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Hospice:

MedPAC Hospice Rec Could Wreck Future Reimbursement

Published on Fri Apr 19, 2024

The advisory body did finally back off one important area, however.

Medicare has already proposed a 2.6 percent boost to hospice payment levels starting in October. But that could still change, if the Medicare Payment Advisory Commission gets its way.

In its latest annual report to Congress, MedPAC urges lawmakers to “eliminate the update to the 2024 Medicare base payment rates for hospice” for fiscal year 2025. That would strip up to $5 billion from Medicare hospice spending over five years, the report notes.

Upside: “MedPAC discussions and recommendations are just that,” points out trade group LeadingAge. The Centers for Medicare & Medicaid Services “and Congress are not obligated to act on the Commission’s recommendations,” it says in analysis of the report.

Downside: When members of Congress are looking to raise funds for their budget priorities, they may find hospice an easy target due to MedPAC’s advice. And that could happen at the end of the federal fiscal year, or even sooner. MedPAC’s side of the story also may influence CMS, which often cites the influential advisory body in its rulemaking.

The Commission’s “recommendations do bear weight among policymakers and lawmakers,” cautions the National Hospice and Palliative Care Organization in a release about the report.

To justify this year’s rate freeze recommendation, MedPAC points to a variety of statistics including profit margin, cap excesses, surging spending, and the rapidly increasing number of providers (see details, p. 99). The Commission also highlights increasing levels of nonhospice spending for hospice patients in areas such as drugs and hospital encounters.

As always, profit margin proves particularly thorny for hospices. MedPAC calculates a fee-for-service Medicare aggregate margin of 13.3 percent in 2021, the most recent year with data available. With pandemic relief funds factored in, that margin climbs to 14.5 percent.

The 13.3 percent figure is actually down from 14.2 percent the prior year and compares to 13.4 percent in 2019, 12.4 percent in 2018, 12.5 percent in 2017, 10.9 percent in 2016, 9.9 percent in 2015, 8.2 percent in 2014, and a 7.4 percent margin back in 2010.

MedPAC projects a reduced profit margin of just 9 percent in 2024.

Hospice representatives have been quick to criticize MedPAC’s rate freeze rec.

“This recommendation is offered at a time when hospice care costs have risen faster than any inflation update provided by CMS,” National Association for Home Care & Hospice President William Dombi says in a release. “A rate freeze would interfere with the progress made through hospice wherein highly patient-centered care, controlled by the patient at the most important point of an individual’s life, offers Medicare with significant financial savings while providing incredible end-of-life care.”

However: MedPAC disputes the well established fact that hospice saves Medicare money. “The literature is mixed on whether hospice has saved the Medicare program money in the aggregate compared with conventional care,” the report maintains. “A Commission contractor … concluded that while hospice produces savings for some beneficiaries, such as those with cancer, overall, hospice has not reduced net Medicare program spending and may have even increased it because of very long stays among some hospice enrollees with noncancer diagnoses,” the report says.

“There continues to be debate about hospices’ effect on Medicare spending,” MedPAC concludes in the report.

“NHPCO is disappointed by MedPAC’s recommendation,” the trade group says in its release. “At a time when costs have been increasing across the board and hospices are competing for a limited healthcare workforce, keeping hospice payments flat would put the squeeze on hospice providers,” NHPCO’s Ben Marcantonio says in the release. “Congress should ensure hospice providers are reimbursed to provide the end-of-life care people want and deserve,” Marcantonio exhorts.

MedPAC’s arguments are shaky, insists The Health Care Group in Morgantown, W. Va. “Margins … have decreased from prior MedPAC reports and hospices are being significantly impacted by increases in costs and increasing regulatory demands,” the accounting and advisory firm says in its electronic newsletter.

“The recommendation to eliminate the update to the established 2024 Medicare hospice payment rates is not justified,” The Health Care Group blasts. And “historical rate increases were substantially less than the actual increase in costs experienced by hospice providers,” the firm adds. “Hospice suffers an ever-increasing effective rate shortfall to what the payment rates should be,” it adds.

The report does include one silver lining for hospices, however: No mention of cap changes.

Background: In previous years, MedPAC urged Congress to cut the aggregate per patient cap amount by 20 percent.

“We are pleased to see MedPAC not recommend an arbitrary reduction to the cap,” The Health Care Group says. “There never was any reasonable justification for an across-the-board cap reduction,” it maintains.

“MedPAC’s shift away from its previous recommendations to cut the aggregate payment cap is a win for hospices, patients, and families,” Marcantonio says. “For nearly five years, NHPCO and our members have publicly and privately made it clear that cutting the hospice aggregate cap would likely reduce access to hospice care by forcing some providers to close and incentivizing hospices to discharge patients after 180 days of care. We are gratified that Congress never acted on the cap cut concept,” he continues.

One cap change is still needed, however, The Health Care Group says. “Wage-adjusting the cap is necessary to reverse the inappropriate cap liability calculation … which discriminates against hospices based on geographical location,” the firm says in its newsletter.

Another positive in the report is that MedPAC “was a bit easier on hospice” than home health, Dombi assesses.

Note: The 561-page report is at www.medpac.gov/wp-content/uploads/2024/03/Mar24_MedPAC_Report_To_Congress_SEC.pdf.

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