Home Health & Hospice Week

Recent PRRB decision highlights common compensation dangers.

A Maryland home health agency will head to federal court to argue for its rightful reimbursement for executive comp time, and you could learn some critical lessons from the case.

From 1995 to 1997, P-B Health Home Care Agency in Baltimore granted its CEO and CFO compensatory time when they worked more than 45 hours per week in the office. Over 45 hours, the execs received one hour of comp time for every hour they worked, according to the recently released Jan. 25 decision in the Provider Reimbursement Review Board case (2007-D15).

When P-B transitioned from a cash accounting to an accrual accounting system in 1997, it recorded more than $100,000 in a one-time accrual for the accumulated comp time. The agency's regional home health intermediary, Cahaba GBA, disallowed the cost, resulting in a reduction to Medicare reimbursement of $96,900.

When P-B appealed to the PRRB, Cahaba said the cost shouldn't be allowed because the agency offered comp time only to exempt employees. And the cost wasn't a true liability to the agency, and therefore shouldn't be claimed, because the employees had used almost none of the comp hours they had accumulated. Finally, the cost wasn't reasonable and necessary because such comp time wasn't a common and accepted practice in the industry, the intermediary argued.

P-B maintained that its comp time policy was spelled out in its employee handbook, handled appropriately according to accounting rules, a common industry practice and reasonable in light of overall exec compensation. Cahaba didn't challenge the cost as out of line, the agency noted.

And 50 percent of the comp time had been used since 1997, the agency added.

Point of contention: As a reason for excluding the costs, Cahaba pointed to a provision in the employee handbook saying that comp hours couldn't be exchanged for financial compensation.

The agency argued that the language meant to convey that an employee couldn't receive double pay by working and also receiving comp time reimbursement for the time worked.

Administrator Shoots Down Favorable Decision

The PRRB sided with P-B, noting that that "although the compensatory hours had not been used over several years, that did not negate the fact that the accrued hours were a future liability to the Provider." Nothing prohibited the agency from giving employees an unlimited amount of time to accrue comp time, the decision says.

Also, the Board found the handbook didn't mean the Provider wouldn't pay employees for accumulated time off when they retire, leave the company or die while employed.

Finally, Cahaba didn't use any documentation to back up its claims that comp time wasn't a common and accepted practice or that non-exempt employees must also be eligible for comp time, the Board added.

The PRRB decision was a good one, says attorney John Gilliland II with Gilliland Markette & Milligan in Indianapolis. It's not important "if the employees actually use the time," Gilliland says. "The key is that they have the right to do so and it is a legal obligation of the agency."

Not so fast: P-B's victory was short-lived, however. The CMS Administrator quickly reversed the PRRB decision, P-B's attorney John Lessner tells Eli. "The administrator took one isolated line from the employee manual out of context," says Lessner, with Ober Kaler in Washington, DC. "We think that's wrong."

P-B plans to appeal the case to federal court. Lessner expects to see a decision in the case in a year to year-and-a-half, unless it settles first.