Home Health & Hospice Week

Industry decries proposed 5 percent reduction to Medicare reimbursement.

The Medicare hospice benefit's significant growth has caught the eye of policy-makers, and now providers and beneficiaries will pay the price for attracting such notice.

The Centers for Medicare & Medicaid Services wants to eliminate hospices' budget neutrality adjustment factor (BNAF), according to a proposed rule in the May 1 Federal Register. That change will cut 4 to 5 percent from Medicare hospice spending over three years, notes the National Association for Home Care & Hospice.

How it will work: CMS proposes phasing out the BNAF by 25 percent in 2009, 75 percent in 2010 and completely in 2011, according to the proposed rule. That would translate to a 1.5 percent decrease to wage index in 2009, 3 percent in 2010 and another 1.5 percent in 2011, CMS explains.

The current BNAF is "clearly obsolete," CMS maintains in the rule. It's based on outdated data that is artificially high, the feds say. CMS and a provider group agreed on the BNAF when CMS revised hospice wage index methodology in 1997.

"Continuation of this excess payment can no longer be justified," the agency argues in the rule. Hospices have had plenty of time to adjust to the new wage index and no longer need this adjustment, CMS says.

The impact: The wage index reductions will result in a 1.1 percent decrease to Medicare hospice spending in 2009, CMS estimates. If an inflation update of 3 percent occurs, hospices will see a 1.9 percent increase overall in payment rates. 

The other shoe: But that inflation update is far from assured. President Bush proposed in his 2009 budget to eliminate the hospice market basket update altogether (see Eli's HCW, Vol. XVII, No. 6). And recent discussions by the Medicare Payment Advisory Commission on startling hospice growth may spur lawmakers to adopt the hospice reimbursement rate freeze.

"The President's budget includes a proposal for a zero percent payment update for hospices in FY 2009," CMS cautions in the rule. The final rule will have "to reflect any legislation that the Congress might enact which would affect the market basket update."

And another thing: Hospices also should watch out for an even quicker implementation of the BNAF phase-out. After comments, the final rule may specify that "a more aggressive phase-out alternative ... is more appropriate," CMS warns. For instance, beginning with a 50 percent phase-out instead of the proposed 25 percent.

CMS Shoots Itself In The Foot

The hospice industry has been quick to condemn the proposed cuts. They are "a backdoor way for CMS to cut rates to hospices," Judi Lund Person with the National Hospice and Palliative Care Association tells Eli.

President Bush included the measure in his array of cost-cutting measures for home care providers in his 2009 budget proposal earlier this year.

"The rationale offered by CMS to eliminate the budget neutrality adjustment rings hollow," NAHC's vice president for law Bill Dombi says in a release. "The reasons for the adjustment in 1997 remain today--a reduction in payment rates will put care access in jeopardy."

Recent MedPAC data shows that hospices have only about 3 to 4 percent profit margins, NAHC notes. That includes payments exceeding the per beneficiary cap that hospices must return, points out Margaret Rudnick with the Illinois Hospice & Palliative Care Organization. A 4 to 5 percent payment decrease will wipe out any operating margin.

"Most hospices today have Medicare margins lower than the 4 to 5 percent cuts, leading to serious concerns about the survivability of those providers," NAHC says. "If there is a loss of hospices, there will be a loss of access to care."

Hospices seem to be getting penalized for the growth in the hospice benefit when that benefit actually saves Medicare money, laments Susan Warinner Hogg with the Virginia Association for Hospices. "It is precisely the wider use of hospice care that has CMS looking," Hogg tells Eli.

A recent Duke University study points out that hospice saves Medicare about $2,300 per patient (see Eli's HCW, Vol. XVI, No. 40).

Given that savings, a cut to hospice payments that may bring about reduced access and even hospice closures "doesn't make sense," Hogg protests.

The reduction may reduce hospices' "ability to provide comprehensive, high quality end-of life services," Hogg worries. "At the very least, quality of care will be impacted."

"The return for the [hospice] dollar would save money, utilize resources more effectively, promote a more dignified death and provide a humanistic approach to society, reaching far beyond just the beneficiary," adds Jeff Lycan with the Ohio Hospice & Palliative Care Organization.

Hypocritical: And CMS is selectively choosing which parts of the wage index to fix--those that reduce payments, Lycan maintains. Hospices have long been calling for wholesale reform of the problematic hospice wage index, which is based on hospital data. But CMS has turned a deaf ear to those requests.

"We question CMS's assertion and rationale that they are moving towards a more accurate method" for wage index, Lycan says. "CMS is just cutting costs."

Hospice Provider Numbers Increase 86%

The industry growth that has caught CMS' eye has also worried providers. The number of Medicare-certified hospices has grown from about 1,600 in 1994 to nearly 3,000 today--an 86 percent increase, the agency notes in the rule. And spending has grown to $9.2 billion in 2006.

"The growth of hospice in the last seven or eight years is alarming," notes Ann Jackson with the Oregon Hospice Association. Some hospices may be gaming the system and providing care to patients whose need is questionable, she worries. "I am relieved that the utilization of hospice care is under investigation," Jackson tells Eli.

NHPCO's Don Schumacher recently blasted CMS' infrequent surveys of hospices in a MedPAC meeting. The industry needs more regulatory oversight, he argued.

But cutting payment to law- and rule-abiding providers isn't the way to fix that problem, industry representatives say.

And striving to slow hospice growth is unrealistic and counterproductive, Rudnick charges. "The reality is that there are lots of people eligible for this wonderful benefit who aren't getting it," she says. "So the dollars spent will continue to increase."

Hopeful sign: Legislators in the U.S. Con-gress are circulating "Dear Colleague" letters condemning the cut, NAHC reports.

Timeline: CMS will take comments on the proposed rule for 60 days. The rule is at www.cms.hhs.gov/hospice/downloads/CMS1548pdisplay.pdf. CMS plans to issue a final rule in August.