Industry Insights

Changes to Crossover Bad Debt Reimbursement for Oklahoma Nursing Centers

March 2016
Author:  Chris Murphy

Chris Murphy

Partner

Consulting

Health Care

Two Warren Place
6120 S. Yale Avenue, Suite 1400
Tulsa, OK 74136-4223

Tulsa
918.584.2900

It’s not news to Oklahoma nursing centers that the Oklahoma Health Care Authority (OHCA) faces a significant funding shortage. On December 10, OHCA presented a plan to its State Plan Amendment Rate Committee (SPARC) to reduce provider Medicaid payments by 3 percent. SPARC approved the proposed state plan amendment.

For most providers, this means a 3 percent reduction in Medicaid payment rates effective January 1, 2016. However, the cut for nursing centers came in the form of a reduction in the amount OHCA will pay for Medicare Part A coinsurance for Medicare beneficiaries who also are Medicaid beneficiaries (dual-eligibles) to 20 percent from 75 percent. This change will be effective beginning with January 1, 2016, dates of service.

The good news:  Nursing centers will be able to partially recover this reduction in reimbursement for Part A coinsurance for dual-eligibles by claiming the unpaid amounts as Medicare bad debt when the Medicare cost report is filed. Medicare will reimburse 65 percent of the amount not paid by Medicaid for coinsurance. However, nursing centers still will need to follow Medicare guidance to claim this reimbursement by:

  • Billing the coinsurance to Medicaid and obtaining a remittance advice showing the Medicare coinsurance amount not covered; providers should be sure the reason code relates to the change in reimbursement rather than a defect in the claim (reason codes can be found on the claim by reviewing adjudication errors)
  • Writing off the remaining coinsurance amount in their accounting system; this should be documented in billing logs if there isn’t a formal accounts receivable system
  • Including the amount written off on a Medicare bad debt log—with all required information; this should be provided to your cost report preparer along with the other materials needed to prepare the cost report

The other concern, of course, is cash flow. Rather than being paid for crossover Part A coinsurance as billed, providers will have to wait until the cost report is filed to be paid, unless a request is made for interim payments from the Medicare Administrative Contractor (MAC). For most Oklahoma providers, this will be Novitas Solutions, Inc.

Understanding the math may be helpful. 

Under the current system, assuming the 2016 coinsurance rate of $161 per day and 30 coinsurance days, the total coinsurance amount is $4,830, of which Medicaid pays 75 percent, or $3,623. Medicare will pay 65 percent of the unpaid amount of $1,207, or $785. The total reimbursement for coinsurance under the current state plan is $4,408 ($3,623 from Medicaid plus $785 from Medicare), or 91 percent of coinsurance.

Under the state plan amendment, Medicaid would pay 20 percent of the $4,830 coinsurance amount, or $966. Medicare would pay 65 percent of the $3,864 of unpaid coinsurance, or $2,512. The new total reimbursement would be $3,478 ($966 from Medicaid and $2,512 from Medicare), or 72 percent of coinsurance.

Providers should evaluate the cash flow impact of this reduction in coinsurance reimbursement by Medicaid and consider requesting pass-through payments from their MAC, if necessary, to meet cash flow needs.

If you have questions, please contact your BKD advisor.

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