Introduction to Medicare Bad Debt — Medicare Advantage

TransUnion Healthcare
Blog Post11/27/2018

Medicare Reimbursable Bad Debt (MBD) is an established revenue source for many hospitals, while MBD from private Medicare Advantage plans (MBD-MA) is a reimbursement opportunity hospitals access less frequently.

Below, TransUnion Healthcare’s Director of Client Development, Joe Gumbert, offers a helpful introduction to MBD-MA for hospitals not capitalizing on this revenue source.

Q: What is Medicare Reimbursable Bad Debt?
J: It’s a component of the Medicare program allowing hospitals to collect reimbursement for deductible and copayment amounts that are incurred by Medicare beneficiaries and are unpaid and uncollectable. MBD is a significant revenue source for many hospitals, as they can receive 65% of the eligible amount of MBD they incur. The key term here is “eligible”, as Medicare has very specific guidelines defining the eligibility of an account claimed as MBD.

Identifying the full amount of MBD a hospital is entitled to is complex, as it requires the aggregation, integration and analysis of different data elements from varied systems. While hospitals were previously able to go back and claim reimbursements from prior fiscal years, MACs are getting more restrictive regarding this practice. Thus, getting it right the first time is more important than ever.

Q: What is Medicare Reimbursable Bad Debt for Medicare Advantage (MBD-MA)?
J: MBD-MA is the analog of MBD for private Medicare Advantage (MA) plans. It’s a mechanism for hospitals to obtain reimbursement for unpaid and uncollectable deductibles and co-payments incurred by MA members. [NOTE: More information on MA enrollment can be found here.]

Q: What are the similarities and differences between MBD and MBD-MA?
J: One similarity from a regulatory perspective is the “must bill” policy applies to both. Hospitals have to wait 120 days before deeming an account uncollectable and returning accounts from collection agencies. Write-off procedures must be established and documented, and shown to be consistently followed.

MBD-MA adds another level of complexity because you’re dealing with multiple MA plans which do not administer MBD-MA consistently. MA plans aren’t required to offer MBD-MA, so some plans offer it, some don’t. Among the plans that do offer MBD-MA, the percentage of bad debt reimbursed fluctuates. Many plans reimburse 65% — the level used by Medicare — but that’s not always the case. Also, hospitals send their detailed listings to the MA plan, and the specific rules by which those listings are accepted vary across plans.

Q: From a process perspective, what makes MBD-MA difficult to manage?
J: Some challenges with MBD-MA are similar to the those hospitals experience with MBD. Piecing together multiple, disparate datasets in order to put together a listing is difficult. In many cases, you’re looking at data from numerous systems covering accounts that may have discharges that occurred over multiple years. MBD-MA adds complexity because you need to identify and track accounts for members enrolled in specific MA plans across specific enrollment dates and present listings in the format required by each MA plan.

Q: How can a hospital identify and fully realize its MBD-MA opportunity?
J: If a hospital isn’t collecting MBD-MA, it should start by assessing its current MA membership base. While 31% of Medicare beneficiaries are enrolled in MA plans, the distribution of those members is clearly not uniform across the country — some areas have very high rates of MA plan penetration, others have very low rates. Because of the significant differences already noted across MA plans that impact a hospital’s MBD-MA opportunity, it’s important to review MA plan policies and contracts.

If a hospital collects MBD-MA, the real challenge is ensuring all accounts eligible for reimbursement are identified and the listings produced are compliant with MA plan requirements. As very few MA plans allow for retrospective reviews, you have to get it right from the beginning.

Q: How does TransUnion Healthcare help hospitals with MBD-MA?
J: We’ve developed a strong set of tools to help hospitals navigate the complex data aggregation, integration and analysis associated with MBD and MBD-MA. For most hospitals, that’s the biggest area where reimbursement is sub-optimized. Our ability to automate these processes produces listings that are more complete, accurate and in the form required by CMS or an MA plan.

Contact us to learn more about how TransUnion Healthcare can help your hospital with MBD-MA.

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