In a recent decision, U.S. ex rel. Sibley v. Univ. of Chicago Medical Center, the U.S. Court of Appeals for the Seventh Circuit considered allegations that two medical billing and debt collection companies, Medical Business Office Corp. (MBO) and Trustmark Recovery Services, Inc. (Trustmark), and the University of Chicago Medical Center (UCMC), a client of one of the debt collection companies, violated the False Claims Act (FCA) by seeking inappropriate reimbursement from the Centers for Medicare and Medicaid Services (CMS) for Medicare “bad debts.”

The Seventh Circuit affirmed the grant of a motion to dismiss claims against UCMC and MBO based on the insufficiency of the allegations in the complaint but allowed claims to proceed against Trustmark.

While UCMC and MBO avoided FCA liability, Sibley is a reminder that healthcare providers and their contractors must be aware of the potential FCA risks associated with seeking Medicare bad debt reimbursement in a non-compliant manner.

Medicare Requirements for Seeking Reimbursement of Bad Debt

Under 42 C.F.R. § 413.89, Medicare providers can seek reimbursement for uncollected patient deductible and coinsurance amounts if the following four criteria are met:

1. The debt relates to covered services and is “derived from deductible and coinsurance amounts.”
2. The provider establishes that “reasonable collection efforts were made.”
3. The debt is “actually uncollectible when claimed as worthless.”
4. “Sound business judgment established . . ....

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