EX-10.2 Settlement Agreement

EX-10.2 4 d01205exv10w2.txt EX-10.2 SETTLEMENT AGREEMENT EXHIBIT 10.2 Settlement Agreement This Settlement Agreement is entered into by and between the Centers for Medicare and Medicaid Services, United States Department of Health and Human Services ("CMS") and Beverly Enterprises, Inc. ("Beverly"), through their authorized representatives (collectively referred to as the "Parties"), to resolve the Medicare reimbursement issues set forth below. Beverly is a corporation that operates, through subsidiaries, nursing facilities that are providers under the Medicare program. CMS is the agency of the federal government that administers the Medicare program. CMS, through its fiscal intermediary, is auditing certain Medicare costs reported by Beverly for certain years. In order to avoid the delay, inconvenience, uncertainty, and expense of concluding those audits and of subsequent protracted litigation of the results thereof, the Parties have reached a full and final settlement as set forth below. By entering into this settlement, Beverly does not admit to any liability or otherwise concede the accuracy of any reimbursement position taken by CMS or its fiscal intermediary. In consideration of the mutual promises, covenants, and obligations set forth below, and for good and valuable consideration as stated herein, the Parties hereby agree as follows: 1. Beverly agrees to pay to CMS the sum of Thirty-five Million Dollars ($35,000,000) within thirty days of execution of this Settlement Agreement. 2. CMS and Beverly agree that payment of the amount set forth in Paragraph One (1) above is in full and final satisfaction of any and all outstanding CMS administrative claims that were specifically excluded from the prior settlement agreement between the United States of America and Beverly entered into on or about February 3, 2000 (the "DOJ Agreement") involving "Covered Conduct", as that term is defined in the DOJ Agreement, including, without limitation, all of the facility specific rate recalculations and routine cost limit exception request revisions described in paragraphs nine through eleven (9-11) of the DOJ Agreement. 3. CMS and Beverly agree that payment of the amount set forth in Paragraph One (1) above is in full and final satisfaction of any and all outstanding claims involving cost reporting issues for all of Beverly's cost reporting periods ending on or before December 31, 2000, including, without limitation, all of the administrative claims described in paragraph eight (8) of the DOJ Agreement and any and all outstanding claims involving Medicare reimbursement for bad debt to Beverly for Beverly's fiscal years 1999 and 2000. 4. (a) CMS and Beverly agree that Beverly's Medicare claims for reimbursement of bad debt for fiscal year 2001 and afterwards shall be made based upon the policies, procedures, and documentation agreed upon by Beverly and CMS in the protocol attached to this Agreement as Exhibit A, the terms of which are hereby incorporated by reference into this Agreement. The Parties acknowledge that all or part of the bad debt protocol attached as Exhibit A may be modified or superceded by statutory, regulatory or policy changes regarding bad debt reimbursement, but that in any event, Beverly will be treated no differently than any Medicare provider of skilled nursing facility services with respect to reimbursement for bad debt. (b) CMS and Beverly further agree that Beverly has provided CMS with a written description of how Beverly calculates bad debt reimbursement and reports 75% of that amount for purposes of interim payments so that CMS can verify that this process is consistent with the protocol attached as Exhibit A. CMS agrees to complete that verification as soon as reasonably practicable, but within no more than 180 days after execution of this Agreement. Upon verification that Beverly's process is consistent with Exhibit A, CMS will instruct the fiscal intermediary to include in Beverly's next interim payment reimbursement for bad debt as reported on Beverly's Periodic Interim Payment submissions from January 1, 2001 through the date of verification, and to include payments to Beverly for bad debt claims in subsequent interim payments made to Beverly. (c) CMS and Beverly further agree that Beverly's Medicare bad debt claims for fiscal year 2001 and subsequent years shall be audited and final settlement made through review of a sample of bad debt documentation. 