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‘Must-Bill’ Policy Trips Up Quest for Medicare Bad Debt Pay

Oct. 18, 2019, 7:28 PM

Eighty-one California acute-care hospitals must go back to a federal agency to determine if they can collect Medicare payments for patients’ bad debts, a federal court in the District of Columbia said.

A Centers for Medicare & Medicaid Services policy requiring health-care providers to prove they billed potential payers before submitting payment requests for indigent patients’ unpaid deductibles and coinsurance doesn’t violate a 1987 Congressional moratorium on changes to Medicare’s bad debt policy, the U.S. District Court for the District of Columbia said.

The hospitals sought payment for bad debts incurred by patients who were eligible for both Medicare and Medicaid. CMS paid such claims before 1995 to providers who demonstrated there were no alternative sources of payment.

But Medicare wasn’t required to pay the bad debts for 1995 to 2004 because the hospitals didn’t show they complied with a 2004 policy requiring them to first bill California’s Medicaid agency and receive remittance advice documents denying the claims, the CMS said.

The hospitals argued CMS’s decision was wrong. CMS’s pre-1987 policy didn’t include the “must-bill” requirements, so the 2004 rule violated the moratorium, they said.

The court agreed in September 2008 that the must-bill policy’s remittance advice component violated the moratorium. But the billing requirement didn’t, the court said in its Oct. 17 decision.

There was evidence CMS had a policy of denying reimbursement prior to 1987 to providers that hadn’t billed state Medicaid agencies before seeking Medicare bad debt payments, even though CMS’s rules didn’t explicitly require providers to do so, the court said.

The court sent the case back to the CMS to determine if the hospitals actually billed California’s Medicaid agency for the claims at issue.

CMS is an agency within the Health and Human Services Department.

Judge Reggie B. Walton wrote the decision.

Foley & Lardner LLP represented the hospitals. The U.S. Attorney’s Office for the District of Columbia represented the CMS.

The case is Mercy Gen. Hosp. v. Azar, 2019 BL 397860, D.D.C., No. 16-cv-99, 10/17/19.

To contact the reporter on this story: Mary Anne Pazanowski in Washington at mpazanowski@bloomberglaw.com

To contact the editors responsible for this story: Jo-el J. Meyer at jmeyer@bloomberglaw.com; Steven Patrick at spatrick@bloomberglaw.com