Home Health & Hospice Week

Neither a borrower nor a lender be, PRRB decision suggests.

Even if the feds give a stamp of approval to your benefit plan, you'd better be ready to defend it.

Hill Country Health Services Inc. in Killeen, TX established a deferred compensation plan for em-ployees in 1994, and the Centers for Medicare & Medicaid Services granted approval of the plan provisions, according to a Sept. 1 Provider Reimbursement Review Board decision.

But in Hill Country's fiscal year 1996 cost report, intermediary Palmetto GBA denied more than $17,000 in interest expenses the home health agency claimed in relation to the plan, says PRRB Decision No. 2005-D65.

"The interest expense associated with the deferred compensation plan was unnecessary because the Provider had not borrowed any funds and ... the expense was avoidable in the same manner as a penalty," Palmetto told the PRRB. The agency just created a liability to its deferred comp plan rather than actually borrowing money, the intermediary argued.

But Hill Country had to borrow funds from the Deferred Compensation Trust, the HHA's attorney tells Eli. The agency couldn't fund the deferred comp plan because Palmetto was withholding Medicare payments due to other issues that have now been settled, explains attorney Rebecca Lambeth with Lambeth and Berliner in Austin, TX.

The Board sided with Palmetto, upholding the denial. "The interest incurred was an expense that could have been avoided and, therefore, was unnecessary," the decision says.

The PRRB also didn't buy Hill Country's arg-ument that the interest amount should count as deferred comp plan administrative and service fees if it didn't count as interest.

The decision shows CMS approval may not mean as much as you think. "The approval does not constitute a determination of covered costs," the PRRB said. "All actual costs are subject to Medicare reimbursement principles and intermediary review."

The outcome is "very frustrating," Lambeth says. The HHA won't pursue an appeal in federal court because the $17K dollar amount is too low to warrant a lawsuit's cost, she adds.

3 Requirements for Interest

HHAs shouldn't think that all interest expenses associated with deferred comp plans are taboo, however. "If interest were to be allowed in such a case, there would have to be an actual loan--not just treatment of an unliquidated liability as a loan," says attorney Joel Hamme with Powers Pyles Sutter & Verville in Washington, DC.

To claim such interest expense, the provider also must show that its financial circumstances necessitated the borrowing and ensuing interest, Hamme advises. "Finally, the provider would have to show that the interest rate was reasonable," he adds.