Home Health & Hospice Week

Don't let liquidation confusion ruin your cost report.

You've got to know when to hold 'em and know when to cash 'em when it comes to owners' compensation paychecks.

Two more home health agencies have learned that lesson the hard way in two recent Provider Reimbursement Review Board decisions.

Both Nurses Registry Home Health Inc. in Harahan, LA and Brady Home Health Care Services Inc. in Brady, TX wrote salary checks to their owners within 75 days of the end of their 1999 cost report years.But the owners failed to cash the checks within the required 75-day period, instead cashing them later, according to the decisions issued Feb. 11 (2005-D24 and 2005-D25, respectively).

Upon audit, regional home health intermediary Palmetto GBA disallowed the salary costs because the assets hadn't been transferred in time. The disallowances cost Nurses Registry about $35,000 and Brady about $23,000, the PRRB says.

The argument: The HHAs told the Board that issuing the check - not cashing it - counted as liquidating the cost under regulations. Further, the HHAs argued that a February 1996 manual change that specified the assets must be transferred was illegal because it lacked proper notice and rulemaking procedures.

Plus, the taxes included in the salary expense shouldn't count in the 75-day rule, the HHAs argued.

The response: The PRRB shot down the agencies' arguments, noting that the 1996 manual change "essentially reiterated existing policy." The regs require an actual transfer of assets, not just a check written, to consider the salary costs valid.

And the 75-day rule applies to the total salary expense claimed, which includes the taxes, the PRRB decided in the cases.

Like in these PRRB cases, many agencies still may be confused about whether issuing or cashing a paycheck counts as liquidating that salary expense. They should realize that the check must be cashed within 75 days of the end of the cost report period, advises attorney Joel Hamme with Powers Pyles Sutter & Verville in Washington, DC.

And if owners fail to cash the checks by then, the agencies can't claim those costs in the next cost reporting year either, Hamme warns.

If HHAs are short on cash, they may want to consider issuing a note instead of a check to their owners, suggests reimbursement consultant Pat Laff with Laff Associates in Hilton Head, SC. The note indicates the owner received the money, but lent it back to the agency.

Keep Your Cost Reports Clean

 These agencies lost out on tens of thousands of dollars by improperly claiming costs under cost-based reimbursement. But you still must work hard to submit your cost reports correctly under the prospective payment system, experts warn.

There is no direct reimbursement impact tied to cost reports anymore under PPS. But "providers are still filing Medicare cost reports and, in doing so, they are effectively certifying that what is on their cost reports is true and correct," Hamme reminds agencies.

Warning: If the government decides something is wrong with your costs, it can slap you with False Claims Act charges based on your cost report - that's what happened recently to Aging Care Home Health Inc. in Monroe, LA (see Eli's HCW, Vol. XIV, No. 6). FCA charges carry heavy penalties.

That might tempt agencies to underreport their costs just to be safe. But doing so would be a big mistake, Laff warns.

The Centers for Medicare & Medicaid Services, the Medicare Payment Advisory Commission and others are using agencies' reported costs to figure profit margins - and those figures are driving potential payment cuts in Congress.

And CMS will use reported costs to rebase PPS rates in the future. Laff expects to see independent audits of cost reports shortly. "Agencies should follow the regs as written," he urges. "Costs must be properly accounted for and reported."

Nurses Registry and both agencies' legal counsel didn't return calls for comment.