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February 13, 2013

Medicare Bad Debts

Acceptance of the Cost Report

During the acceptance process, CGS reviews the bad debt listing to verify that it includes all the required elements per CMS Form 339. This includes:

If the bad debt listing is missing any of the required elements, CGS may contact you to request a corrected listing.

Desk Review of Bad Debt Listing

Various levels of review may be completed on the Bad Debt Listing during the desk review or audit. Whether a review is done and the type of review depends on scoping thresholds as defined by CMS. The review of the sample may include all bad debt criteria as required by section 308 (below), or it may be limited based on prior review experience or the judgment of the Audit Supervisor.

In accordance with the CMS Provider Reimbursement Manual (Pub. 15-2), section 308, the debt must meet these criteria to be an allowable bad debt:

  1. The debt must be related to covered services and derived from deductible and coinsurance amounts.
  2. The provider must be able to establish that reasonable collection efforts were made.
  3. The 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.

Sampling Methodologies

The review may consist of a small judgmental sample or a Probability Proportionate to Size (PPS) sample of 35-60 items. If CGS identifies errors in a judgmental sample, we may expand the sample but the findings will not be projected across the expansion. If CGS selects PPS sample, we will extrapolate the results according to the PPS sampling methodology (see below for an example).

*Sample error calculator

Individual Sample Item $4000
Amount accepted - $3500
Error $ 500
Error % 12.50%
Sampling interval $6666.67
Error projection $833.33

The error projections for each sample item with an error will be summarized for one audit adjustment.

Reference:


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