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Making sure your bad debts pass medicare audits
1. HFMA Western Michigan Chapter
Revenue Cycle
January 28, 2010
Presenters:
Jenni Hoonhorst, FHFMA
Debby Sieradzki, PhD
MAKING SURE YOUR BAD
DEBTS PASS MEDICARE AUDITS
2. Learning Objective
• Understand what documentation is
required by the fiscal intermediary
• Understand how your audit support
and bad debt/collection policies must
be consistent
• Tips to help your audit go smoother
3. Medicare Bad Debts Defined
Medicare Bad Debts are primarily
Medicare Deductible and
Coinsurance amounts that have
gone through the hospital’s collection
process and have been written off to
bad debt.
4. Criteria for Allowable Bad Debt
1. Must be related to covered services and
derived from deductible and coinsurance
amounts.
2. Must be able to establish that reasonable
collection efforts were made.
3. The debt was actually uncollectible when
claimed as worthless.
4. Sound business judgment established
that there was no likelihood of recovery at
any time in the future.
5. What is “Reasonable
Collection Efforts”?
• Must be similar to the effort the provider puts
forth to collect comparable amounts from non-
Medicare patients.
• It must involve the issuance of a bill on or shortly
after discharge or death of beneficiary to the
party responsible for the patient’s obligations.
• There must be subsequent billings, collection
letters, and telephone calls which constitute a
genuine collection effort.
• After reasonable collection efforts, the debt may
be deemed uncollectible if it remains unpaid
6. Collection Agencies
• Collection agencies may be used in
addition to or in lieu of subsequent billings,
follow up letters, and other contact.
• Referral of Medicare uncollected accounts
should be treated the same as all
uncollected accounts.
• Agency collection efforts need to be
documented in the patient’s file just as if
the provider was performing the collection.
• Clarification from CMS requires that the
bad debt must be returned from the
collection agency before it can be claimed.
7. Medicare Bad Debts under State
Welfare Programs (Title 19)
• States are not obligated to pay
deductible and coinsurance amounts
for services that are beyond the scope
of the State Title 19 plan.
• If the State is obligated by statue or
under the terms of its plan to pay all or
part of deductible and coinsurance,
those amounts would not be allowable
as Medicare bad debts.
• The State may be obligated to pay, but
8. Indigent and
Charity Care Patients
Once indigence is determined, the debt may
be deemed uncollectible without applying
reasonable collection efforts.
• Patient’s indigence is determined by the provider, not the
patient
• The provider considers all of the patient’s resources
• The provider determines that no source other than the
patient would be legally responsible for the patient’s
medical bills.
• Document in the patient's file how indigence was
determined. Include all backup to substantiate
9. Recoveries and
Partial Payments
• Recoveries are to be netted against
bad debts in the fiscal year the
recovery is received.
• If only a partial payment is received,
payment should be applied
proportionately to Part A and Part B
deductible and coinsurance, and non-
covered services.
10. Bad Debt list Preparation
1. Responsibility for the listing may be with
Reimbursement, Patient Accounting, and/or
Information Services. The best listings usually
involve all three departments, or the use of a
consultant who specializes in bad debt preparation).
2. Methods vary by provider based on resources
available. The method may be as simple as
compiling a list based on write off codes. The best
methods are more complex and may include
matching detailed PS&R deductable and
coinsurance amounts with hospital patient detail.
11. Submitting the Medicare Bad
Debt Listing to the Intermediary
1. Hospitals are required to submit their detailed
bad debt listings with their cost report
submission.
2. Hospitals may have the opportunity to provide
updated listings at the time of audit. Medicare
Bad Debt audit policies often change and may
require the hospital to revise their listings.
3. Be sure to have all the columns per the CMS-
339 completed. For example, you need to
provide the Medicaid RID (Recipient ID) on
Medicaid crossover claims. The FI may reject
a listing if it is deemed not to be complete.
12. Notice of audit –
What should you do?
Call the Fiscal Intermediary and ask the following:
A. If you believe that, based on your last audit, there may be
problems with your listing, request providing a new
updated list.
B. Let them know that you want to discuss the sample
methodology if bad debts will be scoping for audit. Be
sure to get them to agree that they will discuss it with you
BEFORE they pull a sample.
