Medicare Bad Debts

Presented by:Michelle L Trowell

June 4, 2012

ObjectivesWhat’s new?What can be claimed as a Medicare bad debt?What are the Medicare bad debt categories?How do I prepare my log?What is the FI/MAC looking for upon audit?

What New?Payroll Tax Reduction Act• Hospitals Cost reports beginning on or after 10/1/2012

− 35% reduction applied to all allowable bad debts

• SNFs Cost reports beginning on or after 10/1/2012

− 35% reduction applied to all allowable bad debts

What’s New? (continued)

Payroll Tax Reduction Act (concluded)

• All others (100%) Reduced to 35% over 3 years

− Fiscal year 2013 – 12%− Fiscal year 2014 – 24%− Fiscal year 2015 – 35%

What’s New? (concluded)

Hospital Assessment Fee• CMS has approved program retroactive to 7/1/2011

through 6/30/2013• Crossover claims will be reprocessed & additional

payments will be made• Payments made on accounts written-off in 2011

should be claimed as recoveries in 2012

Allowable Bad DebtsUncollectible coinsurance & deductible amounts• Inpatient & Outpatient claims

• Charity Indigent Deceased Bankruptcy

• Medicaid Crossovers• Traditional

Medicare Bad Debt CategoriesCrossovers• Medicare primary & Medicaid secondary• Can be claimed as soon as Medicaid RA is received• Usually requires the least amount of audit support• Medicaid RA claim status of “paid” not “denied”

Medicare Bad Debt Categories (continued)

Charity/Indigent Bad Debts • Must follow the hospital’s written charity policy• Hospital’s reason for charity approval must be

thoroughly supported• Write-off date must be after charity application was

approved and before charity application expires

Medicare Bad Debt Categories (continued)

Charity/Bankruptcy• Documented by “Discharge of Debtor” notice from

the courts

Charity/Deceased• “No Estate” documentation via the probate court

Marion County Probate Court

200 E. Washington St. #T-1221

Indianapolis, IN 46204

Re: Proof of estate for deceased individuals

To Whom It May Concern:

On behalf of ABC Hospital, please verify whether an estate has been opened for the below referenced deceased individuals who were patients at our hospital and who were all residents of Marion County. If an estate has or has not been opened, please verify in the space provided below and validate with official county stamp (or other official proof documentation) and county signature and/or initials and mail to our offices in the enclosed self addressed stamped envelope.

Thank you for your prompt attention to this matter.

Sincerely,

Patient Name Patient DOB/DOD Patient SSN Estate Status

Medicare Bad Debt Categories (concluded)

Traditional/Valid Effort Bad Debts• At least 3 collection attempts• Must bill for at least 120 days• 120 day clock restarts upon receipt of payments

Preparing Your LogsAssign to a specific staff memberProcess steps need to be clear and conciseMaintain on a monthly or quarterly basis• Don’t wait until the end of the your fiscal year to

prepare the logsRegularly perform internal audits of logs for accuracy

Preparing Your Logs (continued)

Maintain necessary documentation to support every account identified on your logs• Medicare remittance advices• Medicaid remittance advices• Collection effort history• Closed from agency documentation• Charity applications & supporting documentation• Policy and procedures effective during fiscal year

under review

Preparing Your Logs (continued)

Create six bad debt listings with one summary page to total all the logs• Crossover Inpatient and Outpatient

• Charity Inpatient and Outpatient

• Traditional/Valid Effort Inpatient and Outpatient

SUMMARY OF MEDICARE BAD DEBTS

PROVIDER : ABC HospitalPROVIDER #: XX-XXXXFYE : XX/XX/XXXX

InpatientCharity -$ Crossover -$ Expired -$ Valid Efforts -$

Subtotal -$ Exibit 5Less: Recoveries

Total Inpatient -$ Reduction Factor

-$ Net Total Inpatient -$

OutpatientCharity -$ Crossover -$ Expired -$ Valid Efforts -$

Subtotal -$ Exibit 5Less: Recoveries

Total Outpatient -$ Reduction Factor

-$ Net Total Outpatient -$

Gross MBD benefit -$

Net MBD benefit -$

EXHIBIT 5LISTING OF MEDICARE BAD DEBTS AND APPROPRIATE SUPPORTING DATA

PROVIDER : ABC HospitalPROVIDER #: XX-XXXX InpatientFYE : XX/XX/XXXX

(1) (1) (1) (2) (3) (3) (4) (5) (6) (7) (8) (9) (10)PATIENT: PATIENT: Last PATIENT: First HIC. NO. From To Medicaid DATE FIRST WRITE-OFF MEDICARE DEDUCT CO-INS TOTAL WRITE- Section

Preparing Your Logs (continued)

Log content• Account number• Patient name• HIC number• From (admit)• To (discharge)• Date 1st bill to patient• Write off date

Preparing Your Logs (continued)

Log Content (concluded)

• Medicare remit date• Deductible• Coinsurance• Total write off amount• Category type (crossover, charity or traditional)

FI/MAC Audit Focus (Fee Screens)

Fee Screens• Coinsurance and deductible amounts related to

services paid on a fee schedule can not be claimed as a bad debt

• FISS DDE MAP screen 171A for each HCPCS code• Detailed PS&R

FI/MAC Audit Focus (Crossovers)

Crossover Bad Debts• State must be billed• Medicaid RA claim status of “paid” not “denied”• Did write-off occur prior to receipt of Medicaid RA If yes, was the RA paid in the current fiscal year?

• Spend-down or third party payer reduction

FI/MAC Audit Focus (Spenddown)

Medicaid Spend-down• When a patient must spend a certain amount of

their income on medical expenses before they qualify for Medicaid benefits

• Can be claimed as an allowable bad debt amount Charity – with appropriate documentation Traditional – with appropriate collection efforts

• Should not apply to a Medicaid write-off code

FI/MAC Audit Focus (Charity)

Charity/Indigent Bad Debts• Signed application with income supported• Testing of income, assets and liabilities• Charity approval follows charity policy• “No Estate” documentation for Deceased patients• “Discharge of Debtor” notice for bankruptcy patients• Write-off amount not to exceed sliding scale award

percentage

FI/MAC Audit Focus (Traditional)

Traditional/Valid Effort Bad Debts• All collection efforts have ceased• Consistent collection efforts among all payers• Collection agency detail to support closed status• Three collection attempts for at least 120 days from

the latter of the date of first bill to patient or the last payment date

Questions?