A group of providers that collectively appealed the decisions of fiscal intermediaries to disallow reimbursement of expenses incurred in the conveyance of accounts receivable were not entitled to Medicare reimbursement. The providers contracted to obtain financing through the transfer of receivables, through which the providers obtained the right to repurchase the receivables upon thirty days' notice. Section 219 of the Provider Reimbursement Manual states that costs associated with the sale of accounts receivable are not allowable expenses. The Medicare Act and other regulations, however, do not define what constitutes a sale, but rather look to whether the providers surrendered control of the accounts receivable. Although the providers claim that control was not surrendered because the receivables were not isolated and beyond the reach of providers and creditors even in bankruptcy, such argument was not persuasive. Because the providers' right to repurchase the receivables, rather than the accounts receivable themselves, would be included in a bankruptcy, the providers had no real control over the accounts receivable and, therefore, effectively surrendered control upon entering into the contract. Because they surrendered control, the transfers amounted to a sale of the receivables and the expenses claimed were properly disallowed.
Fajardo Home Care, Inc. v. Levitt, D. P.R, Mar. 16, 2009.
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