Home Health & Hospice Week

PRRB shoots down arguments for start-up costs, accrued fees.

Medicare home health agency start-ups are on the rise, and the newcomers could learn a valuable lesson from a recent Provider Reimbursement Review Board decision.
 
Under the prospective payment system, reimbursement isn't tied directly to agencies' cost reports anymore. But submitting an accurate cost report is still vital for reasons ranging from False Claims Act compliance to future payment rate-setting, experts note.
 
HHAs can claim their start-up costs up to the date they see their first patient. But many new agencies make the mistake of claiming start-up costs up to the date they obtain Medicare certification, after making 10 visits.
 
That's what California Nurses Home Health Services Inc. in Los Angeles did in its cost report year ending in June 2000, according to a PRRB decision issued April 11 (2005-D33).
 
"It's no mystery" that start-up costs end on the day operations begin, says consultant Pat Laff with Laff Associates in Hilton Head Island, SC. Foregoing start-up status for those 10 patients is part of the initial investment in a new HHA, Laff notes.
 
California Nurses claimed costs of about $127,000 but regional home health intermediary United Government Services cut that to $22,000 when applying the correct start-up deadline, according to the decision.
 
HHAs like to claim start-up costs because they can capitalize the expense, claiming it over a number of years, Laff explains. In contrast, normal operating costs are claimed in only one year and were subject to per-visit caps under cost-based reimbursement.
 
California Nurses could have claimed the costs in its first years of operation, notes consultant Tom Boyd with Rohnert Park, CA-based Boyd & Nicholas. But RHHIs often deny start-up costs too late for agencies to go back, reopen the cost report and claim them as normal operating costs.
 
California Nurses argued that the start-up date cutoff set out in regulation applies to hospitals and not HHAs. Also, the agency maintained that it didn't officially make the first "visit" until after obtaining certification, according to regulation.
 
The Board didn't buy the argument and upheld the disallowance.
 
Tip: If HHAs can treat patients with non-government payors that don't require certification as part of their first 10 visits, they can defray the initial cost of operating, Laff counsels.

HHA Stuck In Payment Catch-22, It Argues

An HHA shut down by the state mere months after receiving its certification didn't get a break at the PRRB either.
 
Mid City Home Health Care in Los Angeles submitted a 1997 cost report claiming various legal and accounting fees, but never liquidated the accrued costs for the fees, according to another April 11 decision (2005-D35).
 
Mid City never got off of 100 percent medical review and was accused of "serious patient treatment and record-keeping deficiencies" that ultimately shut the agency down, the decision says.
 
"The provider was in trouble from the start," Boyd notes. "If the government is mad at you they will find a way to close you down."
 
The HHA couldn't pay the fees because Medicare withheld its payments and it was caught in a Catch-22, Mid City argued. The agency asked for an extension on the one-year deadline to liquidate the fees, but RHHI UGS refused.
 
Even if UGS had granted the extension, Mid City still hadn't paid the fees three years later, the PRRB noted in upholding the disallowance of nearly $40,000.
 
Tip: Agencies that find themselves short on cash to liquidate expenses can issue a note in exchange for accounts payable, Laff advises. Issuing the note allows agencies to claim the costs fair and square on their cost reports.
 
California Nurses and the agencies' representatives didn't return phone calls for this story.