5. CMS will instruct its fiscal intermediary to issue Beverly's Home Office Cost Statements for fiscal years 1996 and 1997, which had been completed as of February 28, 2002, to the state Medicaid programs set forth on Exhibit B to this Agreement. 6. CMS will direct its fiscal intermediary to inform state Medicaid programs in writing that Beverly's Medicare cost reports as filed (and Home Office Cost Statements as filed other than those referred to in paragraph 5 above that were completed as of February 28, 2002) for fiscal years 1996 through 2000 represent final, settled cost statements, and that no further adjustments will be made by Medicare through audit for those fiscal years. 7. At a time and place to be mutually agreed upon, CMS shall facilitate a meeting between representatives of CMS, Beverly, and CMS' fiscal intermediary in order to discuss record keeping, cost reporting, cost allowance, audit, and other issues. 8. This Agreement and the Exhibits hereto constitute the entire agreement between the Parties, and this Agreement may not be amended except in a writing signed by both Parties. 9. The undersigned represent and warrant that they are authorized to execute this Agreement and, for those signing on behalf of CMS, that they do so in their official capacities. 10. This Agreement may be executed in counterparts, each of which constitutes an original and all of which constitute one and the same agreement. 11. This Agreement is effective on the date of the signature of the last signatory to this Agreement, and is binding on the successors, transferees, agents and assigns of the parties. Centers for Medicare and Medicaid Services Date: --------------------- By: ----------------------- [name and title] Beverly Enterprises, Inc Date: --------------------- By: ----------------------- [name and title] EXHIBIT A BAD DEBT REPORTING, DOCUMENTATION, AND AUDITING PROTOCOL BEVERLY ENTERPRISES WILL PROVIDE THE CENTERS FOR MEDICARE AND MEDICAID SERVICES ("CMS"), AND/OR ITS DESIGNATED AGENTS, THE FOLLOWING INFORMATION RELATED TO BAD DEBTS CLAIMED ON ANY BEVERLY ENTERPRISES COST REPORTS TO BE FILED FOR PERIODS BEGINNING WITH THE YEAR 2001 WITH CMS FOR PAYMENT UNDER THE MEDICARE PROGRAM: REPORTING AND DOCUMENTATION o Medicare bad debt listings (inpatient, outpatient and ESRD) that support the amounts claimed in the cost report. The listings should contain the following information that is necessary to determine the allowability of the bad debts: 1. Beneficiary's name and account number (health insurance number); 2. Date of covered service; 3. Date the first bill was sent to patient, or the party responsible for the patient's personal financial obligations, if billing is required under the procedures for Medicare patients entitled to Medicaid; 4. Date of write-off of bad debt; 5. Amount written off as bad debt; and 6. Deductible and coinsurance amounts charged to beneficiary. o Bad debt collection policy that describes, for all classes of patients: (1) when the first bill is to be sent to the patient or responsible party, if applicable, (2) the time intervals when the follow-up letters are to be sent and/or telephone calls are to be made if the provider uses an internal collection process, (3) the dollar thresholds for accounts that are to be sent to the outside collection agency, and (4) the point at which the account is written off. If the patient files are stored electronically, the collection policy should contain codes that are used on the electronic print screens to identify the type of action (e.g., first bill, first follow-up notice, referral to collection agency) taken on the account. o If the patient accounts are referred to an outside collection agency(s), a copy of the contract with the collection agency(s) is needed to determine whether both Medicare and non-Medicare uncollectible accounts are handled in a similar manner. o Medicare, and if necessary non-Medicare, patient files containing the documentation of the collection effort. If the patient files are stored electronically, capability to access the print screen that details the charges to the patient, the billing date, to whom the bill was sent, and the number/code and the date of the follow-up letters or phone calls, and/or