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Takeaway: Payment increase not a surprise; CMS continues to signal ongoing review of payment system, more changes and program integrity response

CMS finalized the FY 2018 Hospice payment update on Tuesday. Like those for other post-acute areas, the annual rule is without much suspense due to Congressional action. This year the market basket adjustment was established by Congress and set at 1 percent.

After accounting for all adjustments, the Routine Hospice Care per diem payment for days 1 to 60 will increase from $190.55 to $192.78. The RHC per diem for days 61 and over will increase from $149.82 to $151.41. CMS expects payments to hospice providers to increase about $180 million in FY 2018.

HOSPICE PAYMENT UPDATE: REGULATORY OUTLOOK STILL CLOUDY (AMED, KND, LHCG) - Slide1

CMS did not signal any major new policy initiatives but did provide information on the impact of payment reform that was implemented in January 2016.

CMS reported on FY 2016 trends in several areas:

  • Length of stay

  • Live discharges

  • Skilled nursing visits in the last days of life

  • Non-hospice spending

The take-away?

Hospice payment reform did not impact utilization or practice patterns much for the nine months it was in effect in FY 2016. Payment reform was intended to compensate providers more for the early part of the admission and less for the late part to acknowledge how costs are distributed in hospice care. The new payment scheme also created an add-on payment for the increase in service that normally accompanies the last few days of a beneficiary’s life.

These payment changes should have resulted in shorter average lengths of stay and an increase in skilled nursing visits in the last seven days of life. However, in FY 2016, providers had only a modest, and in a few areas, contradictory response to the changed incentives:

  • Average length of stay increased from 78 to 79 days between FY 2015 and FY 2016

  • Average lifetime length of stay increased from 95.2 days to 96.1 days

  • Median length of stay was 18 days in FY 2015 and FY 2016

  • In FY 2016, beneficiaries did not receive, on any given day in the last seven days of life, a skilled nursing visit 44 percent of the time, a decline from 46 percent in FY 2014

  • In 2016, 21 percent of beneficiaries did not receive a skilled nursing visit on the last day of life versus 26 percent in FY 2014.

Somewhat unrelated to payment reform, CMS also noted that live discharges – which tend to indicate poor vetting of candidates for admission – increased in FY 2016 after many years of decline.

HOSPICE PAYMENT UPDATE: REGULATORY OUTLOOK STILL CLOUDY (AMED, KND, LHCG) - Slide2

CMS also noted continued increases in Part D spending for hospice beneficiaries that suggests providers are trying to “unbundle” the hospice service and shift costs onto the Part D program.

If these trends – or rather non-trends – continue, CMS signaled more changes to the payment system could be in the offing. Furthermore, CMS indicated that they would also seek to address anomalous utilization patterns through program integrity efforts. The Recovery Audit Contractor program is back up and running with a single RAC, COTV, dedicated to reviewing home health, hospice and DMEPOS claims.

Given the threat of RAC audits and more tweaks to the payment system, the regulatory visibility for hospice providers remains low.

Emily Evans

Managing Director

Health Policy

@HedgeyeEEvans