Reasonable Collection Efforts

1. Reasonable Collection Efforts HomeTown Health University Module Two 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 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,

3. Reasonable Collection Efforts • The requirement of reasonable collection efforts is explained in Provider Reimbursement Manual Section 310. • Reasonable collection efforts must involve the issuance of a bill shortly after the discharge or death of the patient, to be followed by subsequent billings, collection letters, and telephone calls or personal contacts, all amounting to a genuine, rather than token, effort to collect the debt.

4. Reasonable Collection Efforts • The provider must employ the same level of effort that it puts forth to collect comparable amounts from Non-Medicare patients.

5. Reasonable Collection Efforts • If a patient has supplemental insurance, it must be billed and denied for payment. • The patient’s account balance remaining after ALL insurance has been billed and processed, must go through the hospital’s regular collection process, including referral to a collection agency when the internal collection process is complete.

6. Reasonable Collection Efforts • The collection agency must work the claim. • If the agency determines the account balance is uncollectible, it must document this in writing. • The hospital should maintain a record of the collection agency’s determination.

7. Reasonable Collection Efforts • If the patient has Medicaid as a secondary insurance, no further collection procedures are necessary once Medicaid has been billed and finished processing the claim (evidenced by remittance advice.)

8. Reasonable Collection Efforts • If, after all collection efforts have been exhausted, the account balance remains unpaid for more than 120 days (from the date the first bill is mailed to the patient*) the balance may be deemed as uncollectible and reported on the cost report. • *Some FIs have interpreted this as 120 days from last payment received.

9. Reasonable Collection Efforts • The 120 days does not begin until the provider has made a serious demand for payment, i.e., until it has sent a bill for an amount owed by the beneficiary. • Some providers send an informational statement upon discharge to the beneficiary, which does not require payment. The sending of the informational statement will not begin the 120-day period.

10. Uncollectible When Claimed as Worthless

11. Uncollectible 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

12. Uncollectible • If an account is deemed “worthless” the bad debt portion may be claimed in 120 days or less. • This requires a clear showing that the debt was uncollectible and would remain uncollectible even if collection efforts were sustained for more than 120 days from the first bill. • Actual regulations to not define worthless.

13. Uncollectible • Recent FI clarifications have stated that in order to be deemed "worthless”, all collection efforts must be exhausted. • Thus, if a hospital continues to pursue payment through a collection agency, for example, there must still be a possibility of recovery.

14. Uncollectible • PRM Section 310.2 adds the “presumption” that a bill is uncollectible if reasonable collection efforts have been pursued for more than 120 days. • This section provides that “if after reasonable and customary attempts to collect a bill, the debt remains unpaid more than 120 days from the date the first bill is mailed to the beneficiary, the debt may be deemed uncollectible”

15. Uncollectible • This presumption relieves providers of having to document that a debt is “actually uncollectible when claimed as worthless”. The presumption will hold unless there is a reason to believe that the debt is, in fact, collectible.

16. No Likelihood of Future Recovery

17. No Likelihood of Recovery 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.

18. No Likelihood of Recovery • Recent events • Number of CMS administrative decisions • Unfavorable court rulings • Fiscal intermediary clarifications • Three situations in particular • Use of collection agencies • Must-bill policy for dual-eligible patients • Indigent patients

19. Dameron Decision • CMS administrator asserted that while patient accounts are at a collection agency, they are not “actually uncollectible” nor has “sound business judgment established that there was no likelihood of recovery at any time in the future”. • Administrator concluded that if an account is written off, claimed as a bad debt and subsequently sent to a collection agency, it must be disallowed.

20. Battle Creek Decision • US District Court for the Western District of Michigan upheld the CMS administrator’s decision regarding the disallowance of bad debts which continue to be pursued by a collection agency.

21. No Likelihood of Recovery • FI’s are requiring documentation directly from collection agencies indicating that the hospital is no longer pursuing collection efforts on an account for unpaid deductible/coinsurance amounts. • Most collection agencies only report on collections – action will be necessary by the provider to ensure documentation is available.

22. No Likelihood of Recovery • One provider experienced a disallowance of its claimed bad debts in a prior year because the accounts had not been returned from the collection agency. • The provider thought that it would clearly be entitled to claim those bad debts if they were returned from the collection agency. Reimbursement Advisor – August 2005

23. No Likelihood of Recovery • Pursuant to the provider's request, the collection agency returned those accounts that it was no longer working, and the provider claimed those accounts as bad debts. • This provider, however, still suffered a disallowance of its claimed bad debts. Reimbursement Advisor – August 2005

24. No Likelihood of Recovery • In prior years, its bad debt claims had been disallowed because they were claimed prematurely. Yet, when it then claimed the bad debts when they were returned from the collection agency, it was told it was claiming the bad debts too late. Reimbursement Advisor – August 2005

25. No Likelihood of Recovery • The administrator explained this result on the grounds that the "record contains no evidence reflecting the point in time when the debts were actually uncollectible." Reimbursement Advisor – August 2005

26. No Likelihood of Recovery • Some Fiscal Intermediaries are now stating that account balances must remain on the accounts receivable, even if it is sent to a collection agency, until it is actually ready to claim as a Medicare bad debt on the cost report. • This practice may unnecessarily inflate accounts receivable balances.

27. Georgia Update • In December 2006, the Georgia FI stated that it would wait at least eighteen months before implementing the requirement that an account must be returned from a collection agency in order to be claimed as a bad debt.

28. Summary • Collection efforts must be reasonable and mirror the efforts made on non-Medicare accounts. • An account cannot be claimed as a bad debt until it is returned from a collection agency. • The collection agency must document the point in time when the account becomes worthless.