Blog, Reimbursement, The Hospital Finance Podcast®

Potential Medicare Bad Debt Changes [PODCAST]

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The Hospital Finance Podcast

In this episode, we are joined by Jaycee Lin, Senior Consultant on the BESLER Reimbursement Service team, to discuss the proposed changes and implications of bad debt regulations.       

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Highlights of this episode include:

  • Background on the changes CMS is making to its’ bad debt policies
  • A review of the proposed minimum requirements for bad debts
  • What are the minimum field requirements for filing individual claims to the cost report
  • What these changes mean for hospitals going forward
  • And more…

Mike Passanante: Hi, this is Mike Passanante and welcome back to the award-winning Hospital Finance Podcast®.

In the 2021 IPPS proposed rule, CMS is proposing to amend its existing bad debt regulations for the upcoming fiscal year. To tell us about those proposed changes and their implications, I’m joined by Jaycee Lin, Senior Consultant on the Reimbursement Services team at BESLER. Jaycee, welcome to the podcast.

Jaycee: Well, thank you, Mike. It’s always great to be on the podcast.

Mike: Always great to have you. So let’s start out, Jaycee. As I mentioned in the opening, CMS is proposing some changes to its bad debt policies. What are they proposing, and why?

Jaycee: Well, this has always been the age-old question as to how CMS is always updating their “reimbursement requirements”. And it’s always been a mystery for the hospitals to try to keep up with all the requirements. And basically, CMS proposed to codify the requirement of additional requirements the hospital must satisfy in order to claim bad debt from Medicare through this particular– the published notices and comment rule-making. And if CMS doesn’t do it, then they won’t be able to enforce these particular updated requirements. And so the fact that CMS proposed to adopt some of the additional requirements retroactively, that signifies that CMS intends to apply these rules to open or reopenable past cost reports.

Mike: Yeah, I think retroactive is the key there, isn’t it?

Jaycee: Yes, it is. And so at this point, all the hospitals are on the hook to be able to get the cost reports reopened with or without their proper acknowledgment.

Mike: So Jaycee, what are the new proposed minimum requirements for bad debts?

Jaycee: Well, it’s not really the new requirements. This is just to update and reinforce their requirement that hospitals must bill Medicare beneficiary no later than 120 days after the day of the Medicare remit device date. And the new “updated regulation” would also bar hospitals from writing off a bad debt sooner than 121 days after issuing the bill. Now keep in mind the 121-day period would reset each time the patient makes a partial payment. CMS will prohibit hospital to claim bad debt that is written off to a contractual account as hospital must claim bad debts that is written off to a bad debt expense account in the provider’s financial records. And that is the key right now, is typically a hospital will write it off to their contractual allowance as soon as they get a transaction from the patient or from their insurance policy. Let’s say for a Medicare or a Medicaid account. And they’ll just simply write off on it, right? But now Medicare will like to see that it’s written off to the actual bad debt expense. So that is the big– that is the big updated change at this point.

Mike: Got it. And individual claims should be filed with the cost report filing. What are the minimum fields required to do this correctly?

Jaycee: Yeah, that’s always been the same format that CMS has reinforced via their Medicare intermediaries in the past. So there is no change. But again, all hospitals should keep in mind that there are the 10 minimum required fields in order for them to reimburse for a bad debt account. I mean, the field and the data should minimum to have at least 10 fields. And they would include the patient name, their social security number, and the date of service, along with whether a patient qualifies for the indigent write-off, whether that was through their passive income or simply have both Medicare and Medicaid coverages at any given point. And then lastly, they would show the date of the service that the beneficiary was sent a “bill” in order to show their fair share of the Medicare deductible and coinsurance, along with the remit device day. And then lastly, the most important field is the balance of the account. Basically to simply show the patient that they have what’s done with the Medicare bad debt regarding the Medicare deductible and coinsurance in that. So those are the very minimum required format. And each hospital can definitely go through their standard format that they have in their system. And they should be able to extract those important fields in order to qualify for Medicare bad debt reimbursement.

Mike: Got it. And Jaycee, what do you think these changes are going to mean for hospitals going forward?

Jaycee: Well, Mike, it simply makes it harder and harder for hospitals to receive bad debt reimbursement. It appears that CMS is making changes to reflect long-standing policies that have existed for decades, if not since the time the Medicare deductible and coinsurance have existed. But at least the requirement the hospital must factor a patient’s resources and assets in making a care decision is a significant and substantial change on the past policy. And then the Medicare intermediary will likely pay more attention in allowing bad debt claims in the cost reports in general. And therefore, each hospital’s Medicare reimbursement for bad debt will be harder and harder to be allowed through the cost report.

Mike: Jaycee, thanks so much for coming by the podcast today and helping us all understand more about upcoming changes to bad debt.

Jaycee: Yeah, that’s always my pleasure. It’s easier said than done, so each hospital should definitely pay attention to all the requirements.

Mike: Thanks, Jaycee.

The Hospital Finance Podcast

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