The Financial Statement of Debtor and Supporting Regulations in 42 CFR, Section 405.376

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On the basis of subsequently acquired evidence, or otherwise, you determine
that there is no overpayment.

40.2 - Suspension of Payment (See Program Integrity Manual)
(Rev. 29, 0 1 -02-04)
Medicare authority to withhold payment in whole or in part for claims otherwise
determined to be payable is found in federal regulations a t 42 CFR 405.370-377,
which provides for the suspension of payments.
Suspension may be used when the contractor possesses reliable information that:
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Fraud or willful misrepresentation exists;

o

An overpayment exists but the amount of the overpayment is not yet
determined;

Q

The payments to be made may not be correct; or
The provider fails to furnish records and other requested information. (Some
examples include cost reports, credit balance reports, and form CMS-91.)

-

50 Establishing Extended Repayment
(Rev. 29, 03-02-04)
Where the debtor does not comply with the first demand letter requesting that full
the existence of an
refund of the overpayment be made, but acknow1edg.e~
overpayment, it may contact the FI or carrier t o arrange for a repayment plan.
A debtor is expected to repay any overpayment as quickly as possible. I f it cannot
refund the total overpayment within 30 days after receiving the first demand letter,
it should request an extended repayment plan immediately. However, an ERP
request may be received and shall be reviewed at any time the overpayment is
outstanding. The provider must explain and document its need for an extended
(beyond 30 days) repayment plan.
A repayment plan may be established t o recover all or part of an overpayment.
Following the withhold guidelines in Chapter 4, 940 the FI or carrier shall offset any
money owed t o the provider prior to establishing a repayment plan. Some examples
of monies owed to the provider include underpayments money held by suspension or
money withheld from the provider based on Chapter 4, 440. When a repayment plan
is used to recover part of an overpayment, the FIICarrier recovers the remainder of
the overpayment by withholding interim payments (See Chapter 4, §40), setoff of
monies due the debtor, or from a lump-sum payment by the provider. Any approved
ERP will run from the date of the initial demand letter.

Note: Once an ERP is established, the offset of an
underpayment against the ERP is not automatic. I f a Medicare
underpayment is determined subsequent to an established ERP,
the FI shall notify the provider in writing of the underpayment.
The F l will permit the provider 15 calendar days following the
date of nstrfication to submit a statement (includin any
pertinent evidence) as to why the underpayment s ould not" be
offset.

R

I f the provider does not respond in the required time, the FI shall offset the
underpayment against the ERP. I f the provider responds timely, the FI shall not take
action to offset until i t has completed its review of the documentation. Based on its
review, the FI will make a determination as t o whether the facts justify offsetting the
underpayment. I f the FI determines that offset is appropriate, in whole or in part,
written notice will be sent to the provider. Such notice shall contain specific findings
on the conditions upon which the offset was based, and an explanation for the final
decision.

50.1 - Documentation Required in an ERP Application-Physician is a Sole Proprietor - Carrier Only
(Rev. 29, 01 -02-04)
The Carrier shall request the physician to complete and return a Form CMS-379,
Financial Statement of Debtor and a copy of the physician's income tax filing for the
most recent calendar year. A request for an extended repayment of 12 months or
more must also be accompanied with a t least one letter from a financial institution
denying the debtor's loan request for the amount of the overpayment. Also, include
a copy o f the loan application with the denial letter from the bank.

50.2 - Documentation Supporting a Request for Extended
Repayment - Provider is an Entity Other Than a Sole Proprietor
(Rev. 29, 01-02-04)
The FIICarrier shall request the provider t o furnish the following:
Amortization Schedule- this schedule shall contain the proposed repayment
schedule, including length of schedule, dates of payment, and payment amount
broken down between principal and interest for the life of the schedule

Balance sheets - the most current balance sheet and the one for the last
complete Medicare cost reporting period or the most recent fiscal year (preferably
prepared and certified by the provider's accountant).
NOTE:

I f the time period between the two balance sheets is less than 6 months
(or the provider cannot submit balance sheets prepared by its
accountant), it must submit balance sheets for the last two complete
Medicare reporting periods (providers that file a cost report) or last two
complete fiscal years.

o
Income statements - related to the balance sheets (preferably prepared by
the provider's accountant).

