Medicare Bad Debts

Table of Contents

• Review Medicare Bad Debt Listing
• Identifying Non-Allowable Fee Schedule Services
• Fee Schedules Included in Bad Debt Policy
• Medicare Bad Debts
• Related Content

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Review Medicare Bad Debt Listing

Medicare bad debts are unrecovered costs due to uncollectible Medicare Part A deductible and coinsurance amounts. Allowable Medicare bad debt for cost reporting purposes only applies to services paid under reasonable cost (or developed from reasonable cost, such as a PPS). Refer to Section 1861 (v)(1)(a) of the Social Security Act, as implemented in the regulations at 42 CFR Section 413.89. Also refer to CMS Publication 15-1, Provider Reimbursement Manual - Part 1, Chapter 3 for more details.

Medicare bad debts are reimbursable through the Medicare cost report. If claimed on the cost report, the provider must prepare and submit a detailed Medicare bad debt listing that corresponds to each Medicare bad debt line on the cost report (Where an amount is reported). This is a requirement when submitting a Medicare cost report to the MAC in accordance with 42 CFR 413.24.

The Medicare bad debt listing, must include all columns with data as specified in the cost report instructions at CMS Publication 15-2. Please refer to the applicable chapter’s instructions for each provider type. For example, if filing a hospital cost report (Form 2552-10), the instructions for a Medicare bad debt listing are referenced in CMS Publication 15-2 Chapter 40 (Specifically in the Worksheet S-2 Part II Questionnaire at section 4004.2).

Bad debts applicable to Medicare Advantage and Medicare HMO claims do not qualify for Medicare bad debt reimbursement on the cost report. These are private commercial plans covered under Medicare Part C. Medicare bad debt reimbursement on the cost report is only applicable to uncollectible Medicare part A deductible or coinsurance. Do not include Medicare Advantage or Medicare HMO amounts on the Medicare bad debt lines of the cost report. Also do not include these on the supporting Medicare bad debt listing.

Medicare bad debts for uncollected deductible and coinsurance amounts relating to outpatient services that are reimbursed under a fee schedule payment are not allowable for Medicare cost reporting purposes.

When determining “allowable” Medicare bad debt for cost reporting, it is essential that you be able to differentiate between deductibles and coinsurance related to outpatient services paid according to a fee schedule, and other non-fee schedule services as reflected in FISS.

The Bad Debt Listing

Cost Reporting Periods Prior to October 1, 2022

The provider should submit the Exhibit 2 [Excel], Bad Debt Listing, with the cost report. In order to expedite the review process, the provider may also want to consider submitting the state Medicaid remittance advices showing each uncollected co-insurance and deductible amount.

Exhibit 2

Columns 1, 2, 3 - Patient Names, HIC NO., Dates of Service (From - To) - The documentation requested for these columns is derived from the beneficiary's bill. Furnish the patient's name, health insurance claim number (social security number) and dates of service that correlate to the filed bad debt. (See PRM-1, Section 314 and 42 CFR 413.80.)

Column 4 - Indigency/Welfare Recipient - If the patient included in column 1 has been deemed indigent, place a check in this column. If the patient in column 1 has a valid Medicaid number, also include this number in this column. See the criteria in PRM-1, Chapter 3, Sections 312 and 322 and 42 CFR 413.80 for guidance on the billing requirements for indigent and welfare recipients.

Columns 5 & 6 - Date First Bill Sent to Beneficiary - Date Collection Efforts Ceased. - This information should be obtained from the provider's files and should correlate with the beneficiary name, Medicare ID, and dates of service shown in columns 1, 2, and 3 of this exhibit. The date in Column 6 represents the date that the unpaid account is deemed worthless, whereby all collection efforts, both internal and by outside entity, ceased and there is no likelihood of recovery of the unpaid account. (See CFR 413.89(f) and PRM-1, chapter 3, Sections 308, 310, and 314.)

Column 7 - Medicare Remittance Advice Dates - Enter in this column the remittance advice dates that correlate with the beneficiary's name and date of service shown in columns 1, 2, and 3 of this exhibit. This will enable the MAC to verify the authenticity of the Medicare patient and the related deductible and coinsurance amounts.

Columns 8 & 9 - Deductible - Coinsurance - Record in these columns the beneficiary's unpaid deductible and coinsurance amounts that relate to covered services as instructed in this exhibit.

