Summer 2007
As peers, the Revenue Cycle community of practice has been discussing HFMA's Statement 15, which helps healthcare finance leaders properly classify charity care and bad debt. We thought we'd turn the discussion over to you to gain a better understanding of your facility's process for addressing and properly accounting for charity care and bad debt.
Here's the question:
When you review unpaid accounts on patients who have not completed a financial assistance or charity care application, do you move the dollars on that account to bad debt on a prescribed day, or do you have a process for sifting through the unpaid accounts and determining which accounts belong in charity care and which belong to bad debt? How are your financial assistance policies written to allow for dollars to flow to charity care without an application? What specific supporting documents, if any, are required for this process to go smoothly?
And here's what you told us.
We use the benevolence program adjustments only for people who have qualified for the program by submitting an application. Therefore, unpaid accounts on patients who have not submitted an application are sent to bad debt. When a patient submits an application and qualifies, we adjust all outstanding accounts on the patient and all family members. We also allow patients and family members to be eligible for benevolence for six months after the application is approved (although we do update eligibility information at each inpatient admission). We offer five categories of benevolence:
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Category A is up to 150 percent of federal poverty level and is a 100 percent discount per state regulations.
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Category B is up to 200 percent of federal poverty level and is a 100 percent discount per our policy.
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Category C is up to 233 percent of federal poverty level and is a 75 percent discount
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Category D is up to 266 percent of federal poverty level and is a 50 percent discount.
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Category E is up to 300 percent of federal poverty level and is a 25 percent discount.
Kathleen K. Barry
St. Joseph Healthcare
Our facility has a policy that requires patients to complete a financial assistance application unless they are deceased. They must provide a copy of their most current tax return with the completed application.
A review is done of each account, and those that fall between 0 percent and 200 percent of the federal poverty level receive a 100 percent charity care adjustment. Those between 201 percent and 350 percent receive a discount to the expected Medicare payment amount. Those over 350 percent may receive a 10 percent discount on total billed charges upon request. Those who are homeless and/or have no income automatically qualify for charity care with a signed application.
We do a quick review of accounts being turned over to bad debt to make certain that we did not miss an account already under review, but we do not make determination for charity instead of bad debt without completing the application process.
Once an account is approved for the charity, AB774, or Section 1011 program, we run a search on prior accounts sent to bad debt and have the collection agencies cease and desist on any and all further collection efforts on that patient's account. We do not bring bad debt accounts back onto A/R to write off to charity.
Tammy J. Thompson
Emanuel Medical Center
This is in answer to your latest Community of Practice question:
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While accounts are awaiting documentation for charity qualification, the account will continue uninterrupted through the normal collection account flow: statements, early out, then bad debt.
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Memorial Hermann also has written into its charity policy a category for "presumed indigent." It is documented in our P&P as reflected below:
Program/Patient Population
The categories of patients who qualify for charity care are defined as:
A. Presumed Indigents
1. Persons who do not provide the detailed documentation necessary to be classified as financially or medically indigent but who, to the best of Memorial Hermann's knowledge, would be eligible for charity under the program guidelines had the person completed the documentation
2. This patient population would include, but is not limited to:
a. Illegal aliens
b. Deceased with no estate or known family
c. Transient, homeless persons
d. Persons estranged from family and who have no effective support group or are socially dysfunctional
e. Persons whose identity cannot be established
Michael C. Bennett
Memorial Hermann System Services
As a consultant on medical billing and collections, I have a lot of patients who inform us that they are financially unable to pay. Other facilities I have worked with sometimes will accept these statements as fact; however, about 50 percent of the time, after completing a solvency report, we find that these patients do have the means to pay something (many times, they are very financially stable and could pay the entire claim, as most facilities give a self-pay patient a generous discount).
Bad debt write-offs are tremendous in the international market because patients leave and there is not enough information to find them.
How do facilities with a large number of international patients handle these accounts?
Joanne C. Whitfield
Sunbelt Med Billings Inc.
We do not give charity care to patients without an application. We do have one hospital that is still a Hill-Burton site and needs to comply with those regulations. We didn't want to run two distinct programs, so we chose to go with the same process for both hospitals.
I do question how to support the classification to charity care without some type of "proof" that it belongs in that bucket for audit/financial reporting. We are considering, and looking into, self-pay risk segmentation that shows the patient's inability to pay versus unwillingness to pay. We hope we can use that documentation to support the classification into charity care.
We ask for proof of income, including recent paycheck stubs, the previous year's tax returns, checking/savings accounts statements, etc. We certainly work with our patients to make accommodations if documentation is an issue, particularly with the elderly patients.
Christine Fontaine
Shore Health System
We do not approve anyone for charity who has not completed the required financial assistance application. If the patient or responsible party has not completed the application within 30 days, we continue our regular process with statements and phone calls. The account will go to a collection agency in 120 days (from discharge date) if no satisfactory arrangements are made.
We require the application to be completed and signed. The application includes all income, expenses, assets, and liabilities. The applicant must show supporting documentation for income and expenses, including the past three paycheck stubs/ Social Security checks, past two bank statements, and most recent federal tax return. Applicants who state that they have no income must go to the employment office and get a wage statement that shows their quarterly income for the past two years. They also must submit a copy of all medical bills dated within the past 30 days.
Cynthia H. Sharp, FHFMA, MBA
Floyd Memorial Hospital & Health Services
If a patient/guarantor does not provide the completed application in the time frame set forth in our policy, the account is considered bad debt once it completes the normal collection cycle. We can judge an account for financial assistance viability only if the application is complete and all required attachments are provided.
Chris McGivaren
Our Lady of the Lake R.M.C.
Our charity policy is based on the financial application. However, for homeless patients and those who are wards of the state, we move those aged accounts to charity without an application.
Donald R. Thompson
Bayhealth Medical Center