CMS suggests that both the balance sheets and income statements include the
following statements:

MISREPRESENTATION OR FALS:[FICATIOIV OF ANY INFORMATION CONTAINED
IIV THIS BALANCE SHEET OR INCOME STATEMENT MAY BE PUNISHABLE BY
FINE AND/OR IMPRISONMENT UNDER FEDERAL LAW.
CERTIFICATION BY OFFICER OF ADMINISTRATOR

I f the provider does not respond in the required time, the FI shall offset the
underpayment against the ERP. I f the provider responds timely, the FI shall not take
action to offset until i t has completed its review of the documentation. Based on its
review, the FI will make a determination as to whether the facts justify offsetting the
underpayment. I f the FI determines that offset is appropriate, in whole or in part,
written notice will be sent to the provide/-, Such notice shall contain specific findings
on the conditions upon which the offset was based, and an explanation for the final
decision.

-

50.1 Documentation Required in an ERP Application-Physician is a Sole Proprietor Carrier Only

-

(Rev. 29, 01 -02-04)
The Carrier shall request the physician t o complete and return a Form CMS-379,
Financial Statement of Debtor and a copy of the physician's income tax filing for the
most recent calendar year. A request for an extended repayment of 12 months or
more must also be accompanied with at least one letter from a financial institution
denying the debtor's loan request for the amount of the overpayment. Also, include
a copy of the loan application with the denial letter from the bank.

50.2 - Documentation Supporting a Request for Extended
Repayment Provider is an Entity Other Than a Sole Proprietor

-

(Rev. 29, 01-82-04)
The FIICarrier shall request the provider to furnish the following:
A m o r t i z a t i o n Schedule- this schedule shall contain the proposed repayment
schedule, including length of schedule, dates of payment, and payment amount
broken down between principal and interest for the life of the schedule
o
Balance s h e e t s - the most current balance sheet and the one for the last
complete Medicare cost reporting period or the most recent fiscal year (preferably
prepared and certified by the provider's accountant).

NOTE:

I f the time period between the two balance sheets is less than 6 months
(0, 2.n provider cannot submit balance sheets prepa~edby its
accountant), it must submit balance sheets for the last two complete
Medicare reporting periods (providers that file a cost report) or last two
complete fiscal years.

Income s t a t e m e n t s
the provider's accountant).

-

related to the balance sheets (preferably prepared by

CMS suggests that both the balance sheets and income statements include the
following statements:
MISREPRESENTATION OR FALSIFICATION OF ANY INFORMATIOIV CONTAINED
IN THIS BALANCE SHEET OR INCOME STATEMENT MAY BE PUNISHABLE BY
FINE AND/OR IMPRISONMENT UNDER FEDERAL LAW.
CERTIFICATION BY OFFICER OF ADMINISTRATOR

OF PROVIDER(S)
(For physicians/suppliers, "CERTIFICATION BY OFFICER/OWNER OF DEBTOR(S))
IHEREBY CERTIFY that Ihave examined the balance sheet and income
statement prepared by
and that t o the best of m y
knowledge and belief, it is a true, correct, and complete statement from
the books and records of the provider.

Sianed
Officer or Administrator of
Provider(s1
Title
Date
(For physicians/suppliers:
Signed
Officer or Owner of
Debtor(s)
Title)
w
Statement of Sources and Application of Funds - for the periods covered
by the income statements (see Exhibit 2 for recommended format).

e
Cash flow statements - for the periods covered by the balance sheets (see
Exhibit 3 for recommended format). I f the date of the request for an extended
repayment schedule is more than 3 months after the date of the most recent balance
sheet, a cash flow statement should be provided for all months between that date
a n d the date of the request.

