Home Health & Hospice Week

In the murky world of owners' compensation, at least one thing seems clear; if you gave yourself tens of thousands of dollars in bonuses under cost-based reimbursement, you'd better be prepared to defend them.

Regional home health intermediary Cahaba GBA shot down $187,951 in year-end bonuses to the two owners of Denver, CO-based AllCare Home Health Inc. for the cost report year ended May 31, 1998, according to a March 21 Provider Reimbursement Review Board decision.

Cahaba maintained the owners, who were also CEO and CFO of the agency, calculated the difference between AllCare's costs for the year versus its cost caps and awarded most of the amount to themselves as bonuses. Under Medicare regulations, such a calculation is deemed a return on equity capital, not compensation, and isn't an allowable cost, the RHHI argued in AllCare Home Health v. Cahaba (No. 2003-D21).

AllCare's owners argued that Cahaba couldn't prove the bonuses were tied to the cost limits and therefore were a return on equity capital, and that no Medicare rules or regulations require a well-defined bonus plan.

But Cahaba countered that the variance between the agency's costs and the cost limits after the bonuses was only 0.009 percent, and used hearing testimony from the CEO to support its argument that there was no well-defined incentive plan other than looking at costs versus caps at the end of the year.

The Board affirmed the intermediary's adjustment, judging the disallowance as proper. The PRRB had upheld a similar disallowance in a previous cost reporting year for AllCare, and the 10th U.S. Circuit Court of Appeals has upheld it, the decision notes.