Don't get nailed on awareness costs
By Elizabeth E. Hogue, JD
Health Care Attorney
Elizabeth Hogue, Chartered
Burtonsville, MD
Although home care providers anticipate the development of a new method of Medicare reimbursement, several vexing questions remain under the current system of allowable costs. For example, Exactly which community awareness activities are allowed?
The experiences of Mother Francis Hospital Home Health, which was denied $75,000 in community awareness costs, can provide significant guidance to other hospital-based home health care companies.
In Mother Francis Hospital v. Blue Cross and Blue Shield Association/Blue Cross and Blue Shield of Texas,1 the community awareness costs the home care company had billed for were initially denied by the Medicare intermediary. Then the provider reimbursement review board reversed the intermediary's decision and allowed the costs. Finally, the Health Care Financing Administration (HCFA) administrator reversed the review board's decision and disallowed the company's community awareness expenses.
First, the Medicare intermediary notified Mother Francis Hospital Home Care with a Notice of Program Reimbursement for the agency's fiscal year ended June 30, 1988, that it had reclassified certain costs from a reimbursable to a nonreimbursable cost center.
The reallocated costs were associated with advertising and community health awareness activities that the intermediary also determined not to be related to patient care. The intermediary also disallowed certain public relations costs as unrelated to patient care.
The first adjustment by the Medicare intermediary reclassified some costs from the provider's employee benefits cost center to a nonallowable cost center called "community affairs." The provider's employee benefits cost center contained a department called "community affairs."
The intermediary reviewed the "job performance standards" for employees working in this department and found that they performed activities related to advertising, public relations, and community health awareness.
Based upon this review, the intermediary determined that $75,820 of salaries and $222,439 of the "community affairs" department costs were related to activities unrelated to patient care.
The specific activities included sponsoring the Azalea Run; Lifeworks, a health resources information center and library located in a local mall; health fairs; and giving away various items, to the public, bearing the provider's logo.
The intermediary found these activities to be significant enough to establish a nonreimbursable cost center, called "community affairs," so that it could receive an allocation of overhead costs.
The adjustment by the intermediary disallowed costs in the administrative and general cost center. The administrative and general cost center contained a department called "Lifeworks." The intermediary analyzed costs in two sub-accounts of Lifeworks, "purchased services" and "advertising promotion." The intermediary determined that 71.5% of these sampled costs were not related to patient care.
The costs incurred for Mother Francis Hospital Home Health's Lifeworks program were used for advertising to the general public to increase business, the intermediary decided, and were therefore unrelated to patient care at the agency.
However, Mother Francis Hospital Home Health appealed the Medicare intermediary's decision to the provider reimbursement review board, which went against the intermediary and ruled in favor of the company.
The review board's decision was based in part on the 42 Code of Federal Regulations Section 413.9 (b) (2) that defines "necessary and proper" reimbursable costs as those that are appropriate and helpful in developing and maintaining the operation of patient care facilities and activities. These are usually costs that are common and accepted occurrences in the home care field.
The review board also confirmed that advertising costs are allowed, based on HCFA Publication 15-1, Section 2136. These costs must be considered appropriate and helpful in developing, maintaining, and furnishing Medicare-covered services to patients. They also have to be common and accepted occurrences for home care.
Advertising costs incurred for public relations activities are allowed if the advertising is primarily concerned with the presentation of a good public image, the review board decided, based on the same HCFA publication. These costs may be either directly or indirectly related to patient care. In other words, the primary purpose of home health care companies' public relations activities must be to present a good public image for the costs incurred on public relations to be allowed.
Public expects health awareness activities
The review board determined that the activities engaged in by the agency, including Lifeworks, the Azalea Run, health fairs, and other health awareness programs were primarily concerned with the presentation of the agency's image in the community and were, therefore, allowable. By sponsoring these activities, the provider was portrayed as a quality, trustworthy agency that was concerned about the health of the community, the review board found. All of these characteristics enhance the provider's standing in the community, the review board said.
The review board further noted that the public expects providers to participate in health awareness and prevention activities, and that failure to do so reflects poorly on a provider's public image. The board further found that these types of activities have become common and accepted occurrences in the home care industry.
The review board concluded by finding that the Medicare intermediary's adjustments reclassifying Mother Francis Hospital Home Health Care's public relations and community affairs expenses to a nonallowable cost center and disallowing other advertising costs were not proper.
Once again, though, these decisions were overturned. In response to the review board's decisions, the Medicare intermediary then asked the HCFA administrator to review the case.
The basis for the Medicare intermediary's request for the HCFA administrator to review the case was that the review board's decision was not consistent with Section 2136.1 of the Provider Reimbursement Manual that allows advertising costs only if the advertising is primarily to present a good public image and related directly or indirectly to patient care.
Promoting a healthy lifestyle not reimbursed
This time, Mother Francis Hospital Home Health Care lost for good. The HCFA administrator issued a decision that reversed the initial determination of the review board March 8, 1995. In this opinion, the administrator indicated that the issue was not whether the provider should engage in these activities but whether Medicare should share in these costs.
The administrator contended that Medicare policy does not intend these costs to be allowed, despite the fact that Medicare policy is much more limited in allowing such costs. Specifically, Section 2136.1 of the Provider Reimbursement Manual allows advertising costs for "visiting hours information" and costs to conduct "management-employee relations."
According to the HCFA administrator, however, these costs are different from the activities performed by the provider. While the provider's activities may enhance the agency's image, they go further, and by their nature, are intended to keep the public aware of its image and to bring in referrals. The Provider Reimbursement Manual disallows costs for such a purpose.
Further, while promoting healthier community lifestyles is laudable, this factor does not mean that the cost of doing so is allowed. Medicare shares in a provider's costs of services to its patients, not in a provider's services to members of the community who are not patients.
The regulations in the 42 Code of Federal Regulations 413.9 (a) explicitly provide that Medicare payments are based on a provider's cost of services related to the care of beneficiaries and include all necessary and proper costs incurred in furnishing the services. To meet this requirement the agency's ads should assist those who are patients, as opposed to being primarily for the solicitation of new business.
Four tips provide guidance
How can hospital-based home health care companies know what to do when the guidelines are so vague that even the Medicare intermediary and the HCFA administrator disagree with the Provider Reimbursement Review Board? Here are four tips to help you stay in the clear:
* Talk to your intermediary.
Initiate discussion with intermediaries to get them to tell you what community awareness activities are allowed.
Be warned, though, that the answers you get may not seem consistent with the standards described in the Mother Francis case.
For example, representatives of an intermediary recently indicated that advertisements that give the name, address, telephone number and services offered by the agency would be allowed. But if agencies add any so-called "commentary" to the ad, presumably including phrases such as "Celebrating our 100th Anniversary," the costs will be disallowed.
Nonetheless, it is important to know the standards in advance so that agencies do not risk large disallowances such as those in the Mother Francis case.
* Be extra careful in recording your costs.
Carefully document the nature of your community awareness activities, who attended them, and the costs associated with them. This will only help you prove that the costs you incurred on community awareness should be allowed.
* Give information on advance directives at all community awareness activities.
Home health care companies have a clear mandate under the Patient Self-Determination Act to provide education to the community about advance directives. A useful strategy may be to supply information on this subject at all activities related to community awareness, and carefully to document that your company did so.
Reference
1. Mother Francis Hospital v. Blue Cross and Blue Shield Association/Blue Cross and Blue Shield of Texas, Case no. 91-0828 (Provider Reimbursement Review Board, January, 11, 1995). *
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