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    Health Law Daily Wrap Up, ADMINISTRATION OF MEDICARE/MEDICAID PROGRAMS—PRRB DECISIONS: Contractor incorrectly disallowed half-million-dollar bad debt reimbursement to Indiana hospital, (May 15, 2026)

    By David Yucht, J.D.

    A Medicare contractor incorrectly disallowed a bad debt reimbursement to an Indiana hospital for indigent bad debt claims because the contractor incorrectly found that an asset test was mandatory as per the hospital’s policy, when determining ...

    By David Yucht, J.D.

    A Medicare contractor incorrectly disallowed a bad debt reimbursement to an Indiana hospital for indigent bad debt claims because the contractor incorrectly found that an asset test was mandatory as per the hospital’s policy, when determining the indigency of a patient.

    The CMS Provider Reimbursement Review Board (PRRB) determined that a Medicare contractor incorrectly disallowed a bad debt reimbursement of over $500 thousand to an Indiana hospital for indigent bad debt claims from fiscal year 2015 because the contractor incorrectly found that an asset test was mandatory when determining the indigency of a patient. The Medicare contractor was directed to reconsider the hospital’s bad debt reimbursement allowance without a mandatory asset test (Reid Health v. WPS Government Health Administrators, PRRB No. 2026-D14, Dec. No. 19-1379 (April 28, 2026)).

    Charity care policy. Reid Health is an Indiana hospital which provides financial assistance to certain low-income patients, including Medicare patients, who meet stated eligibility requirements. Reid Health’s Charity care policy provided a discount schedule based on a patient’s income as a percentage of the Federal Poverty Level (FPL). Reid Health’s policy statement also indicated that it may “consider other financial assets and liabilities of the person when determining eligibility.” In September 2018, a Medicare contractor conducted a limited desk review of Reid Health’s fiscal year 2015 cost report. The contractor found Reid Health had only compared patients’ income to the FPL and ignored bank account documentation attached to patients’ applications for charity care. Additionally, the contractor indicated that the assistance application included a space for reporting liquid assets which was never filled in. The Medicare contractor denied reimbursement for Medicare indigent bad debt claims totaling over $500 thousand because it found that the hospital “did not document that the patients’ total resources were considered for the 20 patients tested.” Reid Health appealed.

    Asset test not compulsory. The PRRB determined the contractor was mistaken in its belief that an asset test for indigency was required before the hospital could provide charity care. CMS regulations determine the criteria for determining which bad debts are reimbursable. The debt must be related to covered services and derived from deductible and coinsurance amounts. In addition, the provider must make reasonable collection efforts, the debt must be uncollectible and there must be no likelihood of recovery in the future. Providers are to utilize their own “customary methods” for determining patient indigence with respect to Medicare beneficiaries. Based upon federal case law, the word “should” is not “synonymous with must.” Although Reid Health’s policy indicated that a patient’s assets “should” be evaluated in making an indigency determination, the policy did not mandate that assets “must” be considered. Accordingly, Reid Health’s “customary methods” did not include an absolute requirement to investigate patient assets. Consequently, the Medicare contractor was directed to reconsider the hospital’s bad debt reimbursement allowance without a mandatory asset test.

    AdministrativeDecisions: PRRBDecisions CMSNews MedicareContractorNews PaymentNews

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