Hospices Need to Demonstrate Value in Managed Care

When negotiating with managed care payers, hospices must take pains to show how they bring value to that relationship. This requires a detailed look at the provider’s business and clinical operations with a focus on quality, perceptions of care, and cost reduction.

Many hospices will need to brush up on their negotiating skills as hospice moves towards value-based care payment models and as more providers diversify their services to include offerings that are not covered by the Medicare Hospice Benefit, such as palliative care, home-based primary care and other business lines.

“As we transition in our health care community away from fee for service into more managed care, we’re seeing increasingly thin margins. As Medicare reimbursement continues to go down, we need to pay attention to those contract terms that we in the past may not have paid so much attention to,” said Michael Puskarich, director of advisory services for McBee Associates, in a presentation at the National Association for Home Health & Hospice annual conference. “So it’s gonna be a little different in how you approach these payer relationships.”


Hospices will have increased access to value-based payment programs starting in 2021, with the Medicare Advantage carve-in, formally called the value-based insurance design model (VBID) hospice demonstration. 

Medicare Advantage plans are offered by private insurance companies approved by U.S. Centers for Medicare & Medicaid Services (CMS), and include HMO, PPO, and fee-for-service plans among other options. The program represents an integrated care model that promotes coordination of services and provides incentives for quality and patient satisfaction. Beginning in 2020, the program is available in all 50 states as well as U.S. territories.

Medicare Advantage will not be the only value-based payment model newly available to hospices next year.


CMS announced the Primary Care First program in April 2019 and will implement the models in phases beginning in January 2021, 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.

Hospices will need to perform a careful assessment of their strengths and identify opportunities for improvement in order to optimize their negotiating power. This includes reviews of patient and family satisfaction surveys, examination of quality indicators, technology capabilities, billing processes, referral partner relationships and marketing strategies, according to the guy.

“You need to be reflective on what your agency looks like. Are you prepared to make the changes? Because if you’re not prepared to make changes, then you might need to reassess where you go when it comes to commercial payers,” Puskarich said.

The crucial point is clear demonstration of value. This means understanding the payer’s point of view and the problems they are trying to address. This could include any number of factors such as hospital readmissions; management of high-cost, high-need patients; emergency department or intensive care unit utilization and improvement on the quality metrics for which CMS holds them accountable.

“The psychological aspect of value is that value doesn’t really pertain to what an item costs; tt’s about what that item does in relation to a problem. You’ve got to understand things from their perspective. You’ve got to find out their pain points. And then you yourself need to go back and look at your agency and say, ‘How do I devise solutions that can help me in this value proposition?’” Puskarich said.

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