Be Prepared for Increased Medicare Bad Debt Compliance Scrutiny

Between 2016 and 2018, healthcare providers sought $10 billion in reimbursement for Medicare bad debt, prompting an audit by the U.S. Department of Health and Human Services (HHS) Office of Inspector General (OIG) to examine providers’ compliance with Federal bad debt reimbursement requirements.

To perform its audit, OIG randomly selected 67 provider cost reports from which it pulled a sample of 148 bad debts. Of that sample, OIG identified 18 instances where providers didn’t comply with Federal requirements regarding reasonable collection efforts before claiming reimbursement. OIG further identified four discrepancies between the amounts claimed for reimbursement versus the amounts owed by Medicare beneficiaries. In total, these instances of noncompliance resulted in roughly $30,000 of unallowable Medicare reimbursement.

During its audit, OIG observed 29 instances in which providers complied with Federal requirements but didn’t follow their own internal policies and procedures when collecting Medicare coinsurance and deductibles from beneficiaries. OIG noted that, “[p]roviders that do not comply with their own stated policies and procedures are at an increased risk that they will not comply with Federal requirements.”

OIG + CMS Agree More Scrutiny is Needed for Medicare Bad Debt Reimbursement

OIG recommended to the Centers for Medicare & Medicaid Services (CMS) that it consider issuing instructions or guidance to the Medicare Administrative Contractors (MACs) that would require or encourage the MACs to more regularly review Medicare bad debts claimed on cost reports. OIG suggested that CMS define individual Medicare bad debt thresholds to trigger audits.

In a written letter from Administrator Chiquita Brooks-LaSure, CMS agreed with OIG’s recommendations and stated that it would consider OIG’s findings when issuing future guidance to the MACs regarding the review of Medicare bad debts. CMS also stated that MACs do perform regular reviews of Medicare bad debts and recouped $294 million from providers during the fiscal years 2016 through 2018.

Take Action to Reduce Medicare Bad Debt Compliance Risk

Medicare bad debt compliance continues to draw federal regulatory scrutiny, and this recent report from OIG indicates it may only increase in the future. This OIG report highlighted the need for regular associate education and corresponding internal auditing program. By creating a comprehensive collections policy and auditing program, you help ensure that your organization is prepared for an OIG audit and reduce the risk of FCA actions, which may result in costly damages and penalties. For tips to mitigate risk and enhance regulatory compliance, review our article on Medicare bad debt.

Contact one of our revenue cycle experts today if your organization needs support or has further questions.

These materials are for general informational purposes only. These materials do not, and are not intended to, constitute legal or compliance advice, and you should not act or refrain from acting based on any information provided in these materials. Neither Ensemble Health Partners, nor any of its employees, are your lawyers. Please consult with your own legal counsel or compliance professional regarding specific legal or compliance questions you have.