CMS Final Rule Rebases Payment Rates, Changes Election Statement

The U.S. Centers for Medicare & Medicaid Services (CMS) has rebased payment rates for the four levels of hospice care in a final rule for Fiscal Year 2020. Among other provisions the rule includes a new requirement that hospices provide an addendum to election statements that would detail care, treatment and services the patient would receive that are covered outside the Medicare Hospice Benefit. The rule becomes effective Oct. 1.

The U.S. Centers for Medicare & Medicaid Services (CMS) proposed the rule in late April, calling for a 2.7% cut in routine home care payments and a corresponding 2.7% increase in payments for continuous home care, general inpatient care, and inpatient respite care. Prior to this rebasing, payment rates for those levels of care amounted to less than the cost of providing those types of care.

According to the Affordable Care Act, Medicare payment increases must be budget neutral, requiring CMS to compensate for any increases with comparable cuts in other areas. CMS based the update on a market basket increase of 3.2 percent, less a 0.5 percent multifactor productivity adjustment.

Hospice industry organizations were reticent to accept the rebasing, particularly the cut to the routine home care rate. Routine home care comprises 97.6% of all hospice care, with the three levels of care that received increases representing a much smaller volume of patients. 

“We are gravely concerned about the impact the proposed reduction in the [routine home care] rate will have on care, as well as the message the increased reimbursement for the other levels of care sends to providers,” the National Hospice and Palliative Care Organization (NHPCO) commented on the rule when it was proposed. “NHPCO is concerned that the substantially increased rates for the other levels of care could drive provider behavior away from [routine home care] and toward the higher levels of care. This is not in keeping with the wishes of patients and families or the original intent of the Medicare hospice benefit. The reduction in the [routine home care] rate will be especially difficult for smaller hospices and those in rural areas, which do not have economies of scale and where the cost of personnel and drugs are increasing.”

Despite the drop in routine home care payments, executives at large hospice companies voiced few concerns about the payment levels when the rule was first proposed, though smaller organizations could be adversely affected.

“While the majority of our hospice revenues fall under the [routine home care] category, the impact to LHC Group is slightly positive according to the CMS impact file,” said Don Stelly, president and chief operating officer for LHC Group (NASDAQ: LHCG) in a first quarter earnings conference call. “As a reminder, hospice currently makes up 10.3% of our total revenue.”

Hospice and home health provider Amedisys Inc. (NASDAQ: AMED) estimated that the cuts, if made final, could have a 1% impact on 2020 revenue. In line with the industry, most of the hospice care Amedisys provides is at the routine home care level. Nevertheless, CEO Paul Kusserow said the move would be positive for the industry at large.

“A positive update for hospice payments is a positive move for our industry as we see expanded use of the Medicare Hospice Benefit,” Kusserow said in the company’s Q1 earnings call. “All of this is positive for Medicare beneficiaries and Amedisys.”

Also in the final rule was a provision requiring hospices to provide an election statement addendum listing the rationales for items, drugs, and services that the hospice has determined to be unrelated to the terminal illness and related conditions to the patient or patient’s representative, as well as any other providers caring for the patient, and to Medicare contractors. Submission of that document will become a condition for payment.

This requirement could prove problematic for hospices due to the complexity of determining which services pertain to the terminal diagnosis and which do not, as well as the work time that such an addendum would require.

“The downside is the significance of the workload that it will take to do that. There is already in place a requirement that patients be notified of services that won’t be covered under the hospice benefit,” said Melinda Gaboury, CEO of consulting firm Healthcare Provider Solutions Inc., speaking at the National Association for Home Care & Hospice Financial Management Conference earlier this month. “Giving them this level of detail, explaining why services would be covered in language the patient or patient’s representative can understand, is very labor intensive. [CMS] is not providing a form for this. Each hospice will have to create its own addendum for each patient, and they have to be very careful that it contains all of the information that CMS would require under the rule.”