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Unheard of staffing shortages in nursing home billing offices are leading to billing lapses and major uncollectible or ‘bad’ debt amounts. A $4 million case in Connecticut is fueling observers’ concerns about the mounting financial impact.

Bad debt is debt that cannot be collected from payers largely because claims were not filed or resolved in a timely manner. In the case of nursing homes, this typically involves Medicare, Medicaid or managed care plans. Financial experts say that’s happening more often as facilities see staffing shortages that have plagued their clinical teams creep into their back offices more frequently. 

Fewer people and less institutional knowledge are combining to create extensive and problematic delays, some observers warn.

“These are things we’re seeing over and over again,” said Kristy Brown, director of SNF Financial Services for Quality Healthcare Resources. “We have staffing shortages in departments that we have not seen before. We have a generation of billing people that are retiring or left because they wanted to stay remote … [and providers are having trouble] finding qualified people, especially those that have the expertise level to be able to follow the complex payer landscape that we see now with managed care.”

A COVID-era billing office change appears to have sent Connecticut’s The Nathaniel Witherell into a financial freefall, with the town-owned nursing home revealing earlier this month that it had to forgo about $4 million earlier this year. 

About $3 million of that was bad debt the facility was unable to collect. Much of it was connected to staff failure to file for Medicare and Medicaid reimbursement on time, local media reported.

The 120-year-old facility had another $2.8 million in old bills as of late July, and may have to write off another $1.1 million as uncollectible, officials said.

Missing people lead to uncollected bills

Executive Director John Mastronardi attributed some of the failed collections to the exit of a long-time employee in September 2021, whose colleagues “were not sufficiently cross-trained to take up her work once she left.”

“The knowledge transfer that needed to take place between departing and remaining staff wasn’t adequate or comprehensive enough,” Mastronardi told McKnight’s Long-Term Care News Thursday.

By September 2022, town records show, there was one accounts receivable employee doing the work normally assigned to 2.5 full-time positions — and the number of outstanding bills, or accounts receivable, had doubled. On top of that, Mastronardi said, a previous chief financial officer failed to alert executive leaders that the team was falling behind.

After she left, there was no department head for about six months, but the facility has hired a new and experienced leader for the billing department.

Quick reaction needed to avoid losses

A dearth of staff can happen to anyone, but a timely response is necessary in today’s era of tight margins, denials and time-consuming resubmissions, said Brown, a former administrator and operator who has been in SNF billing for most of her career.

Federal Medicare claims must be made within a year, and the same is true for most state Medicaid programs, Brown noted. But managed care plans are getting “sneaky,” she said, adding that some plans now expect to be billed within 30 to 90 days.

Worse yet, routine denials by managed care plans require lengthy phone calls to understand the insurers’ rationale, completion of new forms and resubmitting again for payment. Those follow-up steps require careful tracking through spreadsheets or software, and may be missed by overburdened staff, who must quickly move on to the next monthly billing cycle.

The older the debt gets, the less likely it is to ever be collected, said Brown, echoing a warning shared with The Nathaniel Witherell by its own outside consultant. The percentage of claims that are outstanding after 90 days is a key factor operators must remain mindful of.

And as that figure increases, billing office staff should feel empowered to ask for help. Not all building or regional managers recognize how much more complex today’s billing practices are, and how drawn-out managed care has made the process of collecting payment. Often, new office staff, especially those coming from outside the sector, may not understand rejections or how to fix them. 

Allow those issues to remain unresolved long enough, and a billing office can find itself losing money its clinical staff had fairly earned.

“It happens more often than you think,” Brown said. “It is astronomical that amount of money that gets written off for timely filing issues.”

Cost report data shows that in the 2018-2020 span, about 75% of skilled nursing facilities nationally reported allowable bad debts, according to a late 2021 report by consulting firm BerryDunn. Providers claimed an average of nearly $63,000 of reimbursable bad debts related to Medicare Part A stays. 

Safeguards in place

At the Nathaniel Witherell, new safeguards are in place to keep bills and resubmissions flowing and ensure visibility into the broader system, Mastronardi said.

“I also realized that the departments directly involved in the revenue cycle weren’t fully aware of their interdependent roles in the process,” he said. “That was why it was and still is extremely important to remind our staff that there are reasons why specific tasks must get done at specific times every month.  That’s because each department can’t move forward without the other completing their tasks sequentially.”

Starting in July, internal clinical and financial reviews are better coordinated on a 5-day, 10-day and 15-day timeline, which leaders believe will result in more timely billing, improved cash flow, and better financial statement reporting.

Mastronardi also brought in outside consultants and is conducting a clean-up of ongoing billing problems while setting up a new budget that starts back at zero. 

That’s a strategy that can be helpful, said Brown, whose company offers accounts receivable clean-ups. She said that help can free staff to focus on learning new processes. She also suggested resources such as skilled training for new staff, subscription hotline support to help interpret denials more quickly, and outsourcing billing or billing for some payers if needed.

While such services cost money, they can help stave off some bad debt and improve cash flow.

“Most of the time, whether you outsource or you just spend the resources to get your staff trained, you can see 3% to 10% return on investment. You’re going to see that because you’re going to have less days outstanding. Your claims are going to go in clean. That’s going to increase that cash flow, and you’re going to be spending less time having to chase the money or resubmit time after time.”