C. Establish dates for providing support. This may have
been stated in the audit letter, but generally this might
only be 2 weeks from the date of the letter (and you may
have received the letter a week after the date of the
13. Entrance Conference -
Timing is Everything!
1. Request when the Final Audit NPR date will be.
2. Establish agreed-upon dates for providing
additional support to the Intermediary.
3. Identify dates when you can expect to receive
the preliminary and final adjustment reports.
14. Entrance Conference -
Timing is Everything! (con’t)
A. Audit – the staff auditors are usually very good about providing a
preliminary adjustment report and accepting additional support within the
time allowed. This is the period when you think you have everything
resolved, etc
B. Supervisory Review - IMPORTANT! The staff auditor will turn in their
work for supervisory review. This may be very close to the required NPR
date. Be sure that you set a date that you will receive a copy of ALL
the final audit work papers including the ACL extrapolation. If there
are new issues at the time of supervisory review, you need to have ample
time to provide additional support. The supervisor may finalize and
NPR the audit (along with new adjustments) without allowing the
hospital the opportunity to provide additional support . Do all you
can upfront to agree on a date and period of time that you can
review the final adjustment with ALL of the audit work papers.
NGS will typically send only the adjustment report without any
support stating they will send you the support after it has been
NPR’d. Do not allow this to happen if possible.
15. Going to Audit
1. The fiscal intermediary will review the list and
determine whether or not the Medicare bad debt
listing will scope for audit. The fiscal
Intermediary may determine the following:
a) The entire listing will scope for audit
b) Part of the list will scope for audit
c) The listing will not scope for audit
16. Going to Audit (con’t)
2. If the listing scopes for audit, the Fiscal Intermediary
will pull a sample. It is helpful to discuss with the
auditor how the sample will be determined before
being pulled. (Call and let them know you want to
discuss this as soon as you receive the audit letter).
If the FI has already pulled a sample, it will be difficult
to have a new sample pulled. Key factors impacting
sample include:
• Sample size, stratified amounts, etc.
• Separate listings between patient type (IP and OP) and
category (Traditional/Dual Eligible)
17. What will the Fiscal Intermediary
require at the time of audit?
A copy of the hospitals bad debt policy for
the period being audited
A copy of the charity policy may be
requested
A copy of the hospital’s collection policies
A copy of the collection policies used by
each of the collection agencies may also be
requested.
18. Support Required –
Traditional Claims
1. Copy of the UB
2. Copy of the Medicare voucher (If available, the PS&R
detail report may be submitted)
3. Patient account history showing the date of the write
off
4. Evidence that you have removed fee screens on
outpatient accounts. (PS&R detail report, FSS
screens, etc.)
5. Evidence that you have contacted Probate to bill the
estate for deceased patients
6. May request the collection notes/activity from the
collection agency.
19. NGS Instructions –
How to identify Fee Screen amounts
Below are the instructions on how to identify the fee based
services for Fee Screen Amounts:
1. Map screen 171A in FISS identifies ded/coins for each
charge code
2. Log into FISS and use 01-Inquiries
3. Then 12 - which is claim inquiry
4. Input the HIC number and DOS
5. Locate the claim you want and enter a “S” (show) at
the left of claim
6. Go to page 2 - which is claim detail by entering F11
20. What if a hospital doesn’t have
access to the FSS screens?
Per Sue Liu:
They can look at the revenue codes on the detailed
PS&R. PT, OT, ST, Mammogram, and etc are fee based
services. However, they may not catch all of them. (Some of
revenue codes 63x or 64x may be fee based also.) The
problem is a listing of revenue codes for the provider to
identify the fee based services does not exist. Our auditors
usually go to the details fee screen to be sure, but it is more
time consuming.
21. Fee Screen Implications
1. Some Radiology and Lab codes may be paid as a
fee screen or may be bundled with the APC. (You
will see the same revenue codes on your PS&R
Summaries for APC’s and Fee Screen payments).
Don’t let NGS deny you a fee screen amount based
on code alone. It may not have been paid as a fee
screen.
