Home Health & Hospice Week

Do you think paying your board of directors $1,000 an hour is a good idea? Neither does the Provider Reimbursement Review Board.

The PRRB upheld regional home health intermediary Palmetto GBA's adjustment to Columbia, SC-based Tri-County Home Health Care and Services Inc.'s payments to its board of directors. Those payments sometimes reached a staggering $1,000 per hour, according to the Nov. 21, 2003 decision in Tri-County v. Palmetto (No. 2004-D3).

The PRRB dismissed as "not persuasive" a study Tri-County produced to justify the payments.

"Tri-County Home Health Care suffered greatly from lack of auditable documentation and customary business practices," says cost report expert Tom Boyd with Rohnert Park, CA-based Boyd & Nicholas. "It is not customary in the HHA business community to pay board of directors fees," Boyd notes.

Tri-County did triumph on two points of its PRRB appeal: compensation for its human resources director, and payment to an HR consultant. Of the consultant, the Board said "although the documentation is sketchy and sparse, a subscription service is not unreasonable in a labor-intensive business, and this information is extremely valuable in such a business."

For the HR director, Palmetto tried to use an owner's compensation survey to dictate salary level and disallow more than $13,000. But since the director wasn't an owner or relative of an owner, the point was moot. "Few auditors challenge compensation for non-owners who are not relatives," notes Boyd, a former RHHI auditor. "The assumption is that compensation is an 'arms length' agreement, unless you share bed or blood, determined by market conditions."

Tri-County struck out on payments for a pharmacy consultant and "continuity of care" consultant. The Board upheld Palmetto's reduction of the pharmacy's consultant costs from $200 per hour to $50 per hour. And it disallowed the continuity consultant's costs altogether, since the consultant's invoices were vague and the duties performed appeared to be related to marketing, according to the decision.

Finally, the HHA also failed to convince the Board that it deserved an exception to related organization rules for sales of supplies. It was unclear if Medi Home Health Agency Inc.'s durable medical equipment and supplies division, which was affiliated with Tri-County's consultant, conducted enough sales with unrelated parties to qualify for the exception, the decision says.

Because Tri-County couldn't prove the related organization exception, the agency could claim only the supplying organization's cost of the supplies it purchased on its cost report, rather than the normal sales price.