This month, OIG published its findings relating to its audit on providers who sought reimbursement from Medicare for bad debts. OIG conducted the audit to confirm whether: (a) providers complied with Federal requirements when claiming Medicare reimbursement for Medicare bad debts; and (b) providers’ policies and procedures for collecting from beneficiaries’ Medicare deductible and coinsurance amounts claimed as Medicare bad debts complied with Federal requirements.

The Audit

OIG performed its audit from June 2020 to October 2022, consisting of a review of 67 randomly selected annual cost reports in which providers claimed Medicare bad debts for cost reporting periods ending in 2016 through 2018. The cost reports, which are submitted annually to the Medicare Administrative Contractors (MACs), are based on the providers’ financial and statistical records and serve as a mechanism for providers to claim reimbursement for Medicare bad debts. MACs are responsible for conducting desk reviews and, as appropriate in their discretion, audits of the cost reports to confirm Medicare reimbursement, including the bad-debt claims. From this sample of cost reports, OIG selected a nonstatistical sample of 148 bad debts and reviewed the documentation submitted by the providers to confirm that they fulfilled their obligation to demonstrate to the MACs that: (a) reasonable collection efforts were made; (b) the debt was actually uncollectible when claimed worthless; and (c) there was no likelihood of future recovery based on sound business judgement.

In order to analyze the data set forth in the 148 bad debts, OIG reviewed the documentation submitted by the providers to document collection efforts associated with the bad-debt claims. OIG then contacted the MACs responsible for reviewing such data and confirmed what level of review was conducted by the MAC on the bad debt reported.

OIG also obtained a sample of the providers’ policies and procedures for collecting Medicare bad debts and evaluated whether the policies set out reasonable efforts for collecting such debt. Generally, “reasonable efforts” means that such efforts are similar to the efforts put forth by a provider to collect comparable amounts from non-Medicare patients.

Findings

OIG states that the audit revealed that of the 148 Medicare bad debts in the nonstatistical sample, 86 bad debts were associated with beneficiaries whom providers had deemed indigent and for whom reasonable collection efforts were not required. Of the remaining 62 bad debts, providers did not make or document reasonable collection efforts and did not comply with Federal requirements when claiming 18 bad debts, resulting in the improper reimbursement of $29,124 by CMS. OIG also found that MACs did not concentrate on reviewing bad debts when performing audits of cost reports and did not perform a review to ensure that providers engaged in reasonable collection efforts on any of the 67 randomly-selected cost reports.

OIG’s Recommendations

OIG recommends that CMS issue guidance to the MACs that require or encourage more review of Medicare bad debts claimed in cost reports. OIG indicated that implementing guidelines and thresholds that require an audit may be a mechanism pursuant to which such monitoring could occur. CMS concurs with the recommendation and states that it would consider OIG’s report when issuing future guidance to the MACs on Medicare bad debts while also considering the budgetary constraints and competing priorities for the MACs.

OIG’s full report is available here.