MEDPAC Calls for 20% Cut in Hospice Payment Cap

The Medicare Payment Advisory Commission (MEDPAC) intends to recommend a 20% reduction to hospice aggregate payment cap, according to a presentation given at the commission’s most recent meeting. This echoes similar recommendations from the commission in prior years.

Though MEDPAC has urged lawmakers to pursue these cuts several years running, Congress has yet to slash the hospice cap to that extent. According to the presentation by MEDPAC Principal Policy Analyst Kim Neuman, the proposed cuts would target hospice providers that see longer lengths of stay and high margins, improve equity of the payment cap among different types of providers, and generate cost savings for taxpayers and the Medicare Part A Trust Fund.

“Most providers would not be affected by the policy option; affected providers would be those with long lengths of stay and high margins,” Neuman indicated in the presentation. “Policy option would improve equity of the cap across different geographic areas with different wage indices.”

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The cap is the upper limit to the amount of funds a hospice can collect from Medicare in a single year. If a hospice exceeds the payment cap, it must refund that amount to the U.S. Centers for Medicare & Medicaid Services. For Fiscal Year 2020, the hospice cap is $29,965 per patient (not wage adjusted).

About 14% of hospices exceeded the cap in 2017, MEDPAC reported.

Hospice utilization, as well as the amount Medicare spends on hospice, is rising, according to MEDPAC. Hospice payments totaled more than $19 million in 2018. Utilization hit 50.7%, the highest rate of hospice utilization since the formal establishment of the Medicare Hospice Benefit in 1983.This is up from 50% in 2017 and 22% in 2000.

Average length of stay was 89.1 days in 2018, up from 88 days in 2017. The Median length of stay was 18 days in 2018. Many hospice patients have very short lengths of stay; others have relatively long stays, impacting the average.

Longer lengths of stays lead to higher profit margins for hospices and tend to attract the attention of regulators, including CMS and the U.S. Department of Health and Human Services Office of the Inspector General. The longest stays occur among patients receiving care from a for-profit hospice, those being treated for neurological conditions and those who dwell in assisted living facilities, according to MEDPAC.

Hospice organizations voiced concerns about the proposed cuts. The National Hospice & Palliative Care Organization (NHPCO) contended that proposed changes to the aggregate payment cap would create a barrier to patients accessing hospice care, or delay their access, disproportionately affecting patients and providers in rural areas.

“NHPCO does not support today’s MEDPAC recommendation to modify the hospice aggregate cap. As we have stressed, without reliable data, it is unclear how such reductions would lead to Medicare savings, increase access to care, or lead to higher quality of care,” said NHPCO President and CEO Edo Banach. “NHPCO shares MEDPAC’s goals, but this approach appears overly broad and likely to lead to a decrease in hospice access for patients and families. In the short term, we urge MEDPAC to use a targeted approach that will have a higher likelihood of rewarding high quality, punishing low quality, and increasing access.”

Reductions that impact margins could also be a threat to nonprofit providers who generally see margins around 2.5% compared to nearly 20% for for-profit providers.

Industry growth during 2018 was largely driven by for-profits, continuing a trend from the past few years. The number of U.S. hospice rose 4% that year, all of which were for-profits. Private equity interest and the mergers and acquisitions market in the hospice space continues to be robust, MEDPAC indicated.

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