Longer Hospice Lengths of Stay Yield Higher Margins

Patient populations who experienced longer lengths of stay boosted hospice margins by as much as 20% during 2016, according to a new report from the Medicare Payment Advisory Commission (MEDPAC).

Financial data in the MEDPAC report reflects the first year of data following 2016 revisions to the Medicare payment system for hospice. The final rule maintained the per-diem payment process, but increased payments at the beginning of the patient’s hospice care as well as at the very end. Hospice care tends to be more intensive and expensive at those stages.

“Medicare’s per diem payment system for hospice has provided an incentive for longer lengths of stay. Hospices with more patients who had stays greater than 180 days generally had higher margins in 2016,” the report indicated. “Hospices in the lowest length-of-stay quintile had a margin of –5.4% compared with a 20% margin for hospices in the second highest length-of-stay quintile.”

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The average length of service for Medicare patients enrolled in hospice in 2017 was 76.1 days. The median length of service (MLOS) was 24 days. A large contingent of hospice patients, nearly 28%, had a length of stay of seven days or less.

For-profit hospices tended to see the most significant margin increases due to length of stay, as those organizations generally care for more patients who are in hospice longer. Long hospice stays were most common among patients with Alzheimer’s disease and other nervous system disorders, chronic airway obstruction, circulatory conditions, and heart failure.

Long hospice stays were least common among beneficiaries with cancer, genitourinary disease and digestive disease.

One caveat is that though longer lengths of stay correlate with higher margins, they also attract the attention of regulators. The U.S. Centers for Medicare & Medicaid Services sees high proportions of patients exceeding the six-month hospice benefit as a red flag that care trigger a costly audit.

Hospice margins in aggregate rose to 10.9% in 2016 from 9.9% the prior year. Freestanding hospices tended to have higher margins, reaching 13.9%, than home health-based or hospital-based hospice providers. For-profit providers saw the highest margins, averaging about 17%, compared to a margin of 2.7% among nonprofit organizations. Margins for hospices located in urban areas were nearly double of those in rural areas.

Total Medicare payments to hospices rose 6% in 2017, totaling nearly $18 billion, with patients with lengths of stay greater than 180 days accounting for 56% of all spending. The number of Medicare beneficiaries receiving hospice services, total number of days of hospice care, and average length of stay all grew in 2017.

MEDPAC also reported that nearly 100 new Medicare-certified hospices popped up between 2016 and 2017 with for-profit hospices representing 100% of the growth. The number of hospices operating in the United States has nearly doubled since 2000.

“Despite this growth, hospice use continued to vary by demographic and beneficiary characteristics. Medicare decedents who were MA enrollees, not dual eligible, older, White, female, or living in an urban area were more likely to use hospice than their respective counterparts,” the report found.

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