This past April, the Centers for Medicaid and Medicare Services (CMS) issued guidance on how crossover bad debts are to be recorded within the income statement. Typically, these amounts are written off to a contractual allowance revenue account. With this new guidance, these unpaid amounts for Medicare-Medicaid crossover claims must correctly be classified to a bad debt expense account.
Switching from the contractual revenue account to the expense account may not have an effect on the bottom line, but it will impact whether or not these amounts can be claimed on the cost reports. This recording practice is not a new requirement; however, providers have not been held to it in the past. For cost reporting periods beginning October 1, 2019 and beyond, this reporting criteria must be followed. If your company does not follow these guidelines, bad debt reimbursement could be impacted. The criteria for allowable bad debt has not changed. The bad debt must be deemed uncollectible and written off in the same year as the cost report period to be reported.
As these amounts are recorded through the patient revenue activity, it is important to prepare now and review your systems configuration to see how these amounts are currently being recorded. If these amounts have been going to a contractual allowance account, there may be some system mapping changes that need to take place, depending on your accounting software. The integration to the general ledger will also need to be reviewed to help ensure that these amounts are hitting the correct accounts on the financial statements.
Do you have questions about the new Medicare-Medicaid crossover change, or other accounting challenges? Call Richter’s healthcare accounting consultants at 866-806-0799 to schedule a free consultation.