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Hospice MedPAC Wrap Up

Hospice Update – Spring 09




Commencing with its June 2004 report to Congress, MedPAC (Medicare Payment Advisory Commission) has been trending a series of reform recommendations to the Medicare Hospice Benefit.  The Hospice benefit remains essentially intact along with its payment system since its inception in 1983.  Originating from a demonstration program in 1983 which analyzed the costs and end-of-life care for cancer patients, the scope of the Hospice benefit has increased substantially over the past twenty-five years, despite the system’s payment and coverage criteria remaining essentially unchanged.  A review of current utilization data concludes that the program is actually paying for more terminal diagnoses in total (all other non-cancer) than cancer diagnoses.


Moving forward to spring 2009, MedPAC has continued its advice to Congress to reform the Medicare Hospice benefit.  Reports issued in June of 06 and June of 08 repeat the theme of reform, adding greater specificity to the issues driving increased utilization and increased spending.  A current MedPAC report issued in March of 2009 is the most encompassing; moving across a broad spectrum of recommended payment and programmatic reforms, inclusive of identified trends that MedPAC advises should be altered via regulatory changes within the benefit itself.




The clear driver in the MedPAC reports back to 2004 is the increase in utilization of the benefit beyond what the original intended scope.  Effectively, there is a belief or at least a dated premise, that the Medicare Hospice benefit was created to offer a level of coverage and payment for end-of-life care correlated to a Cancer diagnosis.  In more recent reports, including the March 2009 release, the utilization trend discussion moves into discussions more programmatic and industry focused, foretelling a desire to re-orient the program more in-line (believed) with current industry trends and health policy initiatives (globally).  It is always imperative to note that MedPAC is far from being apolitical and current health policy trends and discussions in Congress can and do influence the track that the commission takes.


In reviewing the raw data, the trends are undeniable – utilization is up substantially, the number of agencies participating in the program is up substantially, the non-cancer diagnoses qualifying for coverage have expanded and now far outstrip the cancer diagnoses, and the length of stays for the longer-lived patients have lengthened.  Within the raw data are also clear geographic dispersions in length of stay (certain states and regions exhibiting a far longer length of stay pattern than other states or regions).  Additionally, the number of Hospices that exceed the annual per patient benefit cap (dollar limit) is on the rise, increasing annually by one-third since 2006.


Key within the raw data is the presentation of comparison numbers year over year that MedPAC is using to undergird its recommendations.  Bulleted below is a summary of the year over year data MedPAC is using in support.


·         Type of Hospice: Between 2000 and 2007, the number of For Profit hospice’s increased 119%, from 750 to 1,641 for an average annual change of 12%.  In terms of hospice patients served, the For Profit hospices now account for 41% of Medicare hospice patient days, compared to non-profit hospices accounting for 54% of total Medicare hospice patient days.  The lion share of the growth in For Profit hospices came in the form of “freestanding” organizations as opposed to provider based.  The total number of hospices grew between 2000 and 2007 from 2,300 to 3,200, nearly all of which were For Profit.

·         Length of Stay: The largest “growth” in length of stay over the period 2000 to 2007 occurred in the number of patients that remained in “hospice” greater than 150 days.  In 2000, the 90th percentile for length of stay was 150 days.  By 2007, this percentile was at 200 days.

·         Terminal Diagnosis: MedPAC has drawn the correlation between increased lengths of stay at the higher “day” utilization level with underlying diagnosis.  Contributing diagnoses to the creep in longer covered stays are;

o   Alzheimer’s:  Mean LOS = 88 days

o   Nervous System Diseases: Mean LOS = 86 days

o   Dementia: Mean LOS  = 78 days

o   Organic Psychoses: Mean LOS = 77 days

o   Chronic Airway Obstruction: Mean LOS = 73 days

o   Debility: Mean LOS = 70 days

Cancer as a primary diagnosis accounts for a Mean LOS = 47 days, nearly 50% shorter than the Mean LOS for Alzheimer’s disease.

·         Hospice Margin and Length of Stay: MedPAC has drawn the correlation between increased length of stay and margin or gross profitability per patient length of stay.  This may be the most questionable data presented but presumptively, using the Routine Daily Rate as the benchmark, there is likely some strong validity to this correlating analysis.  At the fiftieth percentile of length of stay (the median length of stay), the margin is ten percent or less.  As stays get longer, into the eightieth and ninetieth percentile, the margin literally doubles, moving to fifteen percent at the eightieth percentile and twenty percent at the ninetieth percentile.


