CMS Geographic Designations Could Slash Payment for Some Hospice Providers

The final rule governing hospice payment from the U.S. Centers for Medicare & Medicaid Services adopted a new method for defining different regions as rural or urban. This move could impact geographic adjustments to per diem amounts leading to payment reductions for some providers. 

Effective at the start of the Fiscal Year in October, CMS will be using the White House Office of Management and Budget’s (OMB) statistical area delineations that were made public in September 2018. These delineations determine whether a county is considered rural or urban, and so forth. This applies a 5% cap on any decrease to the wage index used to calculate hospice payments.

“Some individual counties are seeing their core-based statistical area (CBSA) changing. Some of those are changing from rural to urban, others are urban to rural, and others are just a different configuration of counties for a rate,” Judi Lund Person, vice president for regulatory and compliance for the National Hospice & Palliative Care Organization, told Hospice News. “Certainly we’re seeing some counties that have a decrease in their wage index values, the decrease is a maximum of 5% for FY 2021. That’s kind of a heads up from CMS to get ready. If you’re one of those counties with a decrease in the wage index that will definitely, very significantly, impact your rate.”


First introduced in 2000, Combined Statistical Areas represent regions that reflect broader social and economic interactions, such as wholesaling and commodity distribution, among others. Every county in the nation is classified by the OMB as either urban or rural, based on information from the U.S. Census Bureau.

CMS adjusts daily hospice payments to account for differences in wage rates among markets. Each level of care has a labor share and a non-labor share; those amounts differ across each level of care, reflecting the estimated proportion of costs that is attributable to wages, according to the Medicare Payment Advisory Commission.

The labor share of the base payment amount is adjusted by the hospice wage index for the location in which care is furnished and the result is added to the non-labor portion. To calculate the wage index, CMS uses the prior year’s wage data from acute care hospitals.


While the switch to the 2018 OMB delineations is not a revolutionary change, some on the industry have raised their eyebrows regarding the potential payment cuts in some areas that were reclassified. This is of particular concern during the COVID-19 pandemic when providers are seeing skyrocketing costs for personal protective equipment and cleaning products, increased paid leave for staff and reduced referrals.

“We understand CMS’ rationale for using the new delineations but, as always, we are concerned about circumstances where providers will experience a significant drop in wage index value as the result, particularly given the financial strains related to the COVID-19 pandemic,” said Theresa Forster, vice president for hospice policy for the National Association for Home Care and Hospice. “For this reason, we do support CMS’ transitional approach which limits wage index losses between FY2020 and FY2021 to 5%.”

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