The CMS Compliance requirement every provider should know

Thought Leadership

The CMS Compliance requirement every provider should know

By Angela Horn,VP and Corporate Counsel, DCM Services

Angela Horn

Angela Horn,VP and Corporate Counsel, DCM Services

DCM Services is an organization dedicated to helping healthcare providers manage unique and specialty areas of revenue cycle such as probate. Probate is a creation of state law; managed by more than 3,450 courts across the United States to promote an efficient system for collecting and liquidating the assets of a decedent and making distribution to creditors and heirs.

Ten years ago, DCM Services conducted an informal survey of more than 100 health systems and other providers in an effort to understand current practices in the management of decedent accounts. At that time, almost 85% of survey respondents indicated that they did not search for probate estates, nor did they file claims. Survey respondents also acknowledged that they knew there was opportunity to enhance compliance and gain substantial revenue by creating an effective estate strategy but noted that they lacked the expertise and resources.

Fast-forward to today and we almost never hear this reply. Why?

Estates emerge among top provider challenges
The answer is simple. The convergence of important socioeconomic and demographic trends means that no successful provider can afford to ignore the opportunity. The baby boomer generation has aged into retirement, and the Centers for Disease Control (CDC) tells us that retirees account for more than 75% of persons who pass away each year. By 2050, the number of people on Medicare who are 80 years and older will nearly triple, while the number of Americans 65 years and older will quadruple. We also know that, with regard to healthcare services, this group vastly outspends other generations at three times the percentage of the population they represent. Finally, we know that self-pay percentages are rising for many providers by double digits year over year.

The end result is that revenue which at one time may have been thought of as a rounding error, or icing on the cake, has now become sizeable enough that it is imperative for providers to capture it as a matter of maintaining fiscal health. There are also two revenue streams; one from estates, and one from reimbursement in cases where there is no estate.

The CMS requirement many providers miss
Chief among the risks in the unique area of estate revenue cycle, is failing to comply with 42 CFR 413.89 (e). This statute codifies the Centers for Medicare and Medicaid Services’ (CMS) requirements regarding bad debts, charity, and courtesy allowances, as it requires an estate search to be conducted and documented for every decedent whose bill goes on the cost report. The CMS Provider Reimbursement Manual Part I §308 states that in order for a bad debt to qualify for the cost report it must meet four basic criteria:

1). The debt must be related to covered services and derived from deductible and coinsurance amounts.
2). The provider must be able to establish that reasonable collection efforts were made.
3). The debt was actually uncollectible when claimed as worthless.
4). Sound business judgment established that there was no likelihood of recovery at any time in the future.

Join hundreds of healthcare professionals in following DCM Services on LinkedIn

The overlooked revenue implications
Working with hundreds of healthcare organizations for the last decade, the number of CMS audits occurring is rising dramatically year over year. What used to be an afterthought for providers is now a necessary revenue stream. If providers attain the ability to produce a valid cost report containing information related to “making an effort to search for estates and recover”, the providers are eligible for creimbursement up to 60% of the debt owed. Providers must meet all compliance expectations to be reimbursed.

Ultimately, CMS reimbursement are revenue dollars being protected by provider compliance. Typically, this is anywhere from 1.5% to 3.5% of your patient population. For example, a health system with $3.98 billion in annual net patient revenue (ANPR) would protect nearly $3 million in revenue by fully complying with CMS audit requirements.

Defining the risk
§310 further defines the reasonable collection efforts as requiring a “genuine rather than a token collection effort and requiring documentation of those efforts.” Auditors and other compliance professionals have interpreted the CMS requirement that reasonable collection efforts were made in the context of a patient who has passed away to mean that:

1. An estate search has to have been conducted with the courts.
2. Those search efforts have been documented. It is noted that reliance on a family member’s statement is not sufficient.
3. Examples of sufficient documentation used to determine that a deceased patient has no estate may include a screen print of system used for inquiry or a signed attestation from the Registrar Office of Wills. CMS has given guidance indicating that providers must retain evidence showing the date on which a search was conducted in a screen print or in the electronic system of record.

Despite the fact that the language of the statute has been essentially the same and in place for decades, it may be that many providers are unaware of the requirement until they are audited to the specific estate-related mandate. If this is the case, and the provider is unprepared, it can stand to lose hundreds of thousands or millions in reimbursement dollars.

Proactive identification is key
In order to be prepared as a provider and not find yourself surprised by an audit, procedures must be put in place to ensure that all of the bills for patients who have passed receive estate searches. Since the Provider Reimbursement Manual requires that the provider’s effort to find an estate and file a claim be a bona fide attempt and similar to any effort that would occur for non-eligible debts, the process should be the same for all accounts. This includes patients who pass both inside and outside of a facility. Often, a provider is unaware that a patient has passed if the death occurs outside the facility. There are many cases where it can take an extended period of time to learn of the death when a provider relies on family or other reactive notification of a patient’s passing.

