Medicare Bad Debt Revisions: How Will They Impact You and Your Collection Agencies

Now that the Medicare Bad Debt Final Rule is fully in effect, it’s important to reexamine how these changes can impact your facility. Many of the revisions of the Medicare Bad Debt Policy impact non-profit hospital partnerships with their collection agencies going forward.

In the final rule, the Centers for Medicare & Medicaid Services (CMS) addressed several areas, including:

• Genuine collection effort required
• New collection activity documentation requirements
• Timing of the 120-day collection period and what resets the clock
• Posting payments back to patient accounts
• Claiming Medicare accounts at collections for reimbursement
• How collection agency fees need to be accounted for

In this article, we will discuss how these changes will affect you, as well as the actions we are taking to help our clients comply with the new requirements.

Genuine Collection Effort

What it Means

When it comes to Genuine Collection Effort, CMS is focusing its attention on ensuring your facility is making more than a token effort at collecting Medicare bad debt before submitting it for reimbursement. For you, the Genuine Collection Effort guidelines are usually met during the internal patient billing process you already have in place (subsequent billings, telephone calls, personal contacts, etc.), with one large caveat – the Similar Collection Effort requirement. The Similar Collection Effort requirement says that you and your collection agencies need to treat Medicare and non-Medicare accounts similarly. If you make collection calls on non-Medicare accounts, you need to make collection calls on Medicare accounts. If you send non-Medicare accounts to collections, you need to send Medicare accounts to collections. If you take legal action on non-Medicare accounts in collections, you need to take legal action on Medicare accounts in collections. The primary example CMS gives for what defines “similar accounts” is balance size or “like amount”, so having a balance size threshold for accounts that go to collections, or legal action, or second placements is fine, so long as the balance size criteria is the same for non-Medicare and Medicare accounts, alike.

Also, in this section, CMS uses the phrase, “The provider must ensure,” to hold YOU responsible for everything that falls under the Genuine Collection Effort requirement as it relates to similar collection efforts on Medicare and non-Medicare accounts. This includes collection activity done by your collection agencies – reemphasizing the importance of your collection agencies maintaining the documentation required by CMS to prove that accounts of “like amount” are being treated similarly.

What Americollect is Doing

The first and easiest thing Americollect is doing to ensure you meet these requirements is treating all your Medicare and non-Medicare accounts the same. Whether an account is a Medicare account or not, we know to put in the same efforts and attention to detail when collecting for you, no matter what.

While we work the accounts the same way, we do want to make sure we know where an account belongs. If your system isn’t able to easily separate accounts you are claiming for Medicare Bad Debt reimbursement, we can create a second client code within our system and list all of your Medicare bad debts to that client code. This way, when accounts are canceled and returned uncollectable within your preferred timeframe, you can easily find all your reimbursable Medicare bad debts on that cancel report, including all the relevant data needed for claiming those accounts for reimbursement.

In addition to the common Cancel and Return Report, we send a special listing of Medicare Bad Debts and Supporting Data reports. The fields on this report include:

• Patient Name
• HIC number
• Dates of service
• Indigency stats
• Date first bill sent to beneficiary
• Date collection efforts ceased
• Medicare remittance advice date
• Deductible
• Coinsurance
• Original listed balance
• Agency cancel amount

This list includes everything you need to receive your Medicare Bad Debt reimbursement, eliminating the need for your staff to find the information.

New Collection Activity Documentation Requirements

What it Means

CMS has expanded the documentation requirements when it comes to collection activity. Previously, the requirement was to provide reporting for in-house collection activities only. Once an account had been placed in collections, no specifics, like dates and time of phone calls and dates of collection letters sent, were required.

