Case Study: How R1’s Medicare Experts Recovered $13M in Medicare Bad Debt

Close-up of tablet computer with graphs, diagrams and charts on screen in hands


Medicare bad debt (MBD) can be a significant source of lost revenue for hospitals; in fact, US hospitals claim more than $3 billion in MBD annually. And in the past three years, the amount of bad debt coming from insured patients has risen more than five-fold.

R1’s team noticed a pattern with several Midwestern and Northeastern clients reporting to the same Medicare Administrative Contractor (MAC). After a Medicare cost report has been completed, hospitals have three years to reopen that report. When it came to MBD, these clients kept getting the same answer — no. This particular MAC denied every request to reopen a Medicare cost report for the MBD issue, even though the request met all the standards for such a reopening. All other MACs across the nation routinely allowed proper MBD reopening requests.

Millions of dollars were at stake just for R1’s clients alone. To make any progress, the team knew they’d have to go directly to the Centers for Medicare and Medicaid Services (CMS).


R1’s Regulatory Navigation team is made up of multiple former MAC auditors and policy experts — people with an intimate knowledge of the system. The R1 team knew that individual hospitals would not have the resources or multi-hospital data to prepare a case to solve this problem, so they stepped up to advocate.

A face-to-face meeting with CMS was essential. Working with legal experts, R1 outlined a case based on evidence of continued denials over time. They bargained for a meeting while simultaneously building an argument on behalf of the client.

R1’s team of subject matter experts carefully collected evidence to demonstrate that all other MACs routinely reopened Medicare cost reports for the MBD issue. Their case proved the arbitrary nature of the decisions from this single MAC, who denied the benefits that are due all Medicare IPPS hospitals and were properly granted to hospitals served by other MACs throughout the country.


R1’s government reimbursement team, along with legal experts and affected hospital representatives, met with CMS, prepared with data on the impacts of MBD for hospital finances. CMS listened with interest, and at the conclusion of meeting, said they would review the situation internally. Several months later, at CMS’s direction, the MAC changed course and agreed to accept all future proper MBD re-opening requests. Since changing the course of the MAC, R1’s clients have recovered $13 million in lost revenue.

The efforts in advocating for these clients has brought value to other hospitals, too, as the decisions made by CMS impact every hospital that participates in the Medicare program. In this case, R1’s advocacy and partnership, which drew unnoticed issues to the attention of CMS brought needed, equitable reimbursement benefits to all hospitals and healthcare systems across multiple states in that MAC’s jurisdiction.

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