Medicare Bad Debts Referred to a Collection Agency
The Centers for Medicare and Medicaid Services’ (CMS) long-standing position is Medicare bad debts, as defined in 42 CFR 413.80(d) and (e) (unpaid beneficiary deductible and coinsurance) referred to a collection agency are not uncollectible and may not be reimbursed as Medicare bad debts. In accordance with this position, we are informing you that WPS will not reimburse uncollected deductible and coinsurance amounts until all collection efforts cease, including collection efforts made by an outside agency. A hospital that refers debts to a collection agency shall not claim those as bad debts for Medicare reimbursement until the agency ceases all collection activity and returns the debt to the hospital.
One of the regulatory criteria for an allowable bad debt is that sound business judgment established there was no likelihood of recovery of the debt at any time in the future (42 CFR §413.89(e)(4)). However, the fact a provider has referred a debt to a collection agency implies at least some likelihood that a recovery may take place. For this reason, CMS adopted the position that debts referred to a collection agency are not uncollectible and may not be reimbursed.
A hospital that, as of August 1, 1987, was reimbursed by its fiscal intermediary for debts at a collection agency may qualify for continued reimbursement of current year debts at a collection agency under the bad debt “moratorium” created by Congress. See section 4008(c) of the Omnibus Budget Reconciliation Act (OBRA) of 1987 for the text of the law.
This article will be issued in our July 15, 2006 Newsletter. If you have questions, please contact the Audit Supervisor or Field Audit Manager assigned to your facility.
Page Last Updated: Wednesday, 31-Dec-2008 10:49:02 CST
