The proposed 2.6% payment increase for hospices is insufficient in today’s economic climate, the National Hospice and Palliative Care Organization (NHPCO) indicated in comments on the 2025 proposed payment rule.

The U.S. Centers for Medicare & Medicaid Services (CMS) in March issued its 2025 proposed hospice rule, which if finalized would include a 2.6% increase in the per diem base rate. The proposed increase does not keep pace with inflation, largely because the hike is based on outdated data. For example, for FY 2022, the agency used 2018 data.

“We are deeply concerned about the inadequacy of the 2.6% payment update, which fails to reflect the significant inflationary pressures that hospices are currently facing,” NHPCO indicated in a letter to CMS. “This occurs because the hospice payment update, tied to the inpatient hospital market basket less a productivity adjustment, relies on a time-lagged estimate, utilizing past data to predict future outcomes.”

The data lag has resulted in a trend of underpayment going back several years, according to NHPCO. In 2021, the payment update had a 0.6% shortfall. In 2022, the shortfall was 3%, and, in 2023,1%.

Stakeholders, including NHPCO, have contended that rate hikes have not kept pace with inflation, rising labor costs and other headwinds in the hospice space, as well as lingering effects of COVID. Some have also indicated that the “insufficient” payment rates are making it more difficult for hospices to compete with other providers when it comes to hiring staff.

Most hospices also do not have a diversified payer mix and are dependent on the Medicare Hospice Benefit.

“We have serious concerns about the proposed payment updates, which, taken together with labor market area delineation proposals, would result in a net decrease in payments to many hospices in FY 2025,” NHPCO indicated in the letter. “Particularly, the proposed payment rate update fails to reflect the increased severity of rising cost pressures and workforce shortages impacting our hospices nationwide, while we compete for a critically limited pipeline of workers in our communities.”

NHPCO has previously called on CMS to implement a retrospective rate adjustment to offset the discrepancies between anticipated market basket updates and the actual increases. To date, CMS has not signaled an intent to follow suit.

For 2025, the hospice industry group also asked CMS to reconsider the proposed payment rate based on more recent data.

“It is important to note that hospices, unlike certain other provider types, are at the mercy of these rate updates with no means to address inaccuracies in the market basket forecast. This results in payment rates that are not accurately aligned with the costs faced by hospice providers,” NHPCO indicated. “While it is true the adjustment can be applied both positively or negatively, the considerable shortfall hospices have experienced in previous years places these providers at a significant disadvantage, particularly when competing for a limited pipeline of available workers. Insufficient payment rates undermine hospice providers’ ability to compete in labor markets where the demand for health care workers is high.”