CMS released the final IPPS ruling for 2021 on September 2, 2020. There were many clarifications and revisions, both retroactively and prospectively, as it pertains to reimbursable Medicare bad debts and Hospital Uncompensated Care payments. Below is a summary of topics to consider:
Medicare Bad Debt - Applies Retroactively
Definition of “Non-Indigent Beneficiary”
A beneficiary who has not been determined to be categorically or medically needy by a state Medicaid agency to receive medical assistance from Medicaid and has not been determined to be indigent by the provider for Medicare bad debt purposes.
Reasonable Collection Effort for Non-Indigent Beneficiaries
Must be similar to the effort the provider, and/or the collection agency acting on the
provider’s behalf, puts forth to collect comparable amounts from non-Medicare
Must involve the issuance of a bill to the beneficiary or the party responsible for the
beneficiary’s personal financial obligations on or shortly after discharge or death of the
120-day Collection Effort and Reporting Period for Writing Off Bad Debts
A provider’s reasonable collection effort requirement for a non-indigent beneficiary must also start a new 120-day collection period each time a payment is received within a 120-day collection period.
Similar Collection Effort Required, Including Collection Agency Use
Provider’s effort to collect Medicare deductible and coinsurance amounts must be similar to the effort the provider puts forth to collect comparable amounts from non-Medicare patients:
A provider may use a collection agency to perform reasonable collection efforts on its behalf. The provider must ensure that the collection agency’s collection effort is similar to the effort the collection agency puts forth to collect comparable amounts from non-Medicare patients.
The fee charged by the collection agency is its charge for providing the collection service and is not considered a Medicare bad debt.
Documentation Required – Reasonable Collection Effort for Non-Indigent Beneficiaries
Provider must maintain and, upon request, furnish to the MAC documentation of the provider’s collection effort, whether the provider performs the collection effort in house or whether the provider uses a collection agency to perform the required collection effort on the provider’s behalf. To include:
Bad debt collection policy which describes the collection process for Medicare and non-Medicare patients
The patients account history documents which show the dates of various collection actions such as the issuance of bills, follow-up collection letters, reports of telephone calls, and personal contact, etc.
State Medicaid Programs Not Providing Medicaid Remits
CMS codified alternative Medicaid RA documentation policy, so that, in limited circumstances, providers can comply with the must bill policy and still evidence a State’s cost sharing liability (or absence thereof) for dual eligibles when a State does not process a Medicare crossover claim and issue a Medicaid RA to providers. A provider must submit all the following:
The State Medicaid notification evidencing that the State has no obligation to pay the beneficiary’s Medicare cost sharing or notification evidencing the provider’s inability to enroll in Medicaid for purposes of processing a crossover cost sharing claim.
Documentation setting forth the State’s liability, or lack thereof, for the Medicare cost sharing.
Documentation verifying the beneficiary’s eligibility for Medicaid for the date of service.
Dual Eligible Beneficiaries Cost Sharing
Bill the state Medicaid program to determine that no source other than the patient would be legally responsible for the patient’s medical bill. i.e., “Must Bill” policy.
Obtain and submit to the contractor, a Medicaid RA from the state Medicaid program.
Medicare Bad Debt – Applies Prospectively
(Cost Reports with FYB 10/1/2020 or after)
Reasonable Collection Effort for Non-Indigent Beneficiaries
For cost reports beginning on or after 10/1/2020, an issuance of a bill to the beneficiary or the party responsible for the beneficiary’s personal financial obligations on or before 120 days after the latter of one of the following:
The date of the Medicare remittance advice that is produced from processing the claim for services furnished to the beneficiary that generates the beneficiary’s cost sharing amounts.
The date of the remittance advice from the beneficiary’s secondary payer, if any.
The date of the notification that the beneficiary’s secondary payer does not cover the services furnished to the beneficiary.
Crossover Medicare Bad Debt and Contractual Allowances
For cost reports beginning on or after 10/1/2019 Medicare bad debts must NOT be written off to a contractual allowance accounts but must be charged to an uncollectible receivables account that results in a reduction in revenue.
Beneficiaries Determined Indigent by Provider Using Required Criteria
Must not use a beneficiary’s declaration of their inability to pay their medical bills or deductibles and coinsurance amounts as sole proof of indigence or medical indigence.
Must take into account the analysis of both the beneficiary’s assets (only those convertible to cash and unnecessary for the beneficiary’s daily living) and income.
May consider extenuating circumstances that would affect the determination of the beneficiary’s indigence or medical indigence which may include an analysis of both the beneficiary’s liabilities and expenses, if indigence is unable to be determined under PRM 15-1, Chapter 3, Section 312.
Must determine that no source other than the beneficiary would be legally responsible for the beneficiary’s medical bill, such as a legal guardian or State Medicaid program.
Must maintain and, upon request, furnish its MAC with the provider’s indigence determination policy describing the method by which indigence or medical indigence is determined and all the verifiable beneficiary specific documentation which supports the provider’s determination of the each beneficiary’s indigence or medical indigence.
First Billing Statement
Providers must send the first billing statement to the patient 120 days after:
The date of the Medicare remittance advice.
The date of the remittance advice from the beneficiary’s secondary payer if any; or
The date of the notification that the beneficiary’s secondary payer does not cover the service(s) furnished to the beneficiary; whichever is latest. A provider’s reasonable collection effort must also include other actions such as subsequent billings, collection letters, and telephone calls or personal contacts with this party.
Statements to Indigent Patients
Once indigence is determined, the bad debt may be deemed uncollectible without applying collection effort.
Accounting Standard Update Topic 606
Providers are required to record bad debts, known as implicit price concessions” and uncollectible accounts as a direct reduction of net patient revenue rather than an operating expense in their financial records.
Worksheet S-10: Uncompensated Care Payments
Factor 1: $11,378,005,107
Factor 2: .7286
Uncompensated Care Pool (Factor 1 * Factor 2) = $8,290,014,521
Will use a single year of data on uncompensated care costs from Worksheet S-10 of FY 2017 cost reports to calculate Factor 2 in the FY 2021 methodology for all eligible hospitals, except HIS and Tribal hospitals and Puerto Rico hospitals.
Establishing that to calculate Factor 3 for FY 2022 and all subsequent fiscal years for all eligible hospitals, except HIS and Tribal hospitals and Puerto Rico hospitals, CMS will use the most recent available single year of audited Worksheet S-10 data.
Provides greater predictability regarding the basis for determining future uncompensated care payments.
Uncompensated care payments to hospitals whose FY 2017 Worksheet S-10 data had been audited represented approximately 65 percent of the total uncompensated care payments for FY 2021.
MACs are in the process of auditing FY 2018 data on an expanded number of hospitals.
Intend to use the respective March HCRIS database for future final rules.
CMS does not intend to establish fixed start dates for audits across MACS so that they can retain the flexibility to use limited audit resources to address and prioritize audit needs across all CMS programs each year.