AGG Helps Providers Obtain Reimbursement of Bad Debts

Arnall Golden Gregory LLP

Between 2006 and 2014, affiliated long-term care hospitals and a skilled nursing facility (“the Providers”) provided covered services to patients who were eligible for both Medicare and Medicaid (“dual-eligible beneficiaries”). Because these beneficiaries are deemed indigent and unable to pay their Medicare co-pays and deductibles and because the state Medicaid programs were not obligated to pay, the Providers sought Medicare reimbursement of these “bad debts” (amounts related to patient liability for Medicare services that are uncollectible). However, the Secretary of the United States Department of Health and Human Services (“Secretary”) denied reimbursement of these bad debts because the Providers, who did not participate in Medicaid at the time, could not obtain state-issued remittance advices (“RAs”) showing Medicaid denial of the co-pays and deductibles. The Secretary’s denial followed sub-regulatory guidance requiring Medicare providers to bill State Medicaid programs (the “Billing Requirement”) and obtain a state-issued RA reflecting the amount of Medicaid payment (if any) (the “RA Requirement”).

The United States District Court for the District of Columbia ruled that the administrative record reflected that the Providers satisfied the Billing Requirement and that the agency had denied reimbursement of the bad debts at issue solely based on a failure to satisfy the RA Requirement. The Court further ruled that the RA Requirement was not enforceable because it violated a statutory moratorium prohibiting changes to bad debt reimbursement policies in effect as of August 1, 1987. The Court held that, to avoid that moratorium, it was not enough for the Secretary “to identify pre-Moratorium materials that are merely consistent with the current must-bill policy, which includes the RA Requirement.” Instead, the Secretary needed to show, as a matter of historical fact, that “CMS, in fact, applied the must-bill policy as it does now” (i.e., with an RA Requirement) before the 1987 moratorium was passed. And, as the Court observed, “nothing in the record demonstrates that CMS’s must-bill policy required providers to obtain a state-issued RA before 2004, let alone when the Bad Debt Moratorium was passed in 1987.” Accordingly, the Court concluded that “the RA Requirement violates the Bad Debt Moratorium.”

For a copy of the Memorandum Opinion in Kindred Healthcare, Inc. v. Azar, Case 1:18-cv-650-RJL (D.D.C. July 1, 2020), please click here

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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