referral to collection agency (if any). Also, on request by auditor, capability to print a sample of the actual letters to the patient. o If a collection agency(s) is used at any time during the collection process, a copy of the collection agency report(s) that shows for each patient account: the name of the patient, date account placed with the agency(s), and balance at the end of the provider's fiscal year. o If no collection effort was exerted on some or all of the bad debts claimed, documented evidence that the patient(s) was indigent. o For Medicaid patients, when there is satisfactory documentation that the state payment formula would result in zero payment, then the write-off may occur before 120 days have passed. FOR MEDICARE PATIENTS WHO ARE ENTITLED TO MEDICAID: In general, the following information must be provided: o Evidence that the patient is eligible for Medicaid (Title XIX) at the time services were rendered. o Copies of the bills for Medicare deductible and/or coinsurance amounts that were sent to the state Medicaid Agency. o Copies of the remittance advice from the state Medicaid Agency showing that the provider's claims for the Medicare deductible and coinsurance amounts were denied. The procedures that shall be followed for documenting bad debt amounts claimed for indigent residents will be those outlined in section L of the HCFA form 339 instructions, as follows: Evidence of the bad debt arising from Medicare/Medicaid crossovers may include a copy of the Medicaid remittance showing the crossover claim and resulting Medicaid payment or non-payment. However, it may not be necessary for a provider to actually bill the Medicaid program to establish a Medicare crossover bad debt where the provider can establish that Medicaid would have no responsibility for payment under the state plan. In lieu of billing the Medicaid program, the provider must furnish documentation of: o Medicaid eligibility at the time services were rendered, and o Non-payment that would have occurred if the crossover claim had actually been filed with Medicaid. Non-payment must be evidenced by a reference to the pertinent sections of a Medicaid state plan or precedent records of denial of previous claim submissions for the same service and same category of payment. The payment calculation will be audited based on the State's Medicaid plan in effect on the date that services were furnished. Providers should be aware of any changes in the Medicaid payment formula that might impact the crossover calculation, and ensure that these changes are reflected in the claimed Medicare bad debt. FOR INDIGENT MEDICARE PATIENTS WHO ARE NOT ENTITLED TO MEDICAID: The following information must be provided: o Medicare patients' files containing documentation that the provider used customary methods based on the guidelines in the PRM-1, section 312 to determine patient indigence. A patient's signed declaration of inability to pay medical bills cannot be considered as proof of indigence. o Backup information showing that the provider considered the patient's totals resources (e.g., analysis of assets that are convertible to cash and unnecessary for the patient's daily living, liabilities, income and expenses) in making the determination of indigence. o Evidence that the provider determined that no source other than the patient (e.g., Title XIX, local welfare agency, guardian) would be legally responsible for the patients medical bill. AUDITING o Audits of claims for reimbursement of bad debts will be performed in accordance with the "Hospital and Skilled Nursing Facility Audit Program (revised and issued November, 1999)," Government Auditing Standards (GAS) or Generally Accepted Auditing Standards (GAAS). Any changes in CMS audit protocols will be incorporated into this agreement. The provider must comply with any changes that are made to governing CMS statutes, regulations or manual instructions regarding bad debt policy subsequent to the effective date of a settlement agreement entered into between CMS and Beverly Enterprises. All or part of this protocol may be superceded by any such CMS statutory, regulatory or policy changes regarding bad debt policy. Beverly Enterprises Summary of all Home Office Cost Report Addresses STATE FILING ADDRESS ----- -------------- AL Mr. Jesse Loving Director or Provider Audit and