Exhibit 21 - CMS Policy for Recognizing Accounts Receivable - (Rev. 5, 08-30-

400.21 - Exhibit 21 - CMS Policy for Recognizing Accounts Receivable - (Rev. 5, 08-30- 02) A1-1960.21, B1-4960.21 CMS Policy for Recognizing Accounts Receivable Overview The majority of the Medicare accounts receivable balances reported by CMS in its financial statements are comprised of overpayments made to providers, physicians, suppliers, beneficiaries, insurers, employers and other entities. The primary responsibility for identifying, recording, collecting, and reporting overpayments lies with CMS's Medicare contractors. CMS defines an "overpayment" as Medicare funds that a provider, physician/supplier, beneficiary, insurer, employer, or other entity has received in excess of amounts due and payable under the Medicare statute and regulations. Once a determination of an overpayment has been made, the amount so determined is a debt that is owed to the Medicare program. For financial reporting purposes, this overpayment or debt must be recognized as an accounts receivable and reported as an asset in CMS's financial statements. CMS has adopted the financial reporting definition for the recognition of an accounts receivable set forth by the Federal Accounting Standards Advisory Board (FASAB). The FASAB recommends generally accepted accounting standards and principles for the Federal Government. The FASAB sets these standards and principles so that Federal agencies' financial reports include understandable, relevant, and reliable information about the financial position, activities, and results of operations of the United States government and its component units. According to the FASAB's Statement on Federal Financial Accounting Standard Number 1 (SFFAS No.1), Accounting for Selected Assets and Liabilities, "Accounts receivables are amounts that an entity claims for payment from others. They arise from claims to cash or other assets." Additionally, the FASAB recommends, "A receivable should be recognized when a Federal entity establishes a claim to cash or other assets against other entities, either based on legal provisions, such as a payment due date (e.g., taxes not received by the date they are due), or goods or services provided. If the exact amount is unknown, a reasonable estimate should be made." For financial reporting purposes, recognition means the process of formally recording an item into the financial statements of an entity as an asset, liability, revenue, expense, or the like. In the case of Medicare contractors, recognition would equate to recording the accounts receivable on Form CMS-H750A/B and Form CMS-H751A/B Contractor Financial Reports. Recognition Policy CMS and its Medicare contractors will recognize and report an accounts receivable as of the date a demand letter is sent to the debtor. Specifically, contractors will recognize and record an accounts receivable (Non- Medicare Secondary Payer (MSP) and MSP overpayments) as of the date of the demand letter on Line 2a, New Receivables of Form CMS-H751A/B Status of Accounts Receivable Report. The act of sending out the demand letter is the event that triggers the recognition of an accounts receivable. The purpose of the demand letter is to notify the debtor of the existence of the overpayment, and to request payment. Chapter 4, Debt Collection, §§10 and 130 outline the language and information that, at a minimum, a demand letter must contain. A demand letter must contain the name and address of the debtor, the amount of the overpayment, terms of how interest will be assessed, date when repayment is due, and the debtor's rights to appeal. All these items are consistent with the definition recommended by the FASAB as outlined above. It is important for Medicare contractors to ensure that they retain copies of a demand letter(s) sent. The demand letter provides documentation or evidence of the actual debt and recovery efforts taken. It must be kept in each case file with other associated case documents or correspondence if the case is referred to the Department of Justice; referred for debt cross-servicing; requested by CMS, Office of Inspector General (OIG) or General Accounting Office (GAO) during audits/reviews. This information is necessary and needed to support the debt. Unless otherwise specifically noted, this policy is applicable to both non-MSP and MSP overpayments. The following are specific circumstances where application of this policy will not apply, i.e., when an accounts receivable would be recognized even though a demand letter has not been issued or, vice versa, where sending a demand letter would not necessarily require the recognition of an accounts receivable. • Accounts Receivables Due to Unfiled Cost Reports; and • Consent Settlement Agreements. These two circumstances are not all inclusive. If there is a specific situation that is not described above, Medicare contractors should consult CMS for further guidance. Accounts Receivable Due to Unfiled Cost Reports Through analysis of Federal financial accounting standards and regulations, CMS believes that recognition of a receivable prior to the filing of a cost report significantly overstates net assets and ultimately net position. Furthermore, CMS believes that current accounting procedures for recognizing accounts receivables due to a provider's failure to file a cost report timely does not adhere to the accounting principles articulated in Statement of Federal Financial Accounting Standards Number (SFFAS No.) 1 - Accounting for Selected Assets and Liabilities, SFFAS No. 5 - Accounting for Liabilities of the Federal Government, and SFFAS No. 7 - Nonexchange Revenue (Measurement & Recognition), as well as Generally Accepted Accounting Principles (GAAP) of conservatism and matching. Based on this analysis, the failure to file a cost report does not complete the earnings process, and accordingly, no accounting event has occurred. As such, the recognition of a receivable prior to the completion of the earnings process (receipt or filing of a cost report) is poor matching. In addition, SFFAS Nos. 5 and 7 states that liabilities and nonexchange revenue should only be recognized when a past event or exchange transaction has occurred, use of resources (inflow or outflow) are probable and can be reasonably estimated or measured. Without the actual submission of the cost report, CMS cannot reasonably estimate the amount of the receivable, as required by SFFAS No. 1. Therefore, unfiled cost report receivables will no longer be reported on the Form CMS-H;750 Contractor Financial Report