Home Health & Hospice Week

You can win back money for items that you didn't include on the original report.

Another federal appeals court has ruled on a cost report controversy that could mean millions of dollars in providers' pockets.

The U.S. Court of Appeals for the Ninth Circuit ruled in favor of Loma Linda University Medical Center over a cost report item dating back to 1985, according to the opinion released July 9, Loma Linda v. Leavitt (No. 05-56497).

Loma Linda appealed its 1985 report, disputing numerous disallowances in its cost report for that year. But significantly after the fact, the medical center realized it failed to claim more than $1 million in interest expenses. It then filed with the Provider Reimbursement Review Board to add the inadvertently deleted interest expense to its still-pending appeal, according to the opinion from Judge Robert Timlin.

The PRRB ruled in favor of Loma Linda, even though the provider didn't include the expense cost originally. The Board found "the error was clear and obvious, and should have been corrected by the intermediary," the Ninth Circuit notes.

The then-Health Care Financing Administration Administrator reversed the ruling, saying the provider must have a decision on the originally included cost, then could appeal that decision.

High Court Could Weigh In

Track record: Legal views on this issue have been mixed, the opinion notes. The Supreme Court has commented but not resolved the issue. And the First Circuit Appeals Court has ruled in favor of providers on this while the Seventh Circuit has done the opposite.

Provider victory: The Ninth Circuit ruled in favor of the provider, noting that "Congress chose to give the Board wiggle room to decide matters covered by a cost report that is properly before it which were not explicitly presented to, or considered by, the intermediary," the court says.

"The decision gives support to other cases which ruled that a provider may challenge cost report issues that were not fully included on the cost report in a timely filed appeal," notes attorney Liz Pearson with Pearson & Bernard in Covington, KY.

What This Means For You

If you have a pending appeal to a cost report from the pre-PPS, cost-based reimbursement years, you could add not-before-requested costs to it.

"If there has been an appeal filed and the home health agency finds out later that it missed including costs ... that issue can be raised in the PRRB setting," Pearson tells Eli.

But the decision may not translate to a windfall for HHAs, cautions attorney Joel Hamme with Powers Pyles Sutter & Verville in Washington, DC. Because PPS began in 2000 and severed the tie between cost reports and direct reimbursement, "the number of such appeals is probably not that staggering any more ... and they are dwindling all the time," Hamme points out.

And to succeed, the provider must have merely overlooked including a legitimate cost. "It happens, but the frequency is probably not all that great," Hamme tells Eli.

Headed to court: Even if an HHA succeeds in obtaining payment for the costs from the PRRB, the Centers for Medicare & Medicaid Services Administrator will likely be ready and willing to reverse the decision, especially for providers that aren't in the First and Ninth circuit regions.

A CMS reversal would force the agency to head to federal court to obtain payment for their costs. Because many circuits haven't ruled on the issue yet, the outcome would be uncertain, Hamme says.

High Court review: This case probably won't be the final word on the matter. If the Department of Health and Human Services appeals the Loma Linda decision, the Supreme Court may decide to take it up because the circuits have split on the issue, Hamme suggests. "If the Court did take the case, I would not be at all surprised if the Ninth Circuit's decision were reversed, given the current composition and ideological leanings of the Court," he says. 

Note: For a copy of the Loma Linda decision, email editor Rebecca Johnson at rebeccaj@eliresearch.com with "Loma Linda Decision" in the subject line.