Home Health & Hospice Week

Requirements trump consistency in latest PRRB decision.

Even if your intermediary has OK'd your accounting practices for years, don't assume they'll pass muster under close scrutiny.

Columbia Montour Home Health Services in Bloomsburg, PA recently found that out the hard way. The Provider Reimbursement Review Board ruled against the home health agency in a Sept. 16 decision over the agency's 1998 cost report.

Columbia claimed $21,400 in accounting fees in the year ending in June 1998 for audits of that year's costs. But regional home health intermediary Cahaba GBA disallowed $18,000 of that amount because the work occurred after the cost reporting year concluded. The RHHI disallowed another $1,200 as unsupported by documentation, according to the decision (No. 01-3317).

Columbia argued to the PRRB that the intermediary had always accepted audit expenses during the year they addressed. And Generally Accepted Account-ing Principles (GAAP) require "that expenses be recognized when the product makes its contribution to revenue," the HHA maintained.

Cahaba countered that GAAP accrual accounting requires "the recognition of expenses when incurred." Since the 1998 audit took place after the year end, no benefit took place prior to June 30, 1998, the intermediary told the PRRB.

The Board sided with Cahaba, finding that the provider "may not accrue audit service fees in the current year for services that will be performed in future years," according to the decision.

Track Record Not Relevant

"The need for consistency should have worked in the provider's behalf," protests cost report consultant Tom Boyd with Boyd & Nicholas in Rohnert Park, CA. "The HHA had been doing it for some years prior."

But the decision comes as no surprise, notes Jim Plonsey, president of Medicare Training & Consulting in Lansing, IL. "The accrual of audit expenses is consistent with other prior decisions," Plonsey observes.

Because most of the audit work for a fiscal year happens after the close of that year, HHAs can't claim the audit costs in that year, explains Mark Tsiames with Simione Consultants in Hamden, CT. "You cannot accrue an entire fee for partial work completed, even though the audit is for the fiscal year," Tsiames notes.

Other options: Columbia can reopen its 1999 cost report and claim the audit costs in that year, Tsiames suggests.

Or an agency that wants to claim its audit costs for the year being audited could work out a retainer approach with its accounting firm, offers attorney Joel Hamme with Powers Pyles Sutter & Verville in Washington, DC. But many providers may not want to effectively pay earlier for services, Hamme notes.

Boyd suggests seeking PRRB mediation for similar cases, but the intermediary must agree to the mediation.

Columbia didn't respond to requests for comment for this story.