As the calendar year winds down, don’t let the hectic holiday season distract you from properly writing off Medicare Part A coinsurance and/or deductible bad debt that can be claimed on the Medicare cost report for partial reimbursement. As budgetary pressures grow, it’s to your advantage to claim this reimbursement.
The Centers for Medicare & Medicaid Services has specific guidelines to ensure you’re partially reimbursed for the uncollectible coinsurance. Four basic requirements for eligible bad debt claims are in the 42 Code of Federal Regulations 413.89(e).
- The debt must relate to covered services derived from deductible and coinsurance amounts.
- The debt was actually uncollectible when claimed as worthless.
- The provider must be able to establish that reasonable collection efforts were made. (This doesn’t apply to dual-eligible beneficiaries.)
- Sound business judgment deems no likelihood of recovery at any future time.
There are two types of Medicare bad debts. For Medicaid dual-eligible residents, follow Medicare’s “must bill” policy. This means coinsurance claims must be billed to the state’s Medicaid program and you must keep a copy of the Medicaid Remittance Advice (RA) showing nonpayment. After receiving the nonpayment RA, write off the account as a bad debt in your accounts receivable and general ledger. The write-off date must occur within the cost report period.
For residents not deemed indigent, collection efforts are required. This may include collection letters, documentation of phone calls or use of a collection agency (if used for non-Medicare patients as well). There must be at least 120 days between the write-off date and the date first billed. In addition, collection efforts must constitute a genuine effort of no fewer than three attempts during the 120-day period. The 120-day rule and collection efforts don’t apply to dual-eligible beneficiaries.
When a claim is submitted for reimbursement on the cost report Exhibit 1, proper documentation must be maintained to be produced during an audit by the Medicare Administrative Contractor. For dual-eligible claims, this would include the nonpayment RA. For nondual-eligible residents, this would include billing statements, follow-up letters, documentation of phone calls and personal contact, etc.
Medicare Health Maintenance Organization, Medicare Advantage and other Part A replacement plan claims aren’t reimbursable on the cost report. Also, Medicare Part B coinsurance or deductible bad debts aren’t reimbursable on the cost report.
In some cases, an amount previously written off as a Medicare bad debt may be recovered in a subsequent cost reporting period. When this occurs, the income must be used to reduce the cost of beneficiary services for the period in which the recovery is made. In addition, such reductions in reimbursable costs should not exceed the bad debts reimbursed for the applicable prior period.
Finally, dual- and nondual-eligible claims on the cost report Exhibit 1 will be paid at 65 percent less 2 percent for sequestration for all cost reporting periods beginning on or after October 1, 2014.
Download the checklist and contact your BKD advisor if you have questions.