Home Health & Hospice Week

Lawsuits:

HHA STRIKES OUT WITH DEFERRED COMP APPEAL

Medicare manual rules, court says.

If you want to fight the rules in the Medicare Provider Reimbursement Manual, you'll have a tough battle ahead.

That's the lesson learned by Puerto Rican home health agency Visiting Nurse Association Gregoria Auffant Inc. in a recent U.S. First Circuit Appeals Court decision.

The VNA won't be seeing reimbursement from its mid-1990s deferred compensation plan, despite the fact that the Provider Reimbursement Review Board ruled in its favor in the case in 2002, according to the court decision released May 8 (No. 04-2721).

Case history: Regional home health intermediary United Government Services had disallowed nearly $354,000 in deferred comp costs on 1994 through 1997 cost reports because it said the plan didn't comply with Medicare rules and regulations.

It appears the VNA didn't fund the plan properly, notes consultant Pat Laff with Laff Associates in Hilton Head, SC. If the agency had funded the plan through segregated accounts and a deferred comp administrator, UGS likely would have found the costs reimbursable, Laff expects.

The VNA appealed to the PRRB and won in 2002. The Board said the plan's differences from the Medicare rules were minimal and it was in "substantial compliance" with the Provider Reimbursement Manual, according to the decision.

But then the Health and Human Services Administrator reversed the Board's decision, saying the plan didn't qualify as a formal deferred comp plan under Medicare rules. The VNA appealed, but a federal district court in 2004 upheld the Administrator's decision.

"Never assume that 'substantial compliance' with the applicable requirements will be deemed sufficient," warns attorney Joel Hamme with Powers Pyles Sutter & Verville.

"It is sad that [HHS] decided to attack the decision from the PRRB," notes the VNA's attorney in the case, Hector Perez with Goldman Antonetti & Cordova in San Juan, PR. "Substantial compliance wasn't enough," Perez tells Eli.

Strike 3 For VNA

In the latest decision, the appeals court also sides with the Administrator.

First the court shoots down the VNA's argument that the Administrator made his decision past the 60-day deadline. The requirement doesn't say HHS has to make and mail the decision within 60 days, only make it--which was done correctly.

Then the court doesn't buy the VNA's arguments that the plan complied with Employee Retirement Income Security Act requirements, and thus should be valid under Medicare. The Medicare Manual doesn't merely codify ERISA and ERISA doesn't preempt rules in the Manual, the decision says.

And "the deferred plan specifications found in the Manual ... do not contradict or conflict with the requirements articulated in the Medicare Act and its regulations," the court concludes. Therefore they are valid and the VNA's plan doesn't satisfy their requirements.

The court decisions give manual provisions the same status as regulations, without the government having to go through the notice and comment requirements for regulations, Perez criticizes.

However, the VNA plans no further legal action in the case, as the only further option is to appeal to the U.S. Supreme Court, he adds.

Tip: When setting up a deferred comp plan, be sure you understand the requirements or hire consultants who do, Hamme advises. That includes not only Medicare reimbursement implications, but also ERISA and tax ramifications, among others.