The new rule clearly states that these documentation requirements apply to both in-house and with external collection agency activities. This means that you need your collection agencies to maintain – and upon request – furnish verifiable documentation to the provider’s contractor, including the patient account history documents that show the dates of various collection actions, such as:

• Issuance of bills to the beneficiary
• Follow-up collection letters
• Reports of telephone calls, personal contact, etc.
• Beneficiary’s file with copies of bill(s) and follow-up notices

What Americollect is Doing

This will be no easy feat for collection agencies that have not invested in and grown with technology in recent years. The request to maintain copies of the bills and follow-up notices could prove to be a major issue for agencies who are lagging behind the industry leaders.

At Americollect, we are prepared to meet this need quickly and efficiently. For our clients with EHR systems capable of handling the data, we report our collection activity with a notes file on a weekly basis. This way, if their Medicare contractor would audit their accounts, the system will have all the collection activity information they require, eliminating the need to send Americollect a special request to furnish this report.

For our clients with systems that do not have the capacity to accept notes files, we maintain all collection activity data in our own system and provide the information upon request, as the rule requires. Our internal data team is working on a standard format that we can use to report this data back to our clients for their Medicare contractor audits in the near future.

We are also expanding our engagement with our notice vendor so that they will store images of sent notices for three years, which will fulfill the requirement to maintain copies of the bills and follow-up notices. This way, if your Medicare contractor requests images of statements and notices sent to your patients, we will be able to quickly provide them.

Timing of the 120-Day Collection Period and What Resets the Clock

What it Means

The 120-day collection period has caused some confusion in the past. Previously, the rule didn’t specifically mention restarting the clock with any payment within the 120-day period, but the updated rule calls this reset out, meaning you have one more data point to track. This “gotcha” from CMS means they can deny Medicare bad debt reimbursement if any payments have been made during the 120-day period.

What Americollect is doing

We are adding a new data point to the criteria we use for our clients for cancelling accounts back uncollectable. This data point is called the “date of last payment plus 120 days,” and will ensure that no accounts you receive back from us will be disqualified for reimbursement because the 120-day collection period was not reset after any partial payments were made.

Posting Payments Back to Patient Accounts

What it Means

When you have an account that has been placed in collections, and that collection agency obtains payment of an account receivable, the gross amount collected needs to be posted back to those specific accounts if you would like to claim the final uncollected balance for Medicare bad debt reimbursement.

What Americollect is doing

This ties into what we have been doing for years. We have been providing electronic payment reports to our clients to electronically post payments we collect to their accounts with no manual intervention. If you are still using a process where a team member manually enters those payments into your system based off the report from your collection agency, please let us know and we would be happy to help automate that process for you.

Can I Claim Accounts Still in Collections for Medicare Bad Debt Reimbursement?

What it Means

The simple answer is no. If an account is still at a collection agency, you cannot claim that account for Medicare bad debt reimbursement. According to the rule, the purpose of having an account at a collection agency is to collect on the account, even if it is in a passive collection status. It does not meet the requirement that “sound business judgement established that there was no likelihood of recovery at any time in the future.”

What Americollect is doing

We are providing education and assistance to our clients to help them understand the rules and help them avoid large Medicare bad debt reimbursement adjustments.

How Collection Agency Fees Need to be Accounted For

What it Means

Whenever you have a collection agency work to recover payments, there are fees associated with those actions. When it comes to Medicare bad debt, those fees are not allowed to be considered as part of that reimbursable bad debt, which essentially means you are not allowed to include those fees in what you claim for Medicare bad debt reimbursement. If your collection agency collects $1,000, you need to post the whole payment to the account, not that payment less the collection agency’s fee.

CMS does, however, allow those fees to be allowed as administrative cost, provided the collection agency follows the reasonable collection effort requirement.

What Americollect is doing

This is another situation where Americollect continues to provide education and assistance to help them understand the rules and help them avoid large Medicare bad debt reimbursement adjustments.

The Medicare Bad Debt Final Rule contains a lot of information, but this article highlights many of the important points for organizations that work with collection agencies for their Medicare bad debt. If you are looking for more information on the areas mentioned in this article, we will be hosting a webinar on DATE and TIME. We hope to see you there!