MedPAC Hospice Payment Adequacy Meeting Summary at a Glance: The Medicare Payment Advisory Commission (MedPAC) met 12/11/09 and commissioners heard a staff presentation on payment adequacy for hospice. A number of hospice CEOs and NHPCO staff were in the audience to hear the presentation.

Hospice Payment Adequacy Data 1.In 2008, more than 1 million beneficiaries enrolled in hospice. 2.40% of Medicare decedents now use hospice. 3.Medicare spending for hospice in 2008 exceeded $11 billion.

Hospice Payment Adequacy Trends 1)Between 2001 and 2008 the number of hospices increased from 2,303 to 3,389. Most of the growth since 2001 has been among for profit hospices. 2)The percentage of Medicare decedents using hospice has increased from 22.9% in 2000 to 40.1% in )Medicare hospice spending (in billions) has increased from $2.9 in 2000 to $11.2 in 2008, for an annual change from 2000 to 2007 of 19.8% 4)The average length of stay among Medicare beneficiaries was 54 days in 2000 and 83 days in )Long stays have grown longer and short stays remain virtually unchanged. The median length of stay is 17 days (and has been 17 days since 2000). 6)Non-cancer diagnoses do not explain all the differences in length of stay. There is an increased number of days in the average length of stay across all diagnoses.

Hospice Cap 1.10% of hospices exceeded the aggregate cap in MedPAC reported that there is no evidence that the cap impedes access to hospice care overall or for racial and ethnic minorities. 3.In the top ten states with highest hospice use rates, the hospice cap is unrelated to the use of hospice services.

Hospice Costs 1.Hospices with higher lengths of stay have lower costs per day. 2.Freestanding hospices have higher lengths of stay than provider-based hospices and lower costs per day.

Margins MedPAC reported that margins for hospices ranged from 4.5% to 6.5% over the last 8 years. Year Margins  %  %  %  % (estimated)

Margins based on types of providers Type of ProviderMargins  Freestanding8.8%  For profit10.5%  Not for profit1.8%  Urban6.5%  Rural1.2%  Below cap providers6.2%  Above cap providers  Before overpayments20.0%  After overpayments2%

Recommendations  “Update the payment rates for 2011 by the projected rate of increase in the hospital market-basket index, less the commission’s productivity factor of 1.3%.”

Comments on the Recommendation 1.While the recommendation is a 1.3% reduction in the payment rate for hospice, the commissioners were considering payment rate reductions for all Medicare provider types. For home health, the recommendation is no market-basket increase in 2011; for hospitals, the recommendation is the full market-basket, now expected to be 2.5%. However, inpatient base payments are recommended to be reduced by 1% annually to recoup overpayments from the implementation of a new coding system in FY2008. The 1% reduction could continue for as long as 8 years. 2.The productivity factor used by the Congressional Budget Office (CBO) is 1.6%. The 1.3% is the MedPAC recommendation. The House version of the health care reform legislation includes a productivity factor reduction of 1.6% beginning in The Senate version delays the start date until The productivity factor is a reduction from the hospital market-basket increase for each year. CBO has estimated that the market-basket increase is likely to be 2.4% for the next several years. 4.The MedPAC chairman noted that there were unrecognized costs such as bereavement and other administrative costs not included in their report on margins. Staff reported that bereavement costs are estimated to be 1.5% of the cost of care; the chairman took bereavement costs into account in the recommendation.

Other Recommendations (Other recommendations made by staff were not new and included the recommendations published by MedPAC in the March 2009 Report to Congress) 1.Payment system reform with higher payments at the beginning and end of care, with lower payments as the length of the episode increases, with an effective date of Hospice physician or advance practice nurse should visit the patient to determine continued eligibility prior to the 180 day recertification period start and each subsequent recertification period. 3.All stays in excess of 180 days should be medically reviewed for hospices where stays in excess of 180 days make up 40% of the total cases. 4.Direct the OIG to investigate the prevalence of financial relationships between hospices and long-term care facilities, differences in referral patterns, appropriateness of enrollment practices, and appropriateness of hospice marketing materials. 5.CMS should collect additional data on hospice care and improve the quality of all data collected.