Reimb. Div 501 Dexter Ave. P.O. Box 5624 Montgomery, AL 36103-5621 AR Lori Bowen Chief Program Administrator Department of Human Services Division of Medical Services Office of Long Term Care P.O. Box 8059-Slot 402 Little Rock, AR ###-###-#### AZ Jane Wright, CPA, CIA Arizona Dept. of Hlth Srvcs. Office of Cost Reporting and Review 100 W. Clarendon, Suite 500 Phoenix, AZ 85013 CA Mr. Gary Wong Dept. of Health Services Auditor Review Analysis 591 North 7th Street P.O. Box 943732 Sacramento, CA ###-###-#### DC Mr. Herbert Weldon, Commissioner Commission of Health Services Dept of Human Services 825 North Capital St, NE Washington, DC 20020 GA Mr. Alan Sacks Georgia Nurs. Hme Reimb Div 2 Peachtree Street, N.W. Suite 3829 Atlanta, GA 30303-3159 ###-###-#### Phone HI Mr. Gary S. Mizuno Manager Audit and Reimbursement Hawaii Medical Srvc. Assoc. 818 Keeaumoku Street Honolulu, HI 96808 IL Margel S. Pellicord Illinois Department of Public Aid 201 S. Grand Ave. East - 2nd Floor Springfield, IL 62763 ID Mr. Kevin Londeen 500 Baybrook Court Suite 300 Boise, ID 83706 IN Kennan Buoy Myers and Stauffer 8555 North River Road, Suite 360 Indianapolis, IN 46240 (Rate Setting Contracters for the State) Beverly Enterprises Summary of all Home Office Cost Report Addresses STATE FILING ADDRESS ----- -------------- KS Kansas Department on Aging New England Building 503 S. Kansas Avenue Topeka, KS ###-###-#### Attn: Director, Nurs Fac Rate Setting KY Myers and Stauffer, LC Certified Public Accountants Attn: Ada M. Gebhardt 60 Devils Hollow Connector, Suite 200 Frankfort, KY 40601 LA John C. Marchand State of Louisana Dept of Hlth and Hosp 1201 Capitol Access Road Baton Rouge, LA 70821-9030 MA Ms Sheri Cooney Health Data Policy Group Division of Health Care Finance & Policy Two Boyleston Street Boston, MA 02116 MD H. Terry Hancock Clifton, Gunderson and Company Suite ###-###-#### Deereco Road Timonium, MD 21093 MI Mr. Dennis Madalinski Budget and Fin Admin Bureau of Audit and Rev. Enhanc. 400 South Pine P.O. Box 30479 Lansing, MI ###-###-#### MN Lori Mo Human Services Building Audit Division 444 Lafayette Road St. Paul, MN 55155-3836 MO Marvin Bernskoetter Department of Social Services Division of Medical Services 308 East High Street Jefferson City, MO 65102-6500 Beverly Enterprises Summary of all Home Office Cost Report Addresses STATE FILING ADDRESS ----- -------------- MS Ms. Tabitha Clifton Medicaid Fin. Prog. Coord. The Division of Medicaid Office of The Governor Suite 801, Robert E. Lee Building 239 North Lamar Street Jackson, MS ###-###-#### NC Chris Brady, Audit Manager Desk Audit Section Division of Medical Assistance 2507 Mail Service Center Raleigh, NC ###-###-#### NE Dale Schallenburger State of Nebraska Department of Social Services 301 Centennial Mall South Lincoln, NE 68509 NJ Felix A. Alamzor, Director Hlth Fac Rate Setting - Rm 600 CN 360 Trenton, NJ ###-###-#### OH Mr. Mike Flora Ohio Department of Human Services Audits and Reimbursement Section 30 East Broad Street, 33rd Floor Columbus, OH ###-###-#### PA Joyce B. Haskins, Director Department of Public Welfare Office of Medical Assistance Division of Long Term Care P.O. Box 2675 Harrisburg, PA 17105 SC Melissa C. Davis, Director St Hlth and Hmn Svcs. Fin. Co. Div of Long Term Care Reimb 1813 Main Street, Suite 1300 Jefferson Executive Center Columbia, SC 29201 SD Damian Prunty Program Administrator Department of Social Services Off of Provider Reimb Auditing 700 Governors Drive Pierre, SD ###-###-#### TN Donna Crutcher Department of State Auditing Suite 1500 James K. Polk State Office Building Nashville, TN ###-###-#### Beverly Enterprises Summary of all Home Office Cost Report Addresses STATE FILING ADDRESS ----- -------------- TX Marian Dillard Data Development Specialist Texas Dept. of Human Services Rate Analysis Department 701 West 51st Street Mail Code W-425 Austin, TX 78751 VA Clifton Gunderson, P.L.L.C. 4144-B INNSLAKE DRIVE Glen Allen, VA 23060-3387 WA Joe Perrino Dept of Social Health Services Office of Rates Management Aging and Adult Srvcs. Admin 640 Woodland Square Loop SE Lacey, WA 98503 WI Randall M. Engstrom, Senior Auditor Bureau of Health Care Financing Nursing Home Section P.O. Box 309 Madison, WI ###-###-#### WV Richard P. Brennan, Jr., Director Office of Audit, Research and Analysis 3701 MacCorkle Avenue, SE Charleston, WV 25304