Effective with Medicare Cost Report Fiscal Years ending 09/30/2021, the detail reporting requirements of Medicare Bad Debts will be changing. The following narrative provides specific details on the new requirements with updated definitions and applicable terminology.  For further guidance, we have attached the revised Medicare Bad Debt template (CMS-339, Exhibit 2A template) in Excel that will need to be filed with the Medicare Cost Report.


On the Form CMS-339, Exhibit 2A, the following are newly required fields:

  • Medicaid Remittance Advice Date(s) (Col. 10),
  • Beneficiary Responsible Amount (Col. 12),
  • Sent to Collection Agency (Y or N) (Col. 15a),
  • Collection Agency Return Date (Col. 15),
  • Collections Effective Ceased Date (Col. 16),
  • Recoveries Only – Amount Received (Col. 18) and MCR FYE date (Col. 19),
  • Current Year Payments Received Amount (Col. 22) and Source (Col. 23).


Timely Billing (Non-indigent beneficiaries):

  • On or after 10/1/2020 – provider must issue the bill “on or before 120 days after the latter of” one of the following: (Failure to comply could result in disallowance of the Medicare Bad Debt)
  • The date of the final Medicare remittance advice that generates the beneficiary’s cost sharing amounts.
  • The date of the remit from the secondary payer, if any.
  • The date of the notification that the secondary payer does not cover the service(s) furnished to the beneficiary.


Reasonable Collection effort clarified (Non-indigent “traditional” or “regular)

  • Emails, phone calls and text messages are valid mechanisms for billing.
  • CMS 120-day rule:
  • Write-off must occur at least 120 days after first bill date.
  • 120-day clock “resets” upon receipt of any partial payment.
  • In general, there must be greater than 120 days between the first bill to the patient and the date the bad debt was written off.  If a collection agency is involved, there must be greater than 120 between the date of the first bill to the patient and the date returned from the agency.


The 2021 IPPS Final Rule adopts the Accounting Standards Update (ASU):

  • Prior to 10/1/2020, Medicare bad debt “must not be written off to the contractual allowance but must be charged to an expense account for uncollectible accounts” (reduction in revenue).
  • On and after 10/1/2020, Medicare bad debt “must be recorded in the provider’s accounting records as a component of net patient revenue” and “must not be written off to a contractual allowance account but must be charged to an uncollectible receivables account that results in a reduction in revenue” (as it is defined as “implicit price concessions”)


Please do not hesitate to contact us if you have any questions or need assistance.

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