Many Nursing Home Administrators and Business Office Managers do not fully understand the concept of Medicare Reimbursable Bad Debt or realize the potential dollars they may be forfeiting. I am going to try to break it down so that you can stop losing money and capitalize on an opportunity sitting right in front of you.
Let’s set up a typical NH scenario:
Resident Jane Doe fell at home and broke her hip. She was admitted into the hospital for more than 3 midnights and had hip surgery. She is coming to your nursing home post surgery as a skilled Part A admission for rehab. As you know, when you qualify for a Medicare Part A stay, you have up to 100 days of skilled care. The first 20 days are covered 100% by Medicare. Beginning on day 21, there is a copay required. However, Ms. Doe has no coinsurance payer – neither Medicaid nor a private insurance. Even worse, she knows she won’t qualify for Medicaid due to some assets and she cannot afford to pay the coinsurance privately. So, she is planning on leaving after 20 days.
Here, friends, is the opportunity that most facilities miss. Nursing homes usually are doing everything they can to “assist” that resident out the door on day 21 because they don’t want to create a bad debt, a debt that will not be repaid. You see, bad debts are havoc on the accounts receivable books. A good AR person is constantly scrubbing their books to clean off any old accounts and eliminate any possibilities of growing more bad debt.
This is where you and I can make money and other nursing homes lose. Let’s compare our home to our competitor’s and see the difference in our financials with the same resident. Let’s assume that Ms. Doe RUG’ed out at $400 per day. The typical copay, let’s say, is around $133. So, on days 1-20, both We and Our Competitor will make the same amount or revenue, $8,000. However, that’s it for Our Competitor. That’s all they’re going to get. They’ve allowed, even encouraged, this resident to discharge after only 3 weeks of therapy in their SNF, when she may have actually needed 6-7 weeks of therapy depending on her condition. So, not only have they lost money, they discharged a resident too soon clinically. They’ll probably see her again real soon, though, because, many residents who go home before they’re actually ready to be discharged end up falling again and going back to the hospital.
On day 21 in our facility, nothing changes. We still provide the resident the exact same quality of care that she needs in order to go home as a safe discharge. “But, you’re only getting paid the $400 minus the copay?” you say. You’re right; but, here’s where it gets interesting.
Ms. Doe actually needed 7 weeks of rehab in order to meet her goals. We discharged her home on day 51. So, we had 20 days @ the full $400 RUG rate. We had 30 additional days at $267 ($400 minus the copay $133). That’s not all.
We discussed the payment options with Ms. Doe beforehand. We knew she would not be able to pay the copay. We also knew she needed more than 3 weeks of therapy. Here’s what happened:
Upon the resident discharging from the facility and from Medicare, timely collection efforts were made on the entire balance owed – monthly statements, collection letters, and documented calls.
After 120 days of timely collection efforts beginning from the date of discharge or when the resident comes off Medicare (with no payment…if the resident is paying $100 a month, you must accept this payment and cannot begin counting the 120 day period), this copay to a Medicare Part A claim in a SNF becomes “allowable” bad debt. What this means is it’s reimbursable. Currently, you’re able to recoup 70% of this unpaid balance from Medicare in the year-end Medicare cost report settlement. (This information is accurate as of the December 2009 publication of this article. Medicare changes constantly, so be sure to check the latest Medicare guidelines for current bad debt reimbursement information).
So, let’s look at our numbers again:
Our Competitor made $8,000 and really discharged a resident too early.
We followed the rules, planned a safe discharge when the resident was ready and had maxed her rehab goals and our facility made $18,803 in revenue on the same resident with the same condition.
Days 1-20: $400 per day = $8,000
Days 21-50: $00 – copay $133 = $267 per day x 30 days = $8,010
Reimbursable bad debt: 30 days x $133 @ 70% = $2,793
$8,000 + $8,010 + $2,793 = $18,803 !!!
We’ve more than doubled our revenue on the same resident, same condition. How’s that for maximizing your reimbursement?
I hope that scenario was helpful. There are a few specifics that I did not include and you should check with your business office, AR consultant, accountant, etc. for more details and to make sure you understand all the facility’s documentation requirements on Medicare Reimbursable Bad Debt. Also, you can read for yourself in Chapter 3 of the Provider Reimbursement Manual (PRM), CMS Publication 15-1, and the Code of Federal Regulations (CFR) 42, Section 413.80.