2. Codes may be considered a fee screen before or
after certain dates. Make sure that NGS does not
deny a code that may now be considered a fee
22. Support Required – Crossovers
(Medicaid)
1. Copy of the UB
2. Copy of the Medicare voucher (If available, the PS&R
detail report may be submitted)
3. Patient account history showing the date of the write off
4. Evidence that you have removed fee screens on
outpatient amounts. (PS&R detail report, FSS screens,
etc.)
5. Medicaid Voucher (NGS will not accept the electronic
version)
6. May require the FD622 for Outpatients
7. Psych is paid at the county level and generally does not
generate a detailed voucher. NGS will request a
Medifax as evidence of Medicaid eligibility. (Note: The
state is not sending Psych data to Medifax at this time)
23. Michigan Medicaid (legacy)
Vouchers
1. NGS has not had time to review the new
Medicaid Voucher to determine how they will be
auditing them.
2. Evidence that you have billed Medicaid is not
enough. The FI looks for the following:
• 107 Codes for IP and 840 Codes for
Outpatients (Medicare has paid more than
Medicaid)
• Rejected accounts are not allowed. They must
be re-billed and accepted to be allowable for
bad debt.
• Certain codes are not allowed – e.g. 023 =
“Not eligible for DOS”
24. Problems with the Michigan
Medicaid (legacy) Vouchers
1. The FI will require that they see evidence of full and correct amounts
billed to Medicaid. The Amount Approved or Billed does not always
appear on the Medicaid voucher correctly. NGS has not accepted a
copy of the UB billed to Medicaid as evidence that the correct amount
was billed.
2. The FD622 report may provide the total amount billed, but again, it is
not always 100% accurate. Some hospitals do not keep the FD622
reports and they are not available.
3. The FD622 may indicate a “Patient Pay” amount that is not accurate.
Many FI’s outside of Michigan will try to disallow these amounts saying
that there was a spend down amount not met. (A call to Sue Liu’s
office will help with this issue)
4. The FI may try to disallow an account because the name on the
Medicaid voucher may not be the same as the name on the Medicare
voucher. Be sure to point out the control numbers that are on both the
Medicare and Medicaid vouchers that proves that they are the same
25. Audit problems with
Charity Care Patients
1. The auditor will request a copy of the hospital’s Charity
Care policy. If a copy is not provided, all of the Charity
Care will be disallowed. (If you are claiming Charity
Care, you should insist on a separate sample listing.
There is a higher error incidence with Charity Care,
and you do not want this to impact your other listings)
2. Charity support, including the worksheet used to
determine if the patient qualifies, will be scrutinized in
detail. Any item in the Charity Care policy not in the
patient support will be reason for disallowance.
26. ACL Sampling
1. ACL is the most punitive and harsh sampling methodology
to date. There are 3 levels of errors that may be applied
against a sample:
a) Most Likely Error
b) Upper Error Limit
c) Upper Error Limit plus the basic precision
2. The method used is based on auditor discretion. At the
entrance conference, request that they use the Most
Likely Error when applying any errors. Note: Most re-
openings challenging the use of the Upper Error limits
have been adjusted down to the Most Likely Error.
27. ACL Sampling (con’t)
3. It is important to receive the ACL sampling error
worksheets so you can determine which method
was used. The FI may defend using the Upper Error
Limit because of the number of errors in a sample.
However, the error may represent only small partial
amounts (fee screens, etc.) and are not full errors.
4. Do not allow the Basic Precision to be included in
the Upper Error limit.
5. If you are having difficulty getting all of the support
you need for an account, and it results in an error, it
may be helpful to indicate the amount of
disallowance that you will have if the support is not
28. Audit Etiquette
1. Be nice. The Fiscal Intermediaries are people too and they
have a difficult job. It is not always easy when they appear
to be unreasonable.
2. Help the FI remember important upcoming dates (“Hi…just
a quick reminder that the final adjustments and work papers
that we agreed to at the Entrance Conference are due on
Tuesday) Be sure to copy the audit manager on your
correspondence.
3. If you have an auditor that worked well with you, write a
short note of appreciation and copy their audit manager. A
positive comment on an auditor at the Exit Conference may
also be made.
4. Remember that you may be working with the same auditors
