Managing Medicare Bad Debts

1. Managing Medicare Bad Debts HomeTown Health University Module One 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. Medicare Bad Debts • Medicare will reimburse a hospital for the unpaid portion of deductibles and coinsurance. • PPS Hospital – 70% of amount • CAH – 100% of amount • Bad debts are reported on the hospital’s annual cost report.

3. Provider Reimbursement Manual, Part 1, (PRM) Section 302.2 defines an allowable bad debt as a bad debt that results from uncollectible Medicare deductible and coinsurance amounts AND that meets four specific criteria. Medicare Bad Debts

4. Medicare Bad Debts The provider must establish • that the debt was related to covered services and attributable to unpaid deductible and coinsurance amounts, • that reasonable collection efforts were made, • that the debt was actually uncollectible when claimed as worthless, and • that there was no likelihood of future recovery.

5. There have been several recent events limiting reimbursement for Medicare bad debts. CMS administrative decisions Unfavorable court rulings Fiscal intermediary clarifications Medicare Bad Debts

6. Deductible and Coinsurance Amounts

7. Deductibles and Coinsurance The provider must establish • that the debt was related to covered services and attributable to unpaid deductible and coinsurance amounts. • Medicare will not reimburse for unpaid balances related to anything other than deductibles and coinsurance.

8. Deductibles and Coinsurance • PPS and Critical Access Hospitals, as well as Skilled Nursing Facilities, may claim Medicare bad debts. • There are inpatient bad debts, as well as, outpatient bad debts. • There are some types of Medicare deductible amounts that do not qualify as a bad debt.

9. Deductibles and Coinsurance • Physicians • Deductibles and coinsurance related to professional services of a physician cannot be claimed as a bad debt. • Physicians are paid based upon a fee schedule. • Physician fees billed under the CAH Method II Billing option cannot be included on the Medicare bad debt list for the cost report.

10. Deductibles and Coinsurance • Outpatient Therapy • Effective January 1, 1999, outpatient therapy services are reimbursed on a fee schedule. • Effective for therapy services on or after January 1, 1999, bad debts for deductibles and coinsurance cannot be claimed on the Medicare cost report.

11. Deductibles and Coinsurance • Ambulance • Effective April 1, 2002, ambulance services are reimbursed under a fee schedule methodology. • Therefore, effective for ambulance services on or after April 1, 2002, bad debts deductibles and coinsurance cannot be claimed on the Medicare cost report.

12. Deductibles and Coinsurance • The following services are not subject to Part B deductible and coinsurance amounts: • Pneumococcal pneumonia and influenza virus vaccines • Screening mammography services • Clinical diagnostic laboratory tests • There are no allowable bad debts related to these services.

13. Deductibles and Coinsurance • Medicare Advantage • Unpaid cost-sharing amounts for Medicare Advantage patients cannot be claimed as bad debts. These are considered to be commercial insurance plans.

14. Conclusion • In summary, only unpaid deductibles and coinsurance may be claimed as bad debts. • Generally, unpaid fee schedule services cannot be claimed as bad debts.

15. Managing Medicare Bad Debts HomeTown Health University Module One Presented by: Draffin & Tucker, LLP If you have any questions or concerns regarding this course, please contact Cindy Dupree at cdupree@draffin-tucker.com.