2011 in Review: Hospital Bad Debt

A hospital’s bad debts resulting from deductible and coinsurance amounts that are uncollectible from Medicare beneficiaries are reimbursed by Medicare if reasonable collection efforts have been made. Claiming bad debts without first genuinely attempting to collect payment would constitute Medicare fraud.

Sometimes a hospital will claim bad debts but provide insufficient evidence for the claims. This can lead to an adverse decision on the part of the Medicare administrative contractor regarding the hospital’s final Medicare reimbursement for certain claims.

In 2011, there were three instances of hospital bad debt claims that led to decisions made by the Provider Reimbursement Review Board, decisions which were later affirmed by the CMS Administrator. A summary of these decisions follows.

George Washington University Hospital (Washington, D.C.) v. Blue Cross Blue Shield Association/CareFirst of Maryland Inc., CMS Administrator Decision, (Review of PRRB Decision No. 2011-D31), July 26, 2011. The ruling of the Provider Reimbursement Review Board (PRRB) reversing the Intermediary’s disallowance of bad debts was incorrect. Under 42 C.F.R. §413.89(e) a claim for bad debt resulting from the nonpayment of Medicare copayments or deductibles may be made if, after reasonable collection efforts the provider has determined that the debt is worthless, meaning that the probability of collection is zero. If the provider has turned over a debt to a collection agency, it has determined that the debt still has some value. The moratorium prohibiting changes in policy as to hospitals whose intermediaries had, before August 1, 1987, approved reimbursement for bad debt when the debt was placed with a collection agency, does not apply to these providers because: (no evidence was presented to document the policy in existence as of August 1, 1987. The documentary evidence must be verifiable, auditable and contemporaneous with the pre-1987 conduct, and it must show both the provider’s practice and the intermediary’s acceptance of the practice before August 1, 1987. Declarations and a copy of a manual from 2004 are not sufficient.

Universal Health Services, Inc., (UHS) 2004 and 2005 Medicare Bad Debts Still at Agency Groups Appeal (King of Prussia, Penn.) v. BlueCross BlueShield Association/Highmark Medicare Services/Wisconsin Physician Service, CMS Administrator Decision, (Review of PRRB Decision No. 2011-D30), July 26, 2011. The ruling of the Provider Reimbursement Review Board (PRRB) reversing the Intermediary’s disallowance of bad debts was incorrect. Under 42 C.F.R. §413.89(e) a claim for bad debt resulting from the non-payment of Medicare copayments or deductibles may be made if, after reasonable collection efforts the provider has determined that the debt is worthless, meaning that the probability of collection is zero. If the provider has turned over a debt to a collection agency, it has determined that the debt still has some value. The moratorium prohibiting changes in policy as to hospitals whose intermediaries had, before August 1, 1987, approved reimbursement for bad debt when the debt was placed with a collection agency, does not apply to these providers because: (1) some were not in existence in 1987; (2) others in the group were acquired after August 1, 1987, and thus, do not satisfy the requirement of no change in ownership since that date; and (3) no evidence was presented to document the policy in existence as of August 1, 1987. The documentary evidence must be verifiable, auditable and contemporaneous with the pre-1987 conduct, and it must show both the provider’s practice and the intermediary’s acceptance of the practice before August 1, 1987. Declarations and a copy of a manual from 2004 are not sufficient.

Various Genesis Health Care Corporation Providers v. Blue Cross Blue Shield Association/Highmark Medicare Services, CMS Administrator Decision, (Review of PRRB Decision No. 2011-D12), February 1, 2011. The fiscal intermediary properly determined that the provider failed to demonstrate that the bad debts it claimed were actually uncollectible and worthless when they were written off. The provider did not demonstrate that it had met the reasonable collection requirements by first billing the State and receiving from the State a remittance advice that was contemporaneous with the cost reports at issue as required by 42 C.F.R. §413.89. In addition, the uncollectible Medicare deductibles and coinsurance amounts are only recognized in the reporting period in which they are deemed worthless as stated in 42 C.F.R. §413.89(f). Accordingly, the decision of the Provider Reimbursement Review Board is reversed.

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  1. […] week allowed a lot of reflection on health law happenings in 2011, including an indepth look at bad hospital debt as well as the milestones of the Food Safety Modernization Act for the year. Also this […]

  2. […] Universal Health Services, Inc., (UHS) 2004 and 2005 Medicare Bad Debts Still at Agency Groups Appeal (King of Prussia, Penn.) v. BlueCross BlueShield Association/Highmark Medicare Services/Wisconsin Physician Service, CMS Administrator Decision, (Review of PRRB Decision No. 2011-D30), July 26, 2011. The ruling of the Provider Reimbursement Review Board (PRRB) reversing the Intermediary’s disallowance of bad debts was incorrect. Under 42 C.F.R. §413.89(e) a claim for bad debt resulting from the non-payment of Medicare copayments or deductibles may be made if, after reasonable collection efforts the provider has determined that the debt is worthless, meaning that the probability of collection is zero. If the provider has turned over a debt to a collection agency, it has determined that the debt still has some value. The moratorium prohibiting changes in policy as to hospitals whose intermediaries had, before August 1, 1987, approved reimbursement for bad debt when the debt was placed with a collection agency, does not apply to these providers because: (1) some were not in existence in 1987; (2) others in the group were acquired after August 1, 1987, and thus, do not satisfy the requirement of no change in ownership since that date; and (3) no evidence was presented to document the policy in existence as of August 1, 1987. The documentary evidence must be verifiable, auditable and contemporaneous with the pre-1987 conduct, and it must show both the provider’s practice and the intermediary’s acceptance of the practice before August 1, 1987. Declarations and a copy of a manual from 2004 are not sufficient.Source: wolterskluwerlb.com […]