Bad Debts, Charity Care, and Provider-Based and Departmental Reporting
Bad debts, charity care, and provider-based reporting
Medicare bad debt is the uncollectible deductible and coinsurance portion of covered services furnished to Medicare beneficiaries. To be allowable, the debt must be the provider's own, must follow a reasonable and documented collection effort, must be written off, and must be reduced by any recovery. Medicare reimburses most provider types at 65% of allowable bad debt. Debts attributable to services paid by Medicaid or another payer, courtesy discounts, and amounts never billed are not Medicare bad debt. Bad debts appear on the Worksheet E-3 schedule and flow to settlement.
Charity care is different: it is care furnished to patients determined, under a documented financial assistance policy, to be unable to pay. It is not billed, not pursued as bad debt, and not separately reimbursed; it is reported on Worksheet S-10 as part of uncompensated care. The trap is classifying a patient as charity only after collection efforts began, or claiming the same dollars twice.
Provider-based and departmental reporting requires that a department meet the regulatory tests: licensure, clinical integration, financial integration, public awareness, and location. It must be reported in the correct cost center with the main provider's costs. Hospital-based SNF, NF, and other units are reported in the S-3 series.
Traps: 65% versus 100%; reporting Medicare Advantage claims as Medicare bad debt; reporting charity care as bad debt; and reporting a department as provider-based without attestation or with costs in the wrong center. Rule of thumb: follow the bill and the write-off. If the amount was never billed to the patient, it is charity, not bad debt.