Engagement

We were originally engaged to prepare the cost reports for two Skilled Nursing Facilities under common ownership. While preparing the cost reports, we reviewed the prior year filings and suspected that both providers may not have claimed all of the bad debt that they were entitled to claim. The new client was confident that all bad debt had been written off and claimed on prior year cost reports and had faith in the current business office collection procedures. Hence, the client chose to engage TFG on a 25% contingency fee basis to identify and recoup any previously unclaimed bad debt rather than an hourly rate or fixed fee.

Method

We began a manual process to confirm the actual receipt of all coinsurance and deductibles from all sources of secondary payment for the past four years. Once we manually identified all unpaid coinsurance, we removed all amounts that were claimed on any previous cost report. We discovered that many balances were written off in the accounting system by contractual allowances rather than actual write-off. The providers were then using a write-off report as the basis for the bad debt logs originally submitted to the prior cost report preparer. We then reviewed all collection effort documentation for all amounts previously not reported.

Results

Through a combination of cost report reopening and amendment we were able to recoup in excess of $965,000 that was not previously claimed on any cost report filing! Finally, we made recommendations to improve collection efforts and the bad debt write-off process.