Column 10 - Total Medicare Bad Debts - Enter on each line of this column the sum of the amounts in columns 8 and 9. Calculate the total bad debts by summing up the amounts on all lines of Column 10. This "total" should agree with the bad debts claimed in the cost report. Attach additional supporting schedules, if necessary, for recoveries of bad debts reimbursed in prior cost reporting period(s).

Exhibit 2a

Cost Reporting Periods on or after October 1, 2022

The provider should submit the Exhibit 2A [XLSX], 2552-10 (Hospital) Exhibit 2A Medicare Bad Debt Specification. To expedite the review process, the provider may also want to consider submitting the state Medicaid remittance advices showing each uncollected co-insurance and deductible amount. Complete separate exhibits for bad debts resulting from inpatient services and outpatient services. A hospital healthcare complex claiming bad debts for multiple components must complete separate exhibits for each CCN. Enter dates in the MM/DD/YYYY format.

Columns 1, 2, 3, 4, 5, and 6 - From the Medicare beneficiary’s bill, enter the beneficiary’s name, dates of service, patient account or identification number, and MBI or HICN, that correlate to the claimed bad debt. (See 42 CFR 413.89(f).)

Column 7 - Enter the Medicare beneficiary’s Medicaid number if the beneficiary was dually eligible (eligible for Medicare and some category of Medicaid benefits). If there is an entry in this column, there must be an entry in column 10.

Column 8 - Enter "Y" for yes if the Medicare beneficiary was not eligible for Medicaid but the provider deemed them to be indigent; otherwise, enter "N" for no. (See 42 CFR 413.89(e)(2)(ii).)

Column 9 - Enter the Medicare remittance advice date for the Medicare beneficiary information in columns 1 through 6.

Column 10 - Enter the Medicaid remittance advice date or, when the provider does not receive a Medicaid remittance advice, enter "AD" for alternate documentation used to determine state liability (42 CFR 413.89(e)(2)(iii)(B)), that corresponds to the Medicare beneficiary information in columns 1 through 7.

Column 11 - Enter the date a remittance advice was received from a secondary payer, if applicable. When a secondary payer does not accept liability, a denial or notification date may be entered.

Column 12 - Enter the amount of coinsurance and deductible for which the Medicare beneficiary is responsible. If the beneficiary is a qualified Medicare beneficiary (QMB), enter "QMB." For a Medicare beneficiary who is dually eligible for Medicaid (not a QMB), enter the amount the beneficiary is required to pay under the state cost sharing agreement (42 CFR 413.89(e)(2)(iii)). For a Medicare beneficiary deemed indigent by the provider (column 8 is "Y"), enter zero.

Column 13 - Enter the date that the first bill was sent to the Medicare beneficiary. If the beneficiary is a QMB, enter "QMB."

Column 14 - Enter the date the Medicare beneficiary’s liability was written off of the A/R in the provider’s financial accounting system. The date entered in this column may be the same as, or earlier than, the date the account was deemed worthless (written off as a Medicare bad debt).

Columns 15A and 15 - In column 15A, enter "Y" for yes if the account was sent to a collection agency; otherwise, enter "N" for no. If column 15A, is "Y", in column 15, enter the date the collection agency returned the account (i.e., the date that the collection agency ceased collection effort on the account).

Column 16 - Enter the date all collection efforts ceased, both internal and external, including efforts to collect from Medicaid and/or from a state for its cost sharing liability.

Column 17 - Enter the date the deductible and coinsurance amounts were written off as a Medicare bad debt (i.e., the amount must have been written off as a bad debt against the A/R in the provider’s financial accounting system); all collection effort, internal and external, against the Medicare beneficiary and/or other third parties ceased; and a Medicaid remittance advice was received from the state for Medicaid patients or alternate documentation exists as permitted under 42 CFR 413.89(e)(2)(iii)(B).

Column 18 - Enter the amount of recoveries for amounts previously written off as an allowable Medicare bad debt in this or a prior cost reporting period. The amount reported in this column includes any payments received on an account after the account was written off as a bad debt, including payments received in the same year the account was written off when the payment was received after the date of the write off. (See 42 CFR 413.89(f).)

Column 19 - If an amount is reported in column 18, enter the fiscal year end of the cost reporting period in which the Medicare bad debt (to which the recovery applies) was claimed and reimbursed. This column is optional; however, the date assists in identifying recovery amounts that must be offset. The fiscal year end entered in this column is a prior cost reporting period unless the write-off and recovery both occurred during this cost reporting period.

