Hospice Margins Could Soar Under Primary Care First

Hospice providers that participate in the Primary Care First initiative’s Seriously Ill Population Model could see gross margins in excess of 20% to 25%, according to experts in health care payment models.

The U.S. Centers for Medicare & Medicaid Services (CMS) in April announced that they would implement Primary Care First in phases beginning in Jan. 2020, initially in 26 regions throughout the United States. Hospices and palliative care organizations are eligible to participate in the payment models provided they meet the program’s criteria. The program is designed to control costs, reduce avoidable hospitalizations and improve care coordination.

Eligible providers can choose to participate in one or both of two payment options under the program: A general payment option and a Seriously Ill Population payment option designed to serve patients with complex, chronic needs, through which providers focused on caring for that population would receive increased payments.

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“We believe that you can make 20-25% gross margins in this program,” said Jeremy Powell CEO of Acclivity Health in a National Hospice and Palliative Care Organization (NHPCO) webinar. “[Hospice and palliative care providers] are incredibly well positioned to take your strengths and apply them to this program. Whether you have pre-hospice as palliative or advanced illness or any of those models, you have been doing them knowing that you have to pay for that innovation; the federal government is going to pay for it in this particular program.”

The Seriously Ill Population option is designed to promote coordinated, patient-centered interdisciplinary care, very similar to the hospice care model. Hospices who have diversified their services to include pre-end-of-life care such as palliative care programs or home-based primary care have the experience and expertise to provide this kind of care 

An estimated 4% to 6% of the combined Medicare and Medicare population will be eligible to receive care via Primary Care First programs, which is comparable to the Medicare decedent rate. The program will not require participating providers, including hospices, to obtain a referral. Nor will it require a six-month terminal prognosis.

Hospice companies are increasingly diversifying their service lines to engage with patients throughout the continuum of care as they realize that their skill sets can benefit patients before they reach the end of life. 

Consequently, hospices are establishing palliative care programs, adult day care, home health care, home primary care, and services to address social determinants of health, among other service lines. For many organizations these programs will form a pathway to participation in Primary Care First.

“You almost can’t not participate. You have to think about jumping in. If you are in a state [eligible for Primary Care First] and you choose to sit on the sidelines you are not only allowing the other agencies who may be hospices in this environment to get a leg up, you are also allowing primary care [practices] to figure out how it is going to provide 24/7 access and how it’s going to create an interdisciplinary approach,” Powell said. “You are about to be given opportunities that you have never seen. This is a game changer.”

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