Careful management of the hospice aggregate cap is key to providers’ sustainability as regulatory scrutiny continues to heat up.

The cap is designed to prevent overuse of hospice, put controls on Medicare spending and foster greater access to care among patients. For Fiscal Year 2024, the U.S. Centers for Medicare & Medicaid Services set the cap at $33,394. In 2025, this will rise to $34,465.

“While the cap is a beneficiary driven cap, meaning the reimbursement allowed per Medicare beneficiary, it is not assessed at the beneficiary level, but rather in the aggregate at the agency provider number level for all beneficiaries served by the agency in the cap,” Rochelle Salinas, vice president of operations for CommonSpirit Health at Home, said. “This allows for greater flexibility in providing care to those in need.”

Salinas made these remarks during a presentation at the National Hospice and Palliative Care Organization (NHPCO) Annual Leadership Conference.

Regulators and other stakeholders have been keeping an increasingly close eye on the payment cap. The Medicare Payment Advisory Commission (MedPAC) has recommended to Congress a 20% cut to the aggregate cap for several years running. The commission also called on Congress to wage adjust the cap. To date, Congress has not implemented these reductions.

MedPAC’s proposals are based on a complex set of calculations. But when it comes to the payment cap, two key metrics stand out: length of stay and margins.

“Based on the generally positive indicators of payment adequacy and strong margins, the Commission concludes that a reduction to aggregate payments is warranted,” MedPAC indicated in a 2023 report to Congress. “However, in this sector, with the range of financial performance across providers and the existence of the hospice aggregate cap, there is the potential to focus payment reductions on providers with disproportionately long stays and high margins.”

In addition, the U.S. Department of Health & Human Services (HHS) Office of the Inspector General (OIG) is currently examining methods of calculating the cap, as well as the general inpatient cap, with a report due in 2025. 

Errors or other inconsistencies with the payment cap can have significant consequences for providers. For one, if they have a cap liability, they will have to repay that amount to Medicare. In some situations, a hospice might face additional monetary penalties, interest charges or referrals to the U.S. Treasury Department in severe cases.

Patient length of stay has substantial influence on a hospice’s ability to manage the aggregate cap. One key to cap management is to find an appropriate mix of long length-of-stay patients and those expected to be in hospice for a shorter time.

This corresponds with quality of care considerations. If a patient comes onto service too late in their illness trajectory, they may not receive the full benefit of hospice care, Ryan Klaustermeier, vice president of professional services at Axxess, said during the NHPCO presentation. However, a patient with a very long length of stay may not have been truly ready for hospice when they were admitted, though exceptions exist.

“If we were in a situation where your agency length of stay is a 4-to-1 ratio of long length of stay over a shorter length of stay, if you had a census of 40, then you would need about 10 admissions per month to make sure that you never got into a cap issue,” Klaustermeier said. “And if you needed to clear up a cap issue or get ahead of it, you probably need about 20 starts of care that are shorter lengths of stay each month to balance out your longer length of stay patients.”

When faced with cap issues, some hospices discharge patients alive. While this may be appropriate in some cases, this can also adversely affect patients and families as well as catch the attention of regulators.

Such decisions must be made using an ethical and compliant process, according to Klaustermeier. Providers should also bear in mind that discharged patients will often end up in the care of their competitors, he said.

When analyzing length of stay, providers should pay close attention to two important data points — diagnosis and site of care, ideally with referral partner-specific data, according to Christina Andrews, senior director of professional services at Axxess.

“Going back to data by referral partner, what is the length of stay look like by diagnoses and where are you serving those patients,” Andrews said at the NHPCO conference. “Developing this cap strategy, it is going to give you the opportunity to lean into your branding and messaging … Why should they select your hospice organization and why should they refer their hospice patients to you, helping you to create that balanced length of stay?”