Home Health & Hospice Week

CMS could decide hospice rates are too low - or too high.

One way or another, changes to Medicare hospice payment rates will be coming down the pike.
 
The Government Accountability Office urges the Centers for Medicare & Medicaid Services to take a long, hard look at the appropriateness of current hospice payment rates in a new report, "MEDICARE HOSPICE CARE: Modifications to Payment Methodology May Be Warranted" (GAO-05-42).
 
And if CMS fails to follow up, Congress is apt to reduce hospice payment rates anyway, predicts Janet Neigh with the Hospice Association of America. "I think something is going to happen and it is kind of scary," Neigh tells Eli.
 
Many hospices would welcome a payment review, believes Heather Wilson, president of hospice consulting firm Weatherbee Resources in Centerville, MA. "The world in which hospices operate has changed so significantly since 1983" when the Medicare benefit began, Wilson notes. CMS should update payment rates to reflect those changes, she says.
 
The GAO points out some of those changes in its report. "Several aspects of the hospice per diem payment methodology may not reflect how hospices currently deliver services," it says.
 
One of the most relevant differences between 1983 and now is the ratio of services providers offer under routine home care (RHC). The costliest items and services (nursing, social services, drugs and medical equipment) have gone up while the less expensive services (aides, supplies and outpatient services) have decreased, the GAO found.
 
"The largest cost increase occurred for drugs, which rose from 3 to 15 percent of RHC costs," the GAO explains. Hospice officials told the GAO drugs have become one of their greatest cost pressures.
 
"We have definitely seen an increase in costs of routine care related to medications and treatments," says Meredith Goodrick, hospice director for Munson Home Health in Traverse City, MI.
 
Lengths of stay have decreased as well, the report adds. In 1983 the mean LOS was 70 days but it is now 50 days. That's another pressure on hospices, because services are mostly concentrated in the first and last days of the stay.
 
Decreasing LOS is what has most affected Munson's operating margin, Goodrick relates. "The short lengths of stay are very costly."
 
"It is hard to believe that a per diem rate of $122 per day for routine home care ... covers the cost of care provided," Wilson says. The GAO urges CMS to collect some solid data to make future payment adjustment decisions. Data would most likely show "the current payment rates do not adequately compensate hospice programs for the costs of the comprehensive services provided," Wilson expects.

Payments Exceed Hospice Costs, GAO Says

Goodrick thinks it's time to reevaluate hospice payments. But "I fear that it would be a vehicle to reduce payment," she admits.
 
Data can swing both ways, and a new information-gathering campaign may not show hospices in a good light. For example, the GAO examined hospice cost report data in 2001 and concluded that Medicare payments exceeded hospice costs by 10 percent, and by 12 percent for the two home care hospice payment levels (RHC and continuous home care).
 
The fact that few hospices ever reach the aggregate hospice payment cap means it is probably set too high, the GAO report also implies.
 
And industry developments, such as the sharp rise of for-profit hospice providers, are bound to sway lawmakers and policy-makers to look skeptically at hospices.
 
Still, looking at hospice cost reports isn't a very accurate way to gauge the appropriateness of hospice payments, argues the National Association for Home Care & Hospice. Hospice cost reports leave off two critical costs - bereavement services and volunteers.
 
Both items "are costly and have impact on bottom lines," Goodrick says. "Without bereavement and volunteer services in the mix, I imagine we would have a nice profit too," she quips.
 
Hospice cost reports contain a number of other problems, says the National Hospice and Palliative Care Organization. The data the GAO used is from the first few years hospices submitted the new reports and is from freestanding hospices only, points out NHPCO's Jonathan Keyserling. Confusion about completing hospice cost reports still abounds, Keyserling maintains.
 
The GAO does acknowledge that cost report data is of limited usefulness, which is why it recommends CMS "collect comprehensive, patient-specific utilization and cost data on hospice visits and services." CMS then should use the data to determine what, if any, changes are necessary, the GAO suggests.
 
CMS agrees, but insists it has no funding to undertake such a study. That means payment decisions could be made without supporting data, Neigh worries.
 
Lawmakers seem to think hospice payments should "reflect quality services provided rather than a per diem that is paid regardless of service volume," Neigh says. 
 
Editor's Note: The GAO report is at www.gao.gov/new.items/d0542.pdf.