When is 120 days not always 120?

A question that healthcare facilities and providers often ask when dealing with Medicare billing is – when is 120 days? In September, the Centers for Medicare and Medicaid (CMS) released the 2021 IPPS 2021 Final Rule, which in part sought to clarify how the 120 day rule works. The 120 day rule was first created to set the timeframe for when hospitals were able to send unpaid accounts back to Medicare as bad debt. This period of time is often mistaken for how long hospitals must wait before sending unpaid bills to a collection agency, which is not the case. 

The previous rule stated that if the debt remains unpaid for more than 120 days, from the date the first bill is mailed to the beneficiary, the debt may be deemed uncollectible. 

Pretty straightforward, right? But that’s until the patient makes a payment. This is what the 2021 Final Rule needed to clarify.  

In the Final Rule, they amended § 413.89 by adding a new paragraph that states: 

“When the provider receives a partial payment within the minimum 120-day required collection effort period, the provider must continue the collection effort and the day the partial payment is received is day one of the new collection period. For each subsequent partial payment received during a 120-day collection effort period, the provider must continue the collection effort and the day the subsequent partial payment is received is day one of the new collection period. The provider is permitted to end the collection effort at the end of a 120-day collection effort period when no payments have been received during those consecutive 120 days.” 

But what does this mean for you or your facility? It means it’s never been more important to ensure your EMR and your collection agency are in compliance with the rule. 

Whether you work collections in-house or use a collection agency, ensuring systems are in place to track the 120 day rule compliance could be the difference between receiving Medicare payments or being selected for an audit. Your EMR should have rules designed to reset the countdown when, and if, a payment is received. The same goes for your collection agency. If your agency is returning accounts within 120 days of receiving a payment, they could be pushing you out of compliance. This also applies to your first party collections process. Whether you do it internally or externally, it is important that the date of last payment is being shared if that account is sent to your collections partner. 

At Americollect, we’ve built automation into our software to safeguard against returning accounts early by automatically resetting the 120 day clock when a patient makes a payment. This information is fed back to our clients automatically between our system and EMRs such as Epic. The programing for the cancelation process ensures accounts are properly dated within both systems.  

Some hospital systems and providers will take all accounts under a set threshold that meet requirements and write them off as Medicare bad debt. This makes it imperative that we ensure the accounts we return have reached the 120 day requirement so our clients remain in compliance of any audit requests. Triggering an audit because of the 120 day requirement will cause the Medicare Administrative Contractor (MAC) to review every claim your facility has submitted, adding undue stress to your staff. 

With the updated 120 day rule, there is no more gray area when it comes to what 120 days means. Your Medicare bad debt claims need to meet these requirements to guarantee your facility receives the income it is entitled to. Work with your in-house team or collection agency to make sure they have the correct procedures in place when it comes to the 120 day rule, and if you have any questions about how this works, we would be more than happy to walk you through it.