In addition, whether or not the date of the request is more than 3 months after that
o f the most recent balance sheet, a projected cash flow statement should be
included for the 6 months following the date of the request.
e
Projected cash flow statement - covering the remainder of the current fiscal
year. I f fewer than 6 months remain, a projected cash flow statement for the
following year should be included. (See Exhibit 3 for recommended format.)

List of restricted cash funds - by amount as of the date of request and the
purpose for which each fund is to be used.
w

List of investments - by type (stock, bond, etc.), amount, and current
market value as of the date of the report.
List of notes and mortgages payable - by amounts as of the date of the
report, and their due dates.
e
Schedule showing amounts - due to and from related companies or
individuals included in the balance sheets. The schedule should show the names of
related organizations or persons and show where the amounts appear on the balance
sheet--such as Accounts Receivable, Notes Receivable, etc

Schedule showing types - and amounts of expenses (included in the income
statements) paid to related organizations. The names of the related organizations
should be shown.
e
Loan Applications - Requests for extended repayment of 12 months or more.
Have the debtor include at least one letter from a financial institution denying the
debtor's loan request for the amount of the overpayment. Also, include a copy of the
loan application with the denial letter from the bank.

-

Ffs Only The percentage of occupancy - by type of patient (e.g.,
Medicare, Medicaid, private pay) and total available bed days for the periods covered
by the income statements; and
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All financial records must be for the business participating in the program. They
should not be for the owner if the business is a partnership or a corporation. I f the
financial aspects of the business are managed by an outside facility, the provider's
individual financial records must still be submitted as well as the financial records of
the outside facility.
I f a debtor is unable t o furnish some of the documentation, it should fully explain
why it is unable to. Where the debtor's explanation is reasonable and the
documentation is otherwise acceptable, the FIICarrier shall forward the request for
extended repayment to the RO with its recommendation. It shall comply with
Chapter 4, 540 regarding recoupment of the overpayments pending receipt of the
documentation and a decision on the extended repayment request.

50.3- Approval Process

(Rev. 29, 02-02-04)
Below is a chart detailing the requirements of a Medicare contractor for an extended
repayment plan. Once the FIICai-rier completes these requirements a decision
regarding approval must be made. I f the FIICarrier determines that the provider
does not meet the requirements for an extended repayment plan the provider shall
be notified in writing. I f the FIICarrier determines that the provider does meet the
requirements for an extended repayment plan the following criteria shall be followed:
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I f the ERP request is for 12 months or less the FIICarrier shall notify the
provider immediately in writing of the approval.
I f the ERP request is greater than 12 months the FIICarrier must send the
entire ERP package including the documentation prepared by the FIICarrier to
the servicing RO for approval.

The FIICarrier has the option of altering the length of time when approving an ERP
request. For example, if a provider requests 24 months, but the FIICarrier feels that
12 months is sufficient the FIICarrier can deny the 24 month request and extend an
offer of a 12 month repayment plan. I f the FIICarrier recommends approval of an
ERP that is over 12 months in length, the recommendation must be forwarded t o the
RO for approval.

The FIICarrier may request additional financial information from the provider as well
as financial information from the owner i f the owner is requesting to submit personal
capital to help repay the Medicare debt.
The FIICarrier shall attempt to review and approve or deny or recommend approval
to CMS within 20 days of receipt of the completed EKP application.
Requirements to be
Completed before
approval or denial

ERP request 12
months or less

ERP request
greater than
12 months

ERP Protocol
(See Exhibit 1)
Analysis of financial
statements
Review of Last 12
months of claim
history
Payments on the
claim floor
Outstanding
Advance/Accelerated
Payments (Accelerated
Payments are F I only)
FI- Outstanding
settlements
Outstanding Fraud
Investigations
Send to R O for
additional approval

X

X

ERP request
asking for an
unconventional
payment
arrangement
X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

J

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Exhibit 1 ProtocoI for Reviewing Extended Repayment Plan
6ERP) - Provider/Bhysician Medicare Overpayments
Protocol for Reviewing Extended Repayment Plan (ERP)
Provider
Provider Number
(FIs Only) Cost Report FYE
(Carriers Only) Date(s) Overpaid
Overpayment Amount $
Date of Demand Letter

No. of Months Requested for ERP

Date ERP Approved/Not Approved (12 mos. or less)
Approved
Date Referred to RO for Consideration

.No. of Mos.

