On Friday, CMS released the FY 2017 Hospice Payment update. As we discussed in our analysis of the proposed rule, the reimbursement rate will increase 2.1 percent. This amount is based on a market basket adjustment of 2.7 percent, less a productivity adjustment of 0.3 percent less an ACA mandated reduction of 0.3 percent. Tables 1 and 2 list the FY 2017 per diem payment rates for hospice providers that submit quality data. The payment rate will be reduced by 2.0 percent for hospice providers that do not report quality data.
Table 1: FY 2017 Hospice per Diem Payment Rates
In this final rule, CMS also finalized the hospice aggregate payment cap. For accounting years that begin after September 30, 2016 and end before October 1, 2025, the payment cap is to be updated using the annual reimbursement increase – in this case 2.1 percent – instead of CPI-U which currently stands at about 1.0 percent. The cap year is also being aligned with the federal fiscal year which means that FY 2017 should be the first year that the new cap calculation method is effective for the entire fiscal year for all providers.
The aggregate payment cap is one of the few fiscal restraints on hospice spending and Medicare expenditures in general. In recent years, the growth rate of the aggregate payment cap has been on the decline due to a low rate of inflation. With the substitution of CPI-U for what is essentially the market basket of goods and services used by inpatient hospitals, the aggregate payment cap’s growth rate has increased for FY 2017. Going forward, at least until 2025, the aggregate cap should grow more in line with inpatient hospital costs. Chart 1 illustrates the growth rate for the aggregate payment cap for the last five years.
Chart 1: Growth Rate for Hospice Aggregate Payment Cap 2013 to 2017
An increase in the aggregate payment cap is important for hospice providers with long average lengths of stays as these patients are the most likely to contribute heavily to a hospice provider exceeding the aggregate payment caps. The change in the aggregate payment cap formula is a small positive for providers with a large population of patients that have long stays like CHE.
Sometime next summer, hospice providers will join the Medicare Compare universe with public release of reported quality data. The measures that will be reported, at least initially are:
- NQF #1634 - Percentage of hospice or palliative care patients who were screened for pain during the hospice admission evaluation / palliative care initial encounter.
- NQF #1637 - Percentage of hospice or palliative care patients who screened positive for pain and who received a clinical assessment of pain within 24 hours of screening.
- NQF #1639 - Percentage of hospice or palliative care patients who were screened for dyspnea during the hospice admission evaluation / palliative care initial encounter.
- NQF #1638 - Percentage of patients who screened positive for dyspnea who received treatment within 24 hours of screening.
- NQF #1641 - Percentage of patients with chart documentation of preferences for life sustaining treatments.
- NQF #1647 - Percentage of hospice patients with documentation of a discussion of spiritual/religious concerns or documentation that the patient/caregiver/family did not want to discuss.
- NQF #1617 - Percentage of vulnerable adults treated with an opioid that are offered/prescribed a bowel regimen or documentation of why this was not needed
Eventually, these quality ratings will be used to assign star ratings for each hospice provider. We have noted repeatedly that star ratings are increasingly making their way into the Medicare reimbursement system. In the new CCJR bundled payment for hip and knee replacements, the three day hospital stay can be waived for Skilled Nursing Facility admission provided the SNF received three stars or more.
Finally, CMS released comments from the proposed rule on its monitoring of hospice reform. The proposed rule included analyses of pre-hospice spending, non hospice spending, live discharge rates and skilled nursing visits in last days of life. CMS’s focus on these four issues indicates additional potential areas of reform and/or new program integrity efforts. As we have noted several times, the continued “musings” of CMS on topics of concern with respect to hospice payment adequacy and beneficiary access, limits the regulatory visibility and makes investment in stand-alone hospice providers a difficult proposition. We note also that, despite CMS’s clear contemplation of additional changes to the hospice payment structure, only 56 comment letters were submitted suggesting the industry may, once again, be taken by surprise.
Pre-hospice spending. CMS’s analysis of pre-hospices spending was expressly a pre-curser for consideration of a case-mix system for hospice care. CMS’s analysis, summarized in Chart 2 below, indicates that Hospice patients with the longest length of stay had lower pre-hospice spending relative to short stay patients.
Chart 2: Median Pre-hospice Daily Spending
Hospice is one of the few areas of Medicare that does not use some sort of payment system that takes into account patient characteristics. CMS acknowledges several negative reactions to the suggestion that they adopt a case mix system for hospice. Commenters seem to believe that hospice is such a unique service that a case mix system is not appropriate. We doubt that argument will be compelling. Other commenters identified the high cost of short stay patients for which reimbursement is not adequate – by implication subsidized by the longer stay patients. We believe CMs could address this concern by shifting reimbursement from long stay to short stay patients and are not likely to be deterred by this argument.
CMS is not proposing any concrete changes to the hospice payment system at this point. However, the entire drive toward post-acute reform is centered on payment that reflects the needs of the patient rather than the care setting in which they find themselves. That overarching policy goal makes some sort of case mix system for hospice inevitable. Such a change would likely be budget neutral, at least initially, thus muting the impact of a change. Nonetheless, hospice providers, especially pure play providers that depend on long stay patients for EBITDA will have to make some adjustments.
Not included in the discussion is a possible change in reimbursement for the care of patients in an institutional setting. During the first phase of hospice payment reform announced in 2015, CMS considered and then withdrew a proposal that would prohibit payment of the Service Intensity Adjustment for care delivered in nursing facility. CMS and the Office of the Inspector General continued to be concerned about providers “double dipping” by delivery of care that is otherwise available from the institution in which that patient resides.
The absence of a discussion on this topic does not, to us anyway, indicate that CMS has dropped the issue. The original proposal, to withhold SIA reimbursement got sidelined by equal protection issues. A more acceptable iteration is likely to be a tiered SIA payment with a lower rate for care delivered in an institutional setting.
Non-hospice spending. In the proposed rule, CMS analyzed non-hospice spending on hospice patients. The hospice benefit is intended to be a bundle payment where all care, goods and services are covered by the per diem payment. In recent years, the OIG has noted payments under Part D for drugs associated with palliative care that should be included in the hospice per diem payment. In the proposed and final rule, CMS does not appear to be contemplating any changes to the payment structure to address this problem. Instead they are calling for greater oversight and program integrity efforts (read: auditing) to discourage inappropriate billing. Commenters seem to support this direction.
Live Discharge Rates. In the proposed rule, CMS analyzed live discharge rates and raised the possibility that providers were inappropriately using hospice as a custodial or long term care service. The direction that they appear to be heading in is a regulatory proposal to correct this problem. However, it seems to us more a question of medical necessity and is already the focus of False Claims lawsuits. Unlike the discussion about pre-hospice spending, CMS does not appear to be offering much in the way of direction on this one.
Skilled Nursing Visits in the Last 7 Days of Life. The implementation of the SIA payment is intended to encourage skilled visits in the last seven days of life. Since this payment change was just initiated at the beginning of 2016, it is too early to tell if it has had an impact so CMs appears to be taking a wait and see approach.
We remain convinced time has come around at last for hospice spending to recieve greater and possibly unwelcome attention from regulators and program integrity contractors. Beware.