Immediate Contractor Directives from the CMS Office

140.4.3 - Immediate Contractor Directives from the CMS Office (Rev. 13825; Issued: 06-11-26; Effective: 07-13-26; Implementation: 07-13-26) The assigned CMS Office will give the Contractor the following guidance as soon as the provider files for bankruptcy. 1. The CMS Office will notify the Contractor of Provider Bankruptcy/Litigation. a. Bankruptcy Filed The servicing CMS Office will inform the Contractor that CMS has opened a bankruptcy case. The CMS Office will inform the Contractor that it shall clear any future actions concerning the bankrupt provider(s) through the CMS Office. b. Bankruptcy Filing Date. The servicing CMS Office shall notify the Contractor of the bankruptcy filing date, since it impacts actions that the Contractor can take and the evaluation of whether payments are pre-petition or post- petition. c. Immediate response to requests. Since bankruptcy has court-imposed deadlines, the Contractor shall take immediate action whenever the CMS Office or CMS Counsel makes a request. d. Obtain approval of all correspondence to provider. The Contractor shall submit all correspondence that is not system generated to the servicing CMS Office for approval prior to release, except for routine cost report settlement letters (e.g. NPRs or revised NPRs), unless the CMS Office has directed that such correspondence be submitted for review due to the unique or exceptional nature of the bankruptcy case. The servicing CMS Office will modify all manual letters, obtain CMS Counsel approval, and will inform the Contractor of the final copy of the letter that shall be released to the bankrupt provider. e. The Servicing CMS Office The servicing CMS Office will provide the Contractor with a contact name and telephone number. The CMS Bankruptcy Analyst that provides oversight to the Contractor may need to continue to assist the Contractor in an advisory role. 2. The CMS Office Will Notify the Contractor of Immediate Actions It Must Take. a. Interim Rate Adjustment. After consultation with the CMS Counsel, the CMS Office will direct the Contractor to immediately perform an interim rate adjustment to ensure that payments are accurate and that no future overpayments occur. (Medicare Financial Management Manual §2760.1(C.). 42 CFR §413.64(i). b. Recoupment. The CMS Office will inform the Contractor (after discussion with the CMS Counsel) whether it should continue or cease any current recovery action. c. Administrative Freeze. The CMS Office will inform the Contractor (after discussion with the CMS Counsel) whether it should place payments in administrative freeze. 3. Actions the Contractor Must Take on an Ongoing Basis. a. Expedite Cost Report Settlement The CMS Office will instruct the Contractor to expedite the settlement of any open cost reports. The CMS Office will caution the Contractor not to issue any tentative settlement payments unless explicitly requested by the CMS Office (in consultation with the CMS Counsel). The Contractor can issue final settlements to the provider without first obtaining permission from the CMS Office (in consultation with the CMS Counsel) providing there was no formal communication from CMS that the case is unique or exceptional in nature. b. Contractors shall suspend payments if the provider does not timely file a cost report. If the bankrupt provider fails to submit a timely and acceptable cost report, immediately notify the assigned CMS Office or the assigned CMS Counsel prior to placing the provider in 100% withhold and immediately notify the CMS Office or the CMS Counsel of the actions taken. When the provider submits an acceptable cost report consult with the CMS Office or CMS Counsel prior to release of the withheld funds. c. Part B - Tracking Refunds The Contractor may need to track voluntary refunds for a bankrupt provider. The assigned CMS Office will work with the CMS Counsel to determine what information Counsel needs. The Contractor should be aware of the impact on beneficiary deductibles and coinsurance in a Part B bankruptcy. d. Contractors should check with the assigned CMS Office before making other payments to the provider. It is important that all Contractors establish a process to ensure they do not make payments (e.g., underpayments, lump sum payments, or payments resulting from appeals) to bankrupt providers who have outstanding overpayments unless the CMS Office (in consultation with the CMS Counsel) so directs. This is especially critical for Contractors’ who must continue to settle open cost reports. 4. Contractors Shall Track and Report Information to the CMS Office. a. Cost Report Settlements and Claims Processed Contractor staff should notify the CMS Office promptly of all proposed cost report settlements, changes in the amount of determined overpayments or underpayments, and claims processed. b. Appeals If a bankrupt provider files an appeal for an overpayment, Contractor staff must keep the CMS Office staff informed on the outcome of the appeal. Appeals may take place at the Contractor, with an Administrative Law Judge, or at any Office of Hearings and Appeals, at the Provider Reimbursement Review Board, or at Federal District Court. If the appeal is favorable to the provider, it may require the CMS Office or CMS Counsel to amend its proof of claim because the provider would have a smaller overpayment. Alternatively, in some cases, the CMS Office may direct the Contractor to freeze any outgoing funds. The Contractor shall keep the CMS Office or CMS Counsel updated on the status of appeals. 5. Record-Keeping. a. Interest The CMS will advise the Contractor whether it should continue to accrue interest for overpayments. Medicare's ability to assess interest varies based on the circumstances of the case. The CMS Office will consult with the CMS Counsel before determining whether the Contractor should make an adjustment. If the bankruptcy is in a district where interest should stop accruing on the petition filing date, the Contractor must make an adjustment to remove the interest. The Contractor shall post these adjustments to the Contractors' internal systems and to the Healthcare Integrated General Ledger Accounting System (HIGLAS). The Contractor shall also post the adjustments to the Treasury Report on Receivables (TROR). b. HIGLAS Update The servicing CMS Office will instruct the Contractor to update the provider in bankruptcy status in HIGLAS and whether recoupment of overpayments is permitted or not permitted. • The Contractor shall allow for recoupment or netting of overpayments if recoupment of overpayments is permitted, • The Contractor shall not allow recoupment or netting of overpayments, if recoupment of overpayments is not permitted. c. Bankruptcy Case at the Contractor Once the assigned CMS Office notifies the Contractor of a provider’s bankruptcy, the Contractor shall ensure the bankruptcy debt is not referred to Treasury for collection under the Debt Collection Improvement Act. If any case has already been referred to Treasury – including debts automatically referred through HIGLAS due to delinquency thresholds — the Contractor shall immediately take appropriate action to recall the debt from Treasury upon notification of the bankruptcy. All bankruptcy debts shall remain at the Contractor for financial reporting purposes. The Contractor is responsible for ensuring that each debt is maintained in a bankruptcy status in HIGLAS and that the correct netting indicator is applied or not applied, consistent with the CMS Office instructions. Debts will remain with the Contractor until the CMS Office provides direction regarding the resolution of the debt, including whether to resume normal collection activities or proceed with debt closure (e.g. write-off). d. System for Tracking Audit and Reimbursement (STAR) If the bankrupt provider participates in the Medicare program under Part A, the Contractor shall ensure that STAR is updated with the effective date of the bankruptcy.