Allowable bad debt expense

1. Bad debts for charges incurred in or after July 1, 2005, and fees paid for the collections of those bad debts are allowable only as provided in this section. 2. A bad debt expense must result from nonpayment of the payment rate for an individual who is no longer receiving services from the provider claiming the bad debt expense. 3. The provider must provide documentation to the department which verifies that the provider made reasonable collection efforts, the debt could not be collected, and there is no likelihood of future recovery. Reasonable collection efforts include maintaining written documentation that, in making those collection efforts, the provider received the assistance of an attorney licensed to practice law. 4. In no circumstance may the allowable expense for the collection fee exceed the amount of the bad debt. 5. A bad debt expense shall not be allowed when it resulted from the provider's failure to comply with any applicable laws or regulations. 6. Before any bad debt expense may be allowed, the provider must have a written policy that limits the potential for bad debts and the provider must provide written documentation that shows it has taken action to limit bad debts for individuals who refuse to or cannot make payments. 7. Allowable bad debt expense may not exceed debt associated with one hundred twenty days of services provided for any one individual. 8. Payments on outstanding accounts receivable shall be applied to the oldest invoices for covered services first, and then all subsequent charges until the balance is paid in full. 9. Allowable finance charges on bad debts described in this section are allowable only if the finance charges have been offset as interest income.