Home Health & Hospice Week

HHA loses out on $127,000 repayment in recent court decision.

If your home care organization falls on hard times, you shouldn't expect bankruptcy to be a cure-all for your problems.
 
Medicare doesn't have to follow the usual bankruptcy rules, notes attorney E. Michael Flanagan with Weil Gotshal & Manges in Washington, DC. That's a lesson home health agency Excel Home Care Inc. learned the hard way in a recent court decision.
 
Under the privations of the interim payment system, Excel filed for Chapter 11 bankruptcy in November 2001, President Diane Porter tells Eli. In February 2003, the bankruptcy court confirmed a reorganization plan that had Excel making a monthly payment of $7,000 over seven years to pay back nearly $440,000 to the Department of Health and Human Services, according to an Oct. 29 decision in Excel Home Care v. HHS (D. Mass., Civil Action No. 03-CV-11767-GAO).
 
But in May 2003, Excel's fiscal intermediary found Medicare had underpaid the Tewksbury, MA-based HHA by $127,000 in 2000. Instead of handing over the sum to Excel, the FI withheld the funds, deducting the money from the total the HHA owed under its bankruptcy plan.
 
Excel cried foul, demanding the underpayment be returned to the agency because it wasn't part of the reorganization plan. When the FI didn't respond, the HHA filed suit in federal district court.
 
The court had one main issue to resolve - whether it could rule on the underpayment's fate under bankruptcy rules, or whether the funds were subject to Medicare's authority under separate Medicare rules.
 
The finding: The court said Medicare has its own authority over the payment that supersedes bankruptcy rule jurisdiction. Therefore, Excel would have to exhaust all administrative remedies within HHS before turning to the courts for help - something the agency hadn't done before filing suit.
 
"Medicare providers want more independent review" of payment practices and often turn to the courts seeking that review, notes bankruptcy attorney Mark Bossi with Thompson Coburn in St. Louis. But in most cases, jurisdiction over the dispute will go to HHS and not the federal courts, Bossi notes.
 
"Bankruptcy is often not the safe haven for Medicare providers as it is for other types of companies," Flanagan points out. Medicare nearly always has a "right of recoupment that transcends court jurisdiction," he notes. In other words, FIs can withhold pretty much any underpayments that come along for a provider in bankruptcy and apply the sum to the provider's outstanding balance.
 
Put simply, Medicare authority trumps bankruptcy authority, Bossi says.
 
In its argument, Excel did note some cases where courts had intervened in Medicare bankruptcy issues. But the district court noted circuit court cases that precluded such intervention, and said the cases Excel cited "are in error."
 
The court "hammers the lid shut even tighter" on Medicare versus bankruptcy authority in the decision, Flanagan judges.
 
Medicare providers argue there is no specific avenue for them to take up such bankruptcy disputes with HHS, notes attorney Liz Pearson with Covington, KY-based Pearson & Bernard. Tip: She recommends drafting a letter to the HHS Secretary and presenting that as your attempt to exhaust all administrative remedies, so the court can then rule on the issue.

Catch More Flies with Honey

Providers who find themselves in this type of situation most likely won't secure relief from the courts, as Excel found out.
 
Instead, they should turn to negotiation with the FI and the Centers for Medicare & Medicaid Services, Flanagan recommends. The Medicare program is eager to recoup money where it can, because it often doesn't secure any funds from bankrupt providers that fold. "But the government is not unwilling to work with you," he says.
 
While unlikely to hand over the underpayment to a provider, Medicare may consider withholding the funds and reducing the amount of a provider's monthly repayment, for example. "Sometimes you can get the government to acquiesce a bit," Flanagan says.
 
But to do so, you have to convince them you need the cash to stay in business and repay the rest of your debt to Medicare, he advises. Tools like a cash flow analysis showing your needs can do the trick.
 
The time to negotiate is before you file lawsuits or take other aggressive action, Flanagan recommends. Even if you win in court, you still have to work with your intermediary and don't want to create an adversarial relationship, he reminds providers. "You can lose by winning in this business," he notes.
 
But it's not too late to try negotiation after a negative decision such as Excel's, Pearson says. "The only other hope is to work internally in the CMS Central office, because what they did was likely in contradiction to the ... signed repayment agreement," she notes.
 
Excel President Porter says the agency still is deciding whether to pursue further legal or remedial action. The HHA with $2.7 million in annual revenues emerged from bankruptcy seven months ago, she says.