Home Health & Hospice Week

Recent PRRB decision costs Louisiana HHA $47,000.

If you were a little rusty on your accounting principles under cost-based reimbursement, your mistakes could come back to haunt your compensation.
 
Haven Home Health Inc. in Columbia, LA has learned that lesson the hard way with an unfavorable decision from the Provider Reimbursement Review Board (No. 2005-D10).
 
In its cost reporting year ending in 2000, Haven wrote a check to its owner Brian Causey for $40,000 to cover his salary, according to the decision issued Dec. 10. But Causey failed to cash the check until 128 days after the cost report year ended.

When auditors from Palmetto GBA reviewed the cost report, they disallowed the salary costs, noting that reimbursement rules require the costs to be liquidated - i.e., the check to have cleared the bank - by 75 days after the cost report period closed.
 
Haven argued that the 75-day rule wasn't in effect during the time period. But despite confusing regulatory changes, the Board decided it was and upheld the disallowance.
 
Haven isn't alone in thinking that having the check written is good enough, notes Tom Boyd, consultant with Rohnert Park, CA-based Boyd & Nicholas. Technically, "the writing of the check completes the regulatory requirement," Boyd maintains.
 
But the feds put in place the 75-day rule because providers would write checks and never cash them, thus getting reimbursed for costs they didn't incur, recalls Boyd, a former intermediary auditor.
 
When the 75-day rule was first adopted, intermediaries accepted the date a provider wrote a check and not the date it was cashed, Boyd relates. But then the same non-cashing abuse could take place, so intermediaries changed their interpretation.
 
Causey was under the impression that the date the check was written was what counted with the 75-day rule, he tells Eli. Causey waited to cash the check because Haven didn't have the necessary cash to cover it and he didn't want to have to borrow the money, he says. "There is no language that says the check has to be cashed within 75 days," he argues.
 
Many intermediaries probably never told providers when they switched their interpretation of the 75-day rule from date written to date cashed, Boyd says.

It's All Relative

Auditors also disallowed about $7,000 in office and medical supplies costs because Haven bought them from a related company owned by Causey's father, Robin Causey. Haven had claimed the supplies costs because it maintained that it qualified for an exception to the related organization rule.
 
The HHA and the supply company, Haven Medical Supply Inc., did meet three of the four criteria for the related party exception, the PRRB said. But they failed to meet the standard requiring the supplier to do significant business with organizations not related to the HHA and supplier.
 
Haven Medical did do significant business with other organizations besides Haven Home Health, but those other organizations were related party companies too, the Board ruled.
 
The case highlights "the difficulty of meeting all of the criteria for an exception to the related party rule," notes attorney Joel Hamme with Powers Pyles Sutter & Verville in Washington, DC.
 
Haven Medical is the only supplier in the Columbia area, so obtaining supplies through the company made perfect sense, Causey says. Haven Medical added only a modest 5 percent mark-up to supplies to cover its handling costs to avoid the appearance of impropriety, he adds.
 
Haven Home Health doesn't plan to pursue the case in federal court, Causey says, noting the legal fees associated with an appeal.