and Form CMS-H751, Status of Accounts Receivable Report. CMS's current financial reporting instructions require Medicare fiscal intermediaries to place providers who have not filed a timely cost report on 100 percent penalty withhold, and recognize and demand a receivable based on the value of all interim payments made to the provider in, and subsequent to, the cost reporting period, without considering the value of actual services performed during that period. Federal debt collection regulations allow CMS to demand repayment of the full amount paid to a provider during a cost reporting period if a provider fails to comply with the requirements to file a cost report in a timely manner. However, for financial reporting purposes, CMS recognizes that the entire amount being demanded does not truly represent funds owed to CMS. Since the provider has performed services, the true economic value of the receivable demanded is overstated. In fact, CMS may have a liability upon settlement. Cost report receivables should not be accrued until related cost reports are received, and CMS can support the existence of a receivable through provider agreement, such as filing a cost report, filing a cost report without sufficient payment, or a court ruling in favor of CMS. As a result, for financial reporting purposes, CMS is revising its policy for reporting unfiled cost reports as an accounts receivable, unless the fiscal intermediary is aware of a unique situation where recording an accounts receivable would be appropriate. Fiscal intermediaries will continue to reflect an overpayment on the Provider Overpayment Reporting (POR) system based on the value of all interim payments made to the provider in, and subsequent to, the cost reporting period. However, effective for the March 31, 2001 reporting period, accounts receivable for unfiled cost reports will no longer be reported on Form CMS-H750 and Form CMS-H751. CMS will continue to monitor and manage the status of unfiled cost reports through the POR system, without overstating accounts receivable on the financial statements. All other processes related to unfiled cost reports remain unchanged. Fiscal intermediaries must continue to: (1) Place the providers on 100 percent penalty withhold, (2) Demand the submission of delinquent cost reports from providers based on current debt collection regulations, and (3) Refer the debt in accordance with the requirements of the Debt Collection Improvement Act of 1996. Fiscal intermediaries must ensure that Line 7, Ending Balance, of Form CMS-H751 does not include any receivables due to unfiled cost reports. If accounts receivables due to unfiled cost reports were included in the December 31, 2000 Form CMS-H751, these receivables must be zeroed out by recording a downward adjustment for these amounts on Line 5a, Reclassified/Adjustments, on Form CMS-H751 and provide a specific footnote in the remarks section of the report identifying the nature and amount of the adjustment. Consent Settlement Agreements Resulting from Comprehensive Medical Reviews (CMRs) Typically, postpayment reviews of claims are conducted for a specified provider/physician/supplier or group in order to evaluate their billing patterns over a selected period of time. CMRs are performed to determine whether a suspected provider/physician/supplier or groups are providing noncovered or medically unnecessary services. A CMR is a thorough analysis of a sample of processed claims and all pertinent data (such as medical record, beneficiary payment history, etc.) for selected providers/physicians/suppliers for a specified time period. CMRs are usually targeted to providers/physicians/suppliers who have demonstrated aberrant billing and/or practice patterns. If a CMR determines that an incorrect amount of money has been paid to the provider/physician/supplier, the contractor must assess an overpayment based on instructions outlined in the contractor manuals. Per Chapter 3, Overpayments, there are three different types of overpayments that result from a CMR: Actual overpayment, projected overpayment, and limited projected overpayment. The type of sample used during a CMR determines how Medicare contractors are to assess and demand money back from the provider or physician/supplier who was overpaid. An actual overpayment is, for the actual claims reviewed, the sum of the payments (based on the amount paid to the provider/physician/supplier and Medicare approved amounts) made to a provider/physician/supplier for services which were determined to be not medically necessary or incorrectly billed. If an actual overpayment is assessed, Medicare contractors must send a demand letter for the amount of the actual overpayment and recognize an accounts receivable on Line 2a, New Receivables, of Form CMS-H751. A projected overpayment is defined as the numeric overpayment obtained by projecting an overpayment from a statistically valid random sample (SVRS) to all similar claims in the universe under review. Medicare contractors must notify the provider or physician/supplier of the overpayment, and refer the case to the Medicare contractor's overpayment staff to demand and collect the overpayment. Medicare contractors must send a demand letter for the amount of the projected overpayment and recognize an accounts receivable on Line 2a, New Receivables, of Form CMS-H751. A limited projected overpayment is the numeric overpayment obtained by projecting an overpayment from a limited sample or limited SVRS subsample to all similar claims in the universe under review. If this type of overpayment is assessed, Medicare contractors have three overpayment assessment options. The Medicare contractor can assess an actual overpayment; a projected overpayment based on a SVRS by performing an expanded CMR; or can offer the provider or physician/supplier a consent settlement based on the potential projected overpayment amount. Again, if an actual or project overpayment is assessed, Medicare contractors must send a demand letter, and recognize an accounts receivable on Line 2a, New Receivables, of Form CMS-H751. If a consent settlement is offered to the debtor, the consent settlement document must carefully explain what rights a debtor waives by accepting the consent settlement. It must contain a binding statement that a debtor agrees to waive any rights to appeal the decision regarding the potential overpayment determination. If this option is used, the Medicare contractors must not recognize an account receivable until a consent settlement is signed and agreed to by the debtor and CMS.