Home Health & Hospice Week

Don't count on that written approval from your intermediary.

If you get a new intermediary, all the work you've done with your current one could go out the window.

And your chances of switching to a new intermediary may be greater than you think, with contractor reform and restructuring just beginning.

The U.S. District Court for the Eastern District of Pennsylvania has ruled in a case addressing intermediary switches, and the decision may cost Mercy Home Health in Springfield, PA nearly three-quarters of a million dollars.

Mercy obtained approval in 1993 for an alternate cost reporting methodology from its then-intermediary Independence Blue Cross, recounts the decision issued March 10, Mercy Home Health v. Leavitt, No. 03-6860. Then in 1996, Blue Cross told Mercy it wouldn't accept the alternate methodology starting in 1997.

But then-intermediary Wellmark subsequently took over when Blue Cross terminated its contract with Medicare. Wellmark disallowed the alternate process retroactively, which cost Mercy $272,000 in 1995 and $451,000 in 1996, according to the decision.

Mercy got a short reprieve when the Provider Reimbursement Review Board sided with the agency in an August 2003 decision (see Eli's HCW, Vol. XII, No. 32, p. 254). But the HHS Administrator reversed the PRRB's decision shortly thereafter.

Be Ready Any Time to Prove You're Right

Now the federal court has weighed in, and the outcome isn't favorable to Mercy.

The court upholds the HHS reversal of the PRRB decision. Congress clearly gives HHS "the ability to take retroactive actions to remedy incorrect Medicare reimbursements," the decision says. Going against the Administrator's decision "would place Mercy's compliance with procedure over the Secretary's promulgation of substance," the court maintains.

This decision leaves providers with little confidence in their written approvals from Medicare contractors. Giving a new intermediary the power to retroactively rescind a prior intermediary's approval is "distressing," notes attorney Joel Hamme with Powers Pyles Sutter & Verville in Washington.

"[It's] one thing to say that the previously approved cost allocation methodology is no longer approved and cannot be used for periods after that rescission has occurred," Hamme says. "It is another to make the decision retroactive to the very periods that the old intermediary approved."

Lesson learned: A provider should always be ready to establish that the methodology it uses is a more precise and accurate way of allocating costs than other methodologies, Hamme advises - regardless of whether the process has been approved already.

Mercy didn't return phone calls for this story.