Reviewed By
FIICarrier Analyst

..................................... Date

Supervisor Review

Date

FIICarrier Official

1. Summarize the major reasons why the overpayment occurred.

2.

FIICarrier reviews the documentation sent by the debtor for completeness.
(Refer t o 570.2 for required documentation.) It analyzes the financial data
submitted to determine the availability of cash, marketable securities, accounts
receivable, restricted and unrestricted endowment funds, or special funds. It
considers whether these funds could be used for partial or full payment of the
overpayment.

3. FIICarrier performs the following calculations by using the most current financial
data submitted by the provider t o determine if it qualifies for an ERP.

a.

Current Ratio
The current ratio relates the dollar value of current assets to the dollar value
of current liabilities in order to evaluate an organization's ability t o pay
its current debt. Derived as:
-=
CURRENT LIABILITIES

This ratio defines the number of dollars held in current assets per dollar of
current liabilities (e.g., it relates current assets t o current liabilities). Multiple
coverage of liabilities is desirable. Generally, high values for the current ratio
imply a good ability t o pay short-term obligations and thus a low probability of
technical insolvency.
Normally, the FIICarrier considers a current ratio of 2 to 1 adequate t o meet
current liabilities. However, a debtor with a current ratio (2 t o 1or
greater) may have short-term payment problems if its current assets are
not expected t o be i n liquid form (cash or short-term investments) in time
t o meet the expected payment dates of the current liabilities.
b.

Quick Ratio
A liquidity ratio which measures the number of dollars of liquid assets (cash
plus marketable securities plus accounts receivable) that are available per

dollar of current liabilities. Derived as:
CASH

+ MARKETABLE SECURITIES +

ACCOUNTS RECEIVABLE =

CURRENT LIABILITIES
This is a more stringent measure of liquidity than the current ratio. The
FIICarrier uses it to determine the adequacy of cash, accounts receivable, and
marketable securities to pay current liabilities.
Normally, the FIICarrier considers a quick ratio of 1.5 to 1 adequate to meet
current liabilities. However, a debtor with a high quick ratio may have shortterm payment problems i f there are excessive amounts of slow-paying or
doubtful accounts receivable which may not be turned into cash soon enough
to meet maturing current liabilities. Conversely, a low quick ratio may not
imply a future liquidity crisis if current liabilities include terms that will not
require payment from existing current assets.

4. The FI, for institutional debtors, determines if there are any settlements (interim
rate
adjustments or cost report) in process which could be used to offset the
outstanding
overpayment.

5.

Based upon the previous steps, the FI/Carrier summarizes whether or not a
repayment plan should be approved or denied. I f approval is recommended, it
indicates the number of months, how it calculated the monthly payment and the
reason(s) for the approval. I f denial is recommended, it indicates the reason(s).

Exhibit 2
Covered

- Statement of Source and Application of Funds Period
STATEMENT OF SOURCE AND APPLICATION OF FLINDS
FOR THE PERIOD

Funds Provided by:
Operations - Net income for the period
Add : Charges not affecting working
capital
(depreciation, amortization, etc.)

Less: Operatiug revenues not affecting
working capital
Total fund provided by Operation
Long term loans

$XXXX

XXXX
$XXXX
XXXX
$XXXX

XXXX

Unrestricted cash donations

XXXX

Other (identify)

XXXX

Total Funds Provided

$XXXX

Exhibit 2 (Cont.)
STATEMENT OF SOURCE AND APPLICATION OF FUNDS
FOR THE PERIOD

Funds Applied to:
Retirement of long-term obligations
(mortgages, notes, bonds, etc.)