Column 20 - Enter the Medicare deductible from the Medicare remittance advice (before any payments received from any party). Report deductible amounts only when the provider billed the patient with the expectation of payment. See 42 CFR 413.89(e)(2) for possible exception.

Column 21 - Enter the Medicare coinsurance amount from the Medicare remittance advice (before any payments received from any party). Report coinsurance amounts only when the provider billed the patient with the expectation of payment. See 42 CFR 413.89(e)(2) for possible exception.

Column 22 - Enter the amount of any payments received from the Medicare beneficiary, their estate, third party insurance, etc., before the account was written off, for any amounts reported in column 20 and/or column 21. For example, when a beneficiary had a liability from a prior year for a deductible of $2,500 and made payments totaling $1,500 in the prior and current years, the provider determined the remaining balance of $1,000 uncollectible and deemed worthless. The payments of $1,500 are reported in column 22, leaving the remaining $1,000 written off in the current period as an allowable bad debt.

Column 23 - Enter the allowable Medicare bad debt amount. This amount must be less than or equal to the sum of the amounts in columns 20 and 21, less any payments in columns 18 and 22. If the fiscal year end in column 19 is prior to this cost reporting period, enter the recovery amount (reported in column 18) as a negative amount in this column. For each CCN, the sum of the amounts entered in this column on each listing, (inpatient and outpatient), as applicable, must equal the bad debts claimed for that CCN on the Medicare cost report. For example, CCN ##-0001, an inpatient acute care hospital, reported bad debts of $24,000 on the Exhibit 2A for inpatient and indicated that $12,000 on the Exhibit 2A for Medicaid eligible. The amount reported on Worksheet E, Part A, line 64, must equal $24,000. The amount reported on Worksheet E, Part A, line 66, must equal $12,000 (dual eligible).

Column 24 - This column is for informational purposes. Enter any comments or additional information as needed.

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Identifying Non-Allowable Fee Schedule Services

As provided by CMS in Change Request (CR) 2225 , there is no payment for bad debts (unrecovered costs attributable to uncollectible deductible and coinsurance arising from covered services to beneficiaries considered in calculating payment to providers reimbursed on the basis of reasonable cost) with respect to services paid under the Medicare physician fee schedule. Under a fee schedule (e.g., fee-based outpatient therapies after January 1, 1999 and ambulance services after April 1, 2002), payment is not based on incurred costs; rather payment is made based on a schedule for the specific service furnished. Whether a fee schedule has its basis in charges or is resource-based, the payment is not related to a specific providers cost outlay for a service and does not embody the concept of unrecovered cost. Bad debts are allowable only to an entity that payment is made on the basis of reasonable cost.

The following information describes how providers can identify fee schedule services in the FISS system. This outline presumes the provider has access to the FISS/DDE online system.

If you use the FISS/DDE online system you can review the following screens to verify whether a service was paid on a fee schedule and whether there was coinsurance or deductible applied. In the inquiry mode, locate the claim in question

• Go to Claim Page 02 (MAP 1712) to see the revenue/HCPCS codes that were billed. Usually, but not always, you will notice a rate filled in the rate column when a service has had a fee schedule applied.
• Go to MAP 171A (press from Claim Page 02 to view this MAP) to review each line in the claim. The provider can access the line specific information by paging up (F5) or down (F6) within the line item detail view.
• Locate any lines that have a status indicator “A.” Identify any coinsurance or deductible associated with this line as belonging to fee schedule service.
• Do not include those amounts on your bad debt log.

Use the following FISS screen examples as a resource for determining allowable/non-allowable bad debts:

The first MAP 171A screen example shows that the service has a status indicator “A,” which would be paid on a fee schedule. However, since it is a clinical diagnostic laboratory service, there would be no deductible or coinsurance reflected on the line item.

This second MAP 171A screen example shows the line item deductible and coinsurance amounts, however, the service has a status indicator “X” indicating that it was not paid on a fee schedule and therefore may be eligible for bad debt.

For providers to properly claim a bad debt and be reimbursed under the Medicare Program, you must follow all of the Criteria for Allowable Bad Debt set out at 42 CFR. §413.89(e) For clarification of Medicare bad debt policy related to accounts at a collection agency see MLN Matters article SE0824.

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Fee Schedules Included in Bad Debt Policy

CMS uses different fee schedules for various provider types. If you are generally reimbursed under the OPPS, refer to Addendum B of the Federal Register Final Rule (published annually by CMS) for a list of services that are paid with a status indicator “A” (denoting fee schedule services).

