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Providers Must Bill State Medicaid Agency Before Attempting to Collect Bad Debt

April 19, 2012 by

The HHS Secretary properly denied bad debt claims made by a skilled nursing facility and a long term care hospital (facilities) for failure to prove that the debt was uncollectable, Cove by the District Court for the District of Columbia in the case of Cove Associates Joint Venture v. Sebelius.

Bad debts are deductible and coinsurance amounts that beneficiaries have not paid for services provided. Providers must make reasonable attempts to collect bad debts from the beneficiary before they can seek reimbursement for these bad debts from Medicare.

The term “reasonable collection efforts” mean that the provider has used the same methods to collect bills from Medicare patients as it does to make collections of comparable amounts from non-Medicare patients. Reimbursable bad debt has the following features:

  • (1) the debt must be related to covered services and based on unpaid Medicare deductible and coinsurance payments,
  • (2) reasonable collection efforts have been made,
  • (3) the debt is uncollectible when claimed as worthless, and
  • (4) there is no likelihood of recovery at any time in the future according to 42 C.F.R. §413.89 and §308 of volume 1 of the Provider Reimbursement Manual.

In addition, unless a provider demonstrates that a debt is uncollectible, it must wait 120 days from the date the first bill was mailed to the beneficiary before claiming the debt as worthless.

In this case, the facilities incurred bad debts when treating patients eligible for both Medicare and Medicaid (dual-eligible). The Secretary denied reimbursement because the facilities failed to comply with the agency’s “must-bill” policy. The policy requires facilities to bill the state Medicaid program before claiming payment for costs associated with dual eligibles as Medicare bad debt. The regulations provided that bad debt could be reimbursed to the extent that the state does not pay.

In the past several years a number of providers have challenged decisions by Medicare administrative contractors that denied reimbursement fort bad debts because the providers failed to bill state Medicaid agencies as part of their reasonable collection efforts. This decision upholds numerous decisions by the Provider Reimbursement Review Board and the courts that providers must bill state the Medicaid agency before making a claim for bad debts.

In this case the court held that it was reasonable to read into the regulations a duty to demand payment from the state in order to show that the states would not pay. The facilities, which did not participate in the state Medicaid program, could not establish that the state would refuse to issue a remittance advice until they submitted the bills for services provided to patients.

However, the court found that the Secretary had not previously enforced her must-bill policy against the facilities. Therefore, the case was remanded for the determination of whether the facilities were justified in relying on the Secretary’s prior failure to enforce the must-bill for the years 2004-2005.

For cost reporting periods beginning during fiscal year (FY) 2001 and later Social Security Act Section 1861(v)(1)(T) and 42 C.F.R. Section 413.89 states that allowable bad debt claimed by a hospital is reimbursed at 70 percent of the total allowable amount . There is no reduction in reimbursement for bad debts, however, for critical access hospitals, which are exempt from prospective payment rules.

Bad debts are reimbursable because a provider’s failure to collect Medicare deductibles and coinsurance amounts would shift costs to individuals not covered by Medicare and is therefore reimbursable.

Filed Under: Cases, Centers for Medicare and Medicaid, Health care spending, HHS, Medicaid, Medicare, Skilled Nursing

Provider Vulnerability to Medical Identity Theft Addressed by CMS

April 19, 2012 by

Medical identity theft has become one the fastest growing forms of identity theft in the United States. Although individuals have used physician identifiers of deceased (see the Office of Inspector General report) and non-practicing providers to fraudulently bill Medicare for years, much of the focus on medical identity theft has been on theft of patient’s personal information and health insurance information to get medical treatment and prescription drugs or submit fraudulent bills to health insurance companies.

Health Care Providers Medical Identity Theft

For providers, medical identity theft happens when the identify thief uses a providers’ unique medical identifiers such as National Provider Identifiers (NPIs), Tax Identification Numbers (TINs) or medical licensure information to bill insurance fraudulently for items or services that the provider never provided or prescribed. For example, medical identity thieves may steal the personal information of providers through hacking databases or posting sham hiring ads, CMS Deputy Administrator for Program Integrity, Peter Budetti, MD, JD explained in a recently posted article on the CMS website titled “7 Ways to Protect Yourself from Medical Identity Fraud”.

According to CMS, legitimate providers do not become aware that their identities have been compromised until they begin receiving overpayment demand letters from the Medicare Administrative Contractors (MACs). While the identity thieves receive the illegitimate Medicare payments, the victimized providers are exposed to the financial liabilities, including overpayment demands and tax liabilities for income never received, and credit degradation. Nonpayment of the illegitimate debt may result in the debts being referred to the Department of Treasury for collection. In addition, a physician may become the physician of record for services for which he or she was not involved in any way.

CMS’ Provider Victim Validation/Remediation Initiative

Historically, victimized health care providers had difficulty exonerating themselves from Medicare financial liabilities associated with identity theft because there was no established protocol for addressing provider identity theft issues. CMS, however, has taken steps to address provider vulnerability to medical identity theft by establishing the Provider Victim Validation/Remediation Initiative to assist providers who have suffered unwarranted financial liability as a result of having their NPIs, TINs, or medical licensure information stolen to fraudulently bill Medicare.

Under the initiative, CMS, in coordination with Program Safeguard Contractors (PSCs) and Zone Program Integrity Contractors (ZPICs) has established Points of Contact throughout the country for providers to access if they have been the victims of identity theft and have suffered financial liability as a result. PSCs and ZPICs will conduct investigations and report their findings to CMS. CMS will make a final decision whether to relieve providers of liability based upon the evidence and other information. Providers who believe they are the victims of Medicare identity theft but who have not yet suffered any financial liability, should contact their jurisdictional MAC or contact the OIG hotline at 1-800-HHS-TIPS.

Steps for Providers to Protect Themselves against Medical Identity Theft

Budetti’s article focuses on how providers can protect themselves against medical identity fraud, identifying seven actions providers should take, including:

  1. Keeping medical information up-to-date – by reporting any changes to insurers, such as opening and closing of offices and moving between group practices.
  2. Actively reviewing Medicare remittance notices for items or services listed that the provider didn’t provide and payments to you for services you didn’t provide.
  3. Protecting medical information – by only giving provider information to trusted sources and check out potential employers or other organizations before giving out medical identifiers to ensure they are legitimate.
  4. Training staff – to properly use and distribute provider medical information including prescription pads, electronic health records, and other important documentation.
  5. Educating patients – to be on the lookout for fraudulent activity on their explanation of benefits statements and how to report fraud when they see it.
  6. Reporting any suspected medical identity theft – by calling the CMS program integrity investigative contractor in the provider’s region if the provider believes he or she is a victim of medical identity theft, or by report suspected cases of medical identity theft to the OIG hotline as noted above.
  7. Protecting prescription pads – by keeping prescription pads in a safe and secure environment, so identity thieves can’t use them to obtain prescriptions you never prescribed.

For a further discussion addressing physician vulnerability to medical identity theft fraud, see the Journal of the American Medical Association (JAMA) article written by Budetti and his colleague Dr. Shantanu Agrawai, which explains how medical identity theft occurs and how to prevent it.

Filed Under: Centers for Medicare and Medicaid, Fraud & Abuse, Government Document, HHS, Medicare, Office of Inspector General