, the provider must make certain that “no source other than the patient would be legally responsible for the patients’ medical bill; e.g., title XIX, local welfare agency…..”* prior to claiming the bad debt from Medicare.

22. Indigent Patient • “Must Bill” Policy for “Dual-Eligible” Patients • Therefore, for cost reporting periods beginning January 1, 2004 and forward, Intermediaries will require providers to have a processed State Medicaid Remittance Advice before allowing a Medicare/Medicaid (dual-eligible) Crossover (i.e., crossover) Bad Debt.

23. Bad Debt Recoveries

24. Bad Debt Recoveries • Bad Debt Recoveries are amounts received within the current fiscal year for amounts previously claimed as a bad debt. • Medicare bad debt recoveries should be separately identified. If the hospital’s records do not distinguish Medicare recoveries from non-Medicare recoveries, it is imperative that Medicare bad debt recoveries be identified; if not identified, an appropriate adjustment will be proposed.

25. Bad Debt Recoveries • Bad debt recoveries must be included as an offset to the current year’s bad debts claimed. • This applies even if the related bad debt amount was claimed in a prior year’s cost report.

26. Summary • If the FI allowed collection agency accounts as allowable bad debt as of August 1, 1987, it must continue to do so. • The provider must have proof that the FI allowed the collection agency accounts. • A provider does not have to pursue collection efforts on indigent accounts. • Indigency must be proven with support maintained. • Medicaid must be billed on dual eligible accounts in order for bad debts to be allowed. • Bad debt recoveries must be offset.