Medicare reimburses hospitals 65 percent of unpaid deductible and co-insurance balances for patients covered by the program. The unpaid balance may be claimed once the patient is deemed to be “indigent” by Medicare. For most claims this means documenting that bills have gone to the patient, 120 days have gone by since the first bill to the patient was sent and that the claim has been returned from a collection agency as uncollectable.

Nationally, around 20 percent of all patients enrolled in Medicare are also covered by the Medicaid program. Patients covered by Medicare and Medicaid are commonly called “dual eligible.” For dual eligible patients, the unpaid Medicare deductible and co-insurance amounts are billed to Medicaid and the unpaid balance is deemed as an allowable amount to be claimed by the hospital upon the payment being processed by Medicaid. Patients are considered indigent when Medicaid has processed the claim. Medicaid processing the claim usually results in no payment to the hospital because Medicare has already paid more than Medicaid deems as an allowable payment for the service.

Kennedy University Medical Center, now called Jefferson New Jersey, was looking to improve its practices around such reimbursement dual eligible bad debts.

The Problem

The first part of the problem was, how do you identify which patients have unpaid Medicare deductibles that were billed and processed by Medicaid?

Let’s start at the beginning of the normal process of compiling a Medicare bad debt listing. The process followed by most hospitals. We start in patient accounting when the balance of an account is written off the books. The hospital uses a special code called a “transaction code” to write of unpaid account balances. If the amount due to the hospital is uncollectable because the patient can’t pay, the transaction code should be a “bad debt” transaction code. If the balance is being written off because the payer, in this case Medicare, pays an amount lower than the charges, the code used should be a “contractual allowance” code. At the end of the year most hospitals run a report of all the Medicare accounts written off using the “bad debt” transaction code to create a bad debt list for filing on the cost report.

The first problem we found was that the correct write off code was not always used for Medicare bad debt accounts. Sometimes, for accounts that patients were dually eligible for Medicare and Medicaid, the balance was being written off to a contractual allowance code and not ending up in the bad debt list for the cost report.

The second and larger problem was that It was almost impossible to match up the Medicare remittance advices to the Medicaid remittance advices for claims that would qualify as dual eligible bad debts. Medicare rules require this documentation to support the bad debt listing.

The Solution

We used technology to solve the problem. We started by pulling together all the electronically paid claims by Medicare and Medicaid for the last 4 years. Then the hard part. The claims were in a special format and could not be simply opened and copied in a program like Microsoft Excel. Using our proprietary software, we parsed the claims data. We then loaded the data from the claims into a database. Once we created the database, we matched the Medicare claims to the Medicaid claims by using the claim numbers in the accounts.

It really was harder than that. We had to make sure we only included the latest paid Medicare claims with the latest processed Medicaid accounts. We also had to make sure that if Medicaid had denied the claim, we did not include it in our listing.

Since our list did not depend on how the hospital had written the claims off their books, we found bad debt claims that were written to contractual allowance and excluded from the hospitals list. We compiled the supporting documentation as the files were parsed. When the listing we created is eventually audited by Medicare, we can print the supporting documents and provide Medicare and Medicaid claim payment data. The result was over a million dollars in reimbursement for each of the years we reviewed.

We are proud to help healthcare organizations reinvent how they serve improve their revenue cycle. Whether driving business outcomes or restructuring the organization, we can help. We combine deep industry knowledge with technology to deliver unique outcomes. Let’s build the future together.

Contact: Timothy Powell, Principal
Telephone: (813) 778-8528
Email: tpowell@tpowellcpa.com