The recommendations in the March 09 report track consistently with prior year reports and are essentially, policy and payment conclusions interpolated from the data.  Chief among the recommendations is the payment reform recommendation, albeit not necessarily a new point from MedPAC with respect to Hospice.  Summarized below are the MedPAC recommendations contained in the March 09 report.

·         Change the payment system under the benefit so that shorter stays and days occurring initially in the stay have higher payments.  Reduce payments correlated to longer stays, effectively implementing a gradually reducing daily rate through certification periods if no death or acuity change has occurred.  The one exception is the call for an increased rate at the time of death, seemingly to account for higher costs associated with the last day or perhaps days of the patient’s life.  The recommendation is for this revised payment system to be implemented in 2013, phased in some fashion in the interim years.

·         Revise the certification process to require that a physician or qualified extender visit the patient at the 180th day recertification period and document that such visit occurred.  This process would continue for all recertification periods beyond 180 days.  Further, increase the documentation requirement at each certification period, requiring a narrative assessment of the clinical prognosis of the patient.  Embedded within this recommendation is a required medical review of stays beyond 180 days for Hospice’s that have 40% or more of their stays in excess of this 180 day benchmark.

·         Direct the Secretary of Health and Human Services to investigate the prevalence and nature of the financial relationships between hospices and skilled nursing facilities as well as the differences in referral patterns between the two entities.  The Secretary is also asked to review the appropriateness of the admission process, especially in light of the increased propensity for longer stays and in addition, review the marketing practices of hospices.  Lastly, the Secretary is asked to focus an investigation on the enrollment and admission practices of hospices that have a disproportionate number of lengthier stay patients.

·         Direct the Secretary to improve the data collection process on hospice in order to more accurately assess the benefit with a specific remark that such data collection could be made conditional on the Hospice getting paid for a claim.




Depending on the overall acceptance of Congress of the MedPAC report and the Secretary’s level of engagement to this issue, there is likely to be wholesale change to the Medicare Hospice benefit.  MedPAC reports have received great deference in the past and have been shelved historically as well with little or no action taken by Congress or the Secretary.  Given however, the current climate in Washington and the President’s desire to reform the healthcare system in the United States, it is likely that the MedPAC report will be given a fair to large amount of consideration.  Perhaps even more telling is the report’s focus on revamping the payment process for the benefit, clearly focused on reducing or at minimum stabilizing current expenditure levels.  Correlate this targeted or implied savings with the President’s stated goal of achieving real reductions in Medicare spending and the probability for some level of quick movement toward the MedPAC recommendations is fairly high.


Presuming that the MedPAC recommendations foretell a period of reform for the Medicare Hospice benefit, the following is a reasonable assessment of what will happen in the near to intermediate term future.

·         The program is fundamentally dated.  If the Secretary is moved either by Congress or the President or both, it is likely that the Hospice benefit and the corresponding federal guidelines will be substantially overhauled, conforming tightly to the MedPAC recommendations and perhaps, including even more aggressive regulatory reform (more reporting, documentation, assessment requirements, etc.).  Assuming history is a good guidebook in matters such as these, one can look at the reform and revision process that occurred in home health, skilled nursing and durable medical equipment over the past years.

·         Payments overall will be trimmed and most assuredly, lengthier stays will not be reimbursed at the same level and/or as easily as before.

·         Greater justification will be required of the Hospice and the Physicians/Medical Directors to substantiate diagnosis and decline/progression toward death.

·         Preferential agreements and contracts between Hospices and Skilled Nursing Facilities will end or come under great scrutiny.  Skilled Nursing Facilities will likely need, if they choose, to have contracts with any Hospice rather than the current practice of one or perhaps two preferred Hospices.

·         There will be far more intermediary denials and reviews of Hospice claims during the interim period.  The “word” is assuredly out that some level of reform is in the offing and the translation to fiscal intermediaries will be, “scrutinize claims”.  Hospices will no doubt see far more probes and claim denials, even for previously unexamined Routine Claims.

·         New criteria will be established for terminal diagnosis and refinement will occur, especially in the categories correlated to dementia and general decline.  These categories account for the lion share of elongated stays.

·         Relationships and referral patterns between hospices and all other providers will come under enhanced scrutiny.  The Secretary and the OIG will undoubtedly look to translate new requirements of disclosure and self-referral between the various parties that are part and parcel to the hospice referral and admission.

·         For Profit hospices are clearly targeted as they have been “selected” as the chief cause for increased utilization and the creep of stay lengths.   One cannot tell how this sector will be specifically attacked but past history suggests that the regulatory and payment reforms will be focused on the activities identified with this group of providers.




March 27, 2009 - Posted by | Uncategorized

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