Services that may be paid on a fee schedule (depending on your provider type) include:

• Ambulance
• CORF outpatient rehabilitation facility
• MPFS
• DMEPOS
• Certain drugs
• Certain clinical diagnostic laboratory
• Certain screening services

If you provide services reimbursed under any of these fee schedules, please ensure that bad debts are not claimed for any unpaid deductible and coinsurance.

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Medicare Bad Debts

Allowable Medicare Bad Debt Defined

The Code of Federal Regulations (CFR) at 42 CFR 413.89(e) defines the criteria for an allowable Medicare bad debt. It requires that the Medicare bad debt meet four basic criteria:

1. Debt must be related to covered services and derived from deductible and coinsurance amounts.
2. Provider must be able to establish that reasonable collection efforts were made.
3. 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. Provider Reimbursement Manual (PRM) 15-1, Section 308 mimics these requirements

Claiming Bad Debts

CFR at 42 CFR 413.89(f) requires that the uncollectible Medicare deductible and coinsurance be charged off as bad debts in the accounting period when the bad debt is determined to be worthless. For example, a bad debt that is properly written off the providers books as a bad debt after the providers current Medicare Fiscal Year End Cost Report must be claimed on the next Medicare cost report.  Bad debts may only be claimed on a provider’s cost report after all collection effort has ceased, including efforts made by an external collection agency.

Reasonable Collection Efforts

To be considered a reasonable collection effort, the PRM 15-1, Section 310 requires that a provider's effort to collect Medicare deductible and coinsurance amounts be similar to the effort the provider puts forth to collect comparable amounts from non-Medicare patients. The collection effort must involve the issuance of a bill on or shortly after discharge or death of the beneficiary to the party responsible for the patient's personal financial obligations. Delays in sending a timely first bill could result in the disallowance of the bad debt claim. During our testing of bad debts, we will use the following standards to define the timeliness of billing coinsurance/deductible:

Effective for cost report periods starting on or after 10/01/2020: Providers must issue the first bill within 120 days of the latter:

1. The date of the Medicare remittance advice that is produced from processing the claim for services furnished to the beneficiary that generates the beneficiary's cost sharing amounts.
2. The date of the remittance advice from the beneficiary's secondary payer, if any; and
3. The date of the notification that the beneficiary's secondary payer does not cover the service(s) furnished to the beneficiary.

Absent any verifiable documentation to support otherwise, bad debt billing outside the above timeframe will result in adjustments disallowing bad debts.

Additionally, the PRM indicates that the collection effort should include other actions such as subsequent billings, collection letters and telephone calls or personal contacts with this party which constitute a genuine, rather than a token, collection effort. The provider's collection effort may include using or threatening to use court action to obtain payment.

Use of Collection Agencies

PRM 15-1, Section 310 (A)  permits the provider's collection effort to include the use of a collection agency in addition to or in lieu of subsequent billings, follow-up letters, telephone and personal contacts. Where a collection agency is used, Medicare expects the provider to refer all uncollected patient charges of like amount to the agency without regard to class of patient. The "like amount" requirement may include uncollected charges above a specified minimum amount. Therefore, if a provider refers to a collection agency its uncollected non-Medicare patient charges which in amount are comparable to the individual Medicare deductible and coinsurance amounts due the provider from its Medicare patient, Medicare requires the provider to also refer its uncollected Medicare deductible and coinsurance amounts to the collection agency. Where a collection agency is used, the agency's practices may include using or threatening to use court action to obtain payment.

According to PRM 15-1, Section 310(B)  when a collection agency obtains payment of an account receivable, the full amount collected must be credited to the patient's account and the collection fee charged to administrative costs. For example, where an agency collects $100 from the beneficiary, and its fee is 50 percent, the agency keeps $50 as its fee for the collection services and remits $50 (the balance) to the provider. The provider records the full amount collected from the patient by the agency ($100) in the patient's account receivable and records the collection fee ($50) in administrative costs. The fee charged by the collection agency is merely a charge for providing the collection service, and, therefore, is not treated as a bad debt.

120-day Rule

The PRM 15-1, Section 310.2  is commonly referred to as the 120 day rule. It provides that if after reasonable and customary attempts to collect a bill, the debt remains unpaid more than 120 days from the date the first bill is mailed to the beneficiary, the debt may be deemed uncollectible. Any payments received from the beneficiary re-start the 120-day timeframe.