$XXXX

Purchase of equipment

XXXX

Purchase of land

XXXX

Dividends to stockholders

XXXX

Other (identify)

XXXX

Total Funds Applied

-XXXX

Net Increase
(Decrease) in Working
Capital

*$XXXX

...............................................................................................
---- ---------

Working Capital* (end of period)

XXXX

Less: Working Capital* (beginning of
period) (date)

-XXXX

Net Increase
(Decrease) in Working
Capital
*Current Assets less Current Liabilities

*$XXXX

Exhibit 3, Cash Flow Statement Period Covered
CASH FLOW STATEMENT
FOR THE PERIOD

Cash provided by:
Operations (net) (Schedule A) (See Exhibit 4)

$XXXX

Cash donations (unrestricted)

XXXX

Long-term borrowing

XXXX

Investment earnings (cash dividends, interest)

XXXX

Sale of long-term investments

XXXX

Sale of equipment

XXXX

Issuance of bonds

XXXX

Decrease in current assets - other than Accounts
Receivable, Prepaid Expenses, and Inventory

XXXX

Increase in current liabilities - other than
Accounts Receivable, Prepaid Expense, and
Inventory

XXXX

Others

XXXX

Total Cash Provided

$XXXX

Exhibit 3 (Cont.)
CASH FLOW STA-TEMENT
FOR THE PERIOD
Cash applied to:
Purchase of equipment

$XXXX

Payment of long-term debt

XXXX

Payment of bond redemption fund

XXXX

Purchase of long-term
investments

XXXX

Payment of dividends
Purchase of land and/or
building (purchase
price less mortgage,
capital stock and noncash
assets given toward
purchase)

XXXX
XXXX

Increases in current assets - other than
Accounts Receivable, Prepaid Expenses,
and Inventory

-

Decreases in current liabilities other
than Accounts Payable and Prepaid
Income
Other

xxxx
xxxx

XXXX

Total Cash Applied
Increase (Decrease) in Cash

XXXX
$XXXX

Cash at end of period (date)

$XXXX

Less:

XXXX

Cash at beginning of period (date)

Increase (Decrease) in Cash

Exhibit 4, Projected Cash Flow Statement Cash From
cOperations (Schedule A ) Period Covered

XXXX

iubmitted by the provider. (See

PROJECTED CASH FLOW
CASH FROM OPERATIOIUS (SCHEDULE A)

51

initial contact between the FI/Caq
iyment;
respondence (including demand II
le ERP (including telephone convd

Net Income (or Net Loss)
Increases:

I

41

2f the overpayment; cost report
' any repayments; dates and amol
:count.

Depreciation expense

$XXXX

Loss from sale of
equipment

xxxx

Decrease in net Accounts
Receivable

xxxx

Iunt of the overpayment, claim pq
Decrease in Prepaid
Expense

xxxx

~ r t sin which the overpayments ap
tion i t has on the financial status
~uditsand other sources such as d

Decrease in Inventory

XXXX

Increase i n Accounts
Payable

xxxx

~roposedrepayment plan and ratiC
recommendation and supporting
?epayment plan protocol (See Exhl
; and

Increase in Prepaid
Income

xxxx

Others

XXXX

opinion, based on experience, as.
Gross Cash from
Operations

g An Approved Extended

Decreases:

Iayment plan has been approved,
I ascertain whether recoupment is
ecomes apparent that the repaymi
!btedness within the time period CI
3bly the renegotiation of the amou
: will be recouped within the time 1
i to the RO any significant changer
ation that the provider misstated r
I question of its ability to refund t b
the RO immediately by telephone
)tern.

-om Terminated Provider4
% to Department of T r e a s ~

Gain from sale of equipment
Increase i n net Accounts Receivable

XXXX

Increase in Prepaid Expense

XXXX

Increase in Inventory

XXXX

Decrease in Accounts Payable

XXXX

Decrease in Prepaid Income
Others
Net Cash from Operations

50.4

$XXXX

XXXX
XXXX

- Sending the ERP Request to the Regional 6

(Rev. 29, 01-02-84]
ling an ERP request the FI/Carrier
?e provider/supplier's ability t o re/
ewed. This includes ERP requests

After the FI/Carrier has reviewed the documentation submitted in
request, it sends its recommendation to the RO for approval if thc
over 12 months in length. I t submits the following: