Home Health & Hospice Week

Hospices that had been hoping for the best got the worst in Medicare's final rule on hospice wage index released July 31.

In the rule, the Centers for Medicare & Medicaid Services finalizes a hospice payment cut based on a wage index change it proposed in April (see Eli's HCW, Vol. XVII, No. 17, p. 130). CMS also has issued the reduced payment rates that will take effect Oct. 1 (see box, this page, for rates).

Background: CMS wants to phase out the budget neutrality adjustment factor (BNAF) that had helped hospices transition to a new wage index system a decade ago. Eliminating the BNAF would mean a 1.1 percent reduction to hospice payment rates in 2009, a 2.2 percent cut in 2010 and a final 1.1 percent cut in 2011.

The BNAF is outdated and unneeded by hospices, whose numbers have grown a staggering 70 percent since 1997, CMS argues in a release about the rule. "Phasing-out this special adjustment will save Medicare $2.18 billion over five years," CMS maintains.

Good news: The final rule isn't all bad news. At least the inflation update for hospices, which mitigates the cuts, is larger than expected. In the proposed rule, CMS estimated a 3 percent inflation update reduced by the 1.1 percent cut for a total 1.9 percent increase. In the final rule, the inflation update is actually 3.6 percent so hospices' total increase is 2.5 percent.

The higher inflation update was "welcome news," notes the Connecticut Association for Home Care & Hospice in its member newsletter.

Although the industry hoped for a reprieve from the proposed cut, most providers aren't surprised that CMS went ahead with the reduction. "No one should have been blindsided by the decision," expects Paul Ledford with trade group Florida Hospices and Palliative Care.

Budget pain: Due to political pressure, "CMS is trying to cut anywhere and everywhere regardless of the effectiveness to the benefit," says Jeff Lycan with the Ohio Hospice & Palliative Care Organization. "That way they can report they have done something."

The cuts come at a particularly bad time for hospices, Ledford points out. They are squeezed by high gas prices, rising staff salaries, high health insurance costs and more.

The BNAF cuts are going to cost Florida hospices about $500 million, Ledford estimates. "There's no way that these programs can make up that level of funding by charitable contributions," he tells Eli.

The result: The payment slashes will force hospices to scale back or shut down altogether, forecasts the National Hospice & Palliative Care Org-anization. The move "jeopardizes hospice care," the trade group stresses.

Small hospices and the areas they serve are put most at risk by the cut, says Brenda Clarkson with the Virginia Association for Hospices. A BNAF cut of 4.5 percent or more will wipe out programs whose profit margins only average 3.4 percent, Clarkson points out.

"The states that have hundreds of tiny hospice programs, many of which are barely at the break-even point, will certainly see some of them fold as a result of this action by CMS," Ledford adds. That will translate to access problems for patients in those areas.

The cut is bad for the Medicare program as well as providers and beneficiaries, industry reps maintain. Patients who can't access hospice care will be driven into much more expensive institutional settings. "It is difficult to understand why the government would deliberately jeopardize a program that provides such a compassionate service and does so in a cost-effective manner," Ledford laments.

A new landscape: Expect to see a lot more consolidation as a result of cuts, Lycan advises. That could mean traditional mergers and acquisitions in urban areas and establishment of coalition organizations among rural providers to handle functions like management and marketing. "This actually could be an exciting development that helps utilize those 'non-patient' care dollars more effectively," Lycan tells Eli.

Ray of hope: Industry representatives have not given up hope on getting the cuts repealed. "We are continuing to work with the Congress in hopes of getting this decision overturned legislatively," reports Janet Neigh with the National Association for Home Care & Hospice.

"By issuing this rule, CMS is taking an end run around Congress and its longstanding role protecting hospice," NHPCO maintains. "Congress should intervene to stop the Administration's cut to hospice care, before the rule goes into effect," the trade group urges.

Note: A link to the final rule is at http://www.cms.hhs.gov/center/hospice.asp.