Moratorium for Bad Debts Sent to Collection Agencies

CMS issued a moratorium for bad debts as part the Omnibus Budget Reconciliation Act of 1987 in section 4008(c). Otherwise, in accordance with PRM 15-1, Section 310 which allows the bad debt to be written off when claimed as worthless (when the debt has been returned from the collection agency as uncollectible) the bad debt would be unallowable if written off when sent to collection, and the provider cannot substantiate that this practice was allowed by the Intermediary prior to August 1, 1987.

Clarification - April 3, 2009

CMS has indicated that the moratorium on changes to Medicare bad debt policy in effect on August 1, 1987, does not apply to accounts at a collection agency. As a result, in no case is an unpaid Medicare account which is in collection, (including at a collection agency), an allowable bad debt. Bad debts in collection or at a collection agency will not be allowed.

Indigent Patients

An additional and frequently used approach to determine if a debt is uncollectible by other means is to determine that the beneficiary is indigent or medically indigent. PRM 15-1, Section 312 states that a provider may deem Medicare beneficiaries indigent or medically indigent when such individuals have also been determined eligible for Medicaid as either categorically needy individuals or medically needy individuals, respectively.

A second approach is for the provider to apply customary methods for determining the indigence of patients to the case of the Medicare beneficiary under the guidelines established in PRM 15-1, Section 312  This requires the following:

• The patient's indigence must be determined by the provider, not by the patient (e.g., a patient's signed declaration of his inability to pay his medical bills cannot be considered proof of indigence).
• Provider should take into account a patient's total resources which would include, but are not limited to, an analysis of assets (only those convertible to cash and unnecessary for the patient's daily living), liabilities, and income and expenses. In making this analysis the provider should take into account any extenuating circumstances that would affect the determination of the patient's indigence.
• Provider must determine that no source other than the patient would be legally responsible for the patient's medical bill, e.g., title XIX, local welfare agency and guardian and;
• Patient's file should contain documentation of the method by which indigence was determined in addition to all backup information to substantiate the determination.

Once indigence is determined and the provider concludes that there had been no improvement in the beneficiary's financial condition, the debt may be deemed uncollectible, from the beneficiary, without applying the procedures outlined in PRM 15-1, Section 310.

Charity Care

According to 42 CFR 413.89(b)(2) charity allowances are reductions in charges made by the provider because of the indigence or medical indigence of the patient. Under Medicare, costs of covered services furnished to beneficiaries are not to be borne by individuals not covered by the Medicare program, and conversely, costs of services provided for other than beneficiaries are not to be borne by the Medicare program as indicated at 42 CFR 413.89(d). The PRM 15-1, Section 328 clarifies that charity care, courtesy, and third-party payer allowances are not reimbursable Medicare costs and cannot be claimed as Medicare Bad Debts.

Fee Schedule Reimbursement

As provided by CMS in Change Request (CR) 2225 , there is no payment for bad debts (unrecovered costs attributable to uncollectible deductible and coinsurance arising from covered services to beneficiaries considered in calculating payment to providers reimbursed on the basis of reasonable cost) with respect to services paid under the Medicare physician fee schedule. Under a fee schedule (e.g., fee-based outpatient therapies after January 1, 1999 and ambulance services after April 1, 2002), payment is not based on incurred costs; rather payment is made based on a schedule for the specific service furnished. Whether a fee schedule has its basis in charges or is resource-based, the payment is not related to a specific providers cost outlay for a service and does not embody the concept of unrecovered cost. Bad debts are allowable only to an entity that payment is made on the basis of reasonable cost.

Medicare Health Maintenance Organization (HMO) Bad Debts

Building upon the theory that bad debts must be related to services that are based upon cost reimbursement, Medicare HMO bad debts cannot be claimed on the Medicare cost report. According to CMS, Medicare pays most HMOs on a capitated basis and any arrangements between a hospital or other provider and an HMO is a contractual arrangement between the two. When an HMO sends a member patient to a provider for services and that patient does not pay coinsurance and deductible amounts, the provider must deal with the HMO and not the Medicare Program.

Medicare-Medicaid Crossover Bad Debt Accounting Classification

Medicare regulations require providers to follow standardized definitions, accounting, statistics, and reporting practices that are widely accepted in the hospital and related fields. (42 CFR 413.20(a)). PRM 15-1, Chapter 3, Section 320 sets forth methods of determining bad debt expense, where accounts receivable are analyzed and a determination made as to specific accounts which are deemed uncollectible. The amounts deemed to be uncollectible are charged to an expense account for uncollectible accounts. The amounts charged to the expense account for bad debts should be adequately identified as to those which represent deductible and coinsurance amounts applicable to beneficiaries and those which are applicable to other than beneficiaries or which are for other than covered services. Those bad debts which are applicable to beneficiaries for uncollectible deductible and coinsurance amounts are included in the calculation of reimbursable.

