Non-Medicaid provider entitled to Medicare crossover bad debt reimbursement


May 11, 2017

A community mental health center (CMHC) was entitled to crossover bad debt reimbursement from its Medicare contractor even though it could not enroll in the California state Medicaid program and obtain a Medi-Cal number, the Provider Reimbursement Review Board (PRRB) ruled. Although the CMHC was unable to obtain remittance advices (RAs) in order to comply with the "must bill" policy, it did fall within one of HHS’ exceptions to that policy (Portia Bell Hume Behavioral Health & Training Center (Concord, California) v. Noridian Healthcare Solutions, Inc., PRRB Hearing, Dec. No. 2017-D14, Case No. 10-1036, April 12, 2016).

Background. Portia Bell Hume Behavioral Health & Training Center (Hume Center) is a CMHC that operates a partial hospitalization program. In November 2009, the Medicare contractor, Noridian Healthcare Solutions, LLC (Noridian), issued a Notice of Program Reimbursement (NPR) to the Hume Center for its fiscal year ending June 30, 2008, disallowing all of the Hume Center’s bad-debt expense for individuals who were eligible for both Medicare and California’s Medi-Cal Medicaid program--a status known as "dual eligibles." The Hume Center requested a hearing before the PRRB challenging whether a provider must first submit a claim to Medi-Cal and obtain a Medi-Cal RA in order to receive Medicare reimbursement for crossover bad debts derived from unpaid Medicare deductibles and coinsurance of dual-eligible patients. Following a hearing, the PRRB determined that the Hume Center had met the requisite requirements and remanded the matter back to Noridian for payment.

Medicare’s bad debt policy. Federal regulations at 42 C.F.R. Sec. 413.89 (e) specify criteria that must be met for a provider to claim bad debt reimbursement on its Medicare cost report:

  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; and
  4. sound business judgment established that there was no likelihood of recovery at any time in the future.

Under CMS’ guidance on its bad-debt policy, providers are required to determine that no source other than the patient would be legally responsible for the patient’s medical bill. Additionally, providers may not declare a Medicare bad debt for that portion of the deductible and copayment amounts that the state is obligated to pay either by statute or under the terms of its plan.

Inability to enroll. In the present case, the Hume Center was a provider who could not enroll in the Medi-Cal program because Medi-Cal did not cover services provided in a CMHC. As a result, the Hume Center could not bill Medi-Cal for the dual-eligible crossover bad debts and did not receive RAs. The Hume Center claimed some of these deductibles and co-insurance amounts on its cost report as bad debts; however, Noridian disallowed the Hume Center’s bad debts based on the CMS must-bill policy.

Applicability of the CMHC exception. The PRRB found that the Hume Center was a CMHC located in California and fell within a recognized exception to the must-bill policy. The PRRB rejected CMS’ argument that the Hume Center’s remedy was by way of judicial action against the state, noting that it was not convinced that requiring a provider to take legal action against its state was a viable means for the provider to obtain Medicare bad-debt reimbursement. The PRRB also took note of emails from Noridian’s auditor, which affirmed that previous contractors were instructed by the regional office to allow reimbursement if the only reason for disallowing was the fact that the Hume Center could not bill the state. The PRRB found that this statement suggested that prior to the year at issue, the CMS Regional Office policy for this region was to allow Medicare contractors to accept bad-debt claims for providers that could not be certified by the state as a Medicaid provider.

Conclusion and decision. Given the unique circumstances of the case, the PRRB concluded that the Hume Center’s inability to obtain RAs from Medi-Cal qualified as an exception to the must-bill policy, its bad debts were uncollectible when claimed as worthless, and sound business judgment established no likelihood of recovery at any time in the future. The Hume Center’s bad-debt claims met the requirements of the regulation, and the matter was remanded to Noridian with instructions to pay the Hume Center for its bad debts related to dual-eligible beneficiaries.

Cost reporting period ending June 30, 2008.

Companies: Portia Bell Hume Behavioral Health & Training Center; Noridian Healthcare Solution, LLC

MainStory: TopStory PRRBDecisions CMSNews CostReportNews MedicaidNews MedicaidPaymentNews MedicareContractorNews PaymentNews PartBNews

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