The probate code of each state assigns a finite time in which to file claims, and in the majority of jurisdictions the time for providers to present their claims is as little as 60 or 90 days from the opening of the estate and appointment of a Personal Representative. This means that even providers who do search for estates often find them too late and fall out of compliance with the requirement to make genuine efforts to collect. It makes sense that, in order to comply, a provider should put in place one of the available decedent identification tools to proactively identify all patients who pass in a timely fashion.

Comprehensive, continuous searches overcome compliance hurdles
Claim filing windows are brief as noted above. However, while the requirement is clear that an estate search must be conducted, and it must be directly with the court or with a search engine which interfaces with the courts. Estates can take months and even years to open and 15 to 20% of the time, those probated estates are in a court which is somewhere other than the venue which corresponds to the patient’s last address. If an estate is not located at the last address in provider records, it could be in any of the 3,450+ probate courts in the US.16 Since the effort to collect on a debt by finding an estate must be genuine and not token, it follows that repeated and comprehensive searches are required. A provider could not search, for example, weeks after the patient passes and conclude that there is no likelihood of recovery in the future. A manual search conducted in a single location is also likely to miss a significant percentage of estates because those estates will open in a location other than the address of record.

Providers must create processes which can meet the requirement through automation and repeated, continuous nationwide searches. This can help overcome the challenges and ensure genuine and effective estate searches in compliance with the requirement.

Efforts will be for naught without documentation
We have all heard of the philosophical question posed initially by George Berkeley in his work, “A Treatise Concerning the Principles of Human Knowledge,” which can be paraphrased as asking whether a tree that falls in a forest with no one to hear it actually falls. To be certain, it is true that a provider who fulfills its duty by conducting even comprehensive and continuous searches falls short of compliance if those searches are not documented so that an auditor can see evidence of those searches.

CMS Provider Manual further requires documentation of reasonable collection efforts. Whether a provider is using an automated tool or manually conducting estate searches, there must be a process in place to secure real time documentation should an audit occur. This documentation should include one of the items described above, such as screen prints or reports from a search engine, notes from conversation with probate courts in the providers system of record made concurrent with those conversations, and/or correspondence both to and from the probate courts which corroborates a request and a reply.

Ready to create a compliant process for CMS reimbursement requirements? Schedule a meeting with a member DCM Services Business Development team →

The components of a successful strategy
While understanding the requirements of a compliant estate strategy is key, what matters most is what you do with that information. Turning again to the survey of more than one hundred health systems regarding estates, remember that the number one self-described hurdle to putting in place a successful strategy was not financial constraints or even information technology resources. The major hurdle was a lack of expertise or confidence in their own internal knowledge base. In order to surmount this challenge, a provider first needs to conduct proactive searches to timely identify both decedents and estates.

Secondly, it is important to have a good mechanism to produce documentation which details the evidence of searches and search results. Providers will also want to have a process in place to produce the required claim packages in the event that an estate is located, and a process to manage those claims to collect on the sums owed. This can be a bit tricky as there are more than 3,450 probate courts in the U.S. and estates can be located in any of them. In 15-20% of cases, probate is opened in a location other than the address of record. This phenomenon may be for any number of reasons, but most often occurs when patients are traveling for care or have multiple residences. Each court has unique requirements for its claim packages including forms, affidavit requirements, filing fees, number of copies, and even the color of paper and ink.

The process will also need to manage claim filing deadlines which, as noted previously, can be as short as 60 days from the opening of an estate. Any process for finding estates should be able to search proactively for decedents and estates to insure timely filing. This means that nationwide, proactive searches are a requirement. Once a claim is filed, putting in place a process for claims recovery is also important. We have learned that while the filing of a timely and valid claim entitles a provider to the assets available for its class of claims and provider claims can take priority, an optimal post-claim collection strategy can produce more revenue and even expedite payment.

Finally, depending on the resources available internally and your overall revenue cycle strategy, you may choose to acquire the tools and the knowledge to build a self-managed process, or you may choose to partner with an expert to build your estate strategy.

The rewards of compliance
In conclusion, while compliance with 42 CFR §413.89 and the rules described in PRM 15-1, sections 308 and 310 will mean real dollars and cents for every organization who can prove it is entitled to reimbursement when they have searched, documented that search, and not found an estate, there is a very sizeable opportunity for nearly all providers when they do find an estate. When an estate is timely located, the provider has a chance to present a claim and receive payment to the full extent of its claim and estate assets. In fact, many state probate codes recognize a health care provider’s services at or near the time of passing take priority and are paid over all other general creditors’ claims. As providers continue to strive to meet today’s regulatory and economic challenges, it is worth taking a moment to recognize that every now and then, like with estates and the CMS requirement, the two challenges coalesce, and the benefits of best practice are twofold!

DCM Services for Healthcare
DCM Services is the leader in specialty recoveries for healthcare organizations, securing more than $100 million in total recoveries in partnership with over 100 national hospitals and health systems, including many of the nation’s largest and most respected healthcare organizations and other providers. We serve more than half of the top 50 health systems by size and annual net patient revenue, and more than 100 other systems and providers including over half of US News and World Report’s Top 20 Hospitals. Learn more at

Click here to download article.

Share This Post
Have your say!