Providers claiming Medicare bad debt must meet 42 CFR 413.89 in conjunction with all requirements set forth in CMS Pub. 15-1, Chapter 3. The unpaid deductible and coinsurance amounts for Medicare-Medicaid crossover claims must be classified correctly in providers’ accounting records pursuant to CMS Pub. 15-1, Chapter 3. These Medicare bad debt amounts must not be written off to a contractual allowance account but must be charged to an expense account for uncollectible accounts (bad debt). Effective for cost reporting periods beginning on or after October 1, 2019, providers must comply with these longstanding Medicare bad debt requirements.

Required Documentation

Medicare regulations at 42 C.F.R. 413.20 and 413.24, and program instructions at PRM 15-1, Sections 2300, 2304 require providers to maintain sufficient financial records and statistical data for the proper determination of costs payable under the program. Such data must be accurate and capable of verification by the MAC.

To substantiate a Medicare bad debt the PRM 15-1, Section 314 requires the provider to maintain the source documents to support its claim for a bad debt for each account. Examples of the types of information to be retained may include, but are not limited to, the beneficiary's name and Medicare Beneficiary ID number; admission/discharge dates for Part A bills and dates of services for Part B bills; date of bills; date of write-off; and a breakdown of the uncollectible amount by deductible and coinsurance amounts. This proposed list is illustrative and not obligatory.

For beneficiaries who are dually eligible for Medicare and Medicaid, the patient file must contain the Medicaid remittance advice indicating payment or denial of payment (see CMS' "Must Bill Policy for Dual Eligible Beneficiaries"). When indigence is determined by the facility using a method other than Medicaid eligibility (see Indigent Patients), PRM 15-1, Section 312 requires that the patient's file contain documentation of the method by which indigence was determined in addition to all backup information to substantiate the determination.

Additionally, PRM 15-1, Section 310(B) requires that the provider's collection effort be documented in the patient's file by copies of the bill(s), follow-up letters, reports of telephone and personal contact, etc.

Bad Debt Log Checklist

To ensure that your bad debt claims meet the criteria for cost report reimbursement we recommend that you consider the following items when preparing your bad debt logs:

• Ensure that you do not include accounts that were claimed in prior years. Also ensure that the logs do not contain duplicate accounts for the current year
• Ensure the bad debt relates to unpaid Medicare deductible and coinsurance only.
• Ensure the bad debt is net of any payments received from the beneficiary or other third-party payers. Be able to provide third party remittance advices or proof that deductible/coinsurance is not covered.
• Ensure that coinsurance related to physician Part B professional services or outpatient fee-based services (e.g., therapy services and screening mammography services) is not included.
• For inpatient dual eligible bad debts, ensure that all charges are billed to Medicaid. For outpatient dual eligible bad debts, ensure that at least all charges with associated coinsurance are billed to Medicaid. Ensure that Medicaid is billed timely and a remittance advice showing payment, or a valid rejection is available for our review.
• Ensure that indigent bad debt claims are fully documented with respect to the determination of the beneficiary's total resources.
• For non-indigent, non-dual eligible accounts ensure that collection activity is documented in the file. If accounts are sent to a collection agency, be able to provide clear evidence that accounts were returned from collection.

For deceased patients, ensure that the determination that there was no estate available is fully documented. A statement from a surviving family member that there is no estate is not acceptable.

With respect to testing of bad debt logs submitted with the cost report, please note that the contractor reserves the right to reject a provider's request to submit revised bad debt logs once review of the provider's original submission has commenced.  Any updates to bad debt logs must be submitted through the amended cost report process.

Bad Debt Recoveries

In some cases, an amount previously written off as a Medicare bad debt may be recovered in a subsequent accounting period. When this occurs 42 CFR 413.89(f) provides that the income must be used to reduce the cost of beneficiary services for the period in which the collection is made. Additionally, PRM 15-1, Section 316 provides that such reductions in reimbursable costs should not exceed the bad debts reimbursed for the applicable prior period.

We ask that recoveries be readily identifiable on your submitted bad debt logs, or on a separate log.

​​​​​Related Content

• Recommended Checklist for Provider to Review Bad Debt Listing

Revised 7/23/2024