MedPAC Recommends No Update for FY2018 Hospice Payment

Members | December 14, 2016 | by Peter Notarstefano

At their December 2016 meeting, the Medicare Payment Advisory Commission (MedPAC) at this time agreed to recommend to Congress that it eliminate the legislatively-mandated update for FY2018 hospice payments.   LeadingAge believes it is premature to recommend no payment update for hospice and to estimate average financial margins because MedPAC still does not have data that reflects the impact of the new two-tiered payment system for routine home care (RHC) and the service-intensity add-on (SIA) that was instituted in January 2016. 

 

At their December 2016 meeting, the Medicare Payment Advisory Commission (MedPAC) discussed the adequacy of hospice payments under Medicare and draft recommendations concerning the fiscal year (FY) 2018 payment update.  The MedPAC Commissioners at this time agreed to recommend to Congress that it eliminate the legislatively-mandated update for FY2018 hospice payments.   Under current law, the hospice payment update for FY2018 is capped at 1%, exclusive of the budget sequester. Commissioners will probably finalize their recommendations at a January meeting and include it in the Commission’s annual March Report to Congress. 

The MedPAC Commissioner’s initial recommendation is based on:

  • Its assessment of current access to hospice care (supply of providers and volume of services)
  • Quality of care
  • Access to capital
  • Payments/costs

 

MedPAC staff noted that following statistics on hospice services provided in 2015:

  • Utilized by 1.38 million beneficiaries and 48.6% of decedents
  • The number of hospice providers nationwide has risen to 4,199
  • Medicare payments for hospice services rose to $15.9 billion. 

Hospice Margins

MedPAC estimates that the average financial margin for hospices in 2017 will be 7.7%.  This estimate includes consideration of market basket cuts and other reductions mandated by Congress (including the sequester), as well as recent elimination of the budget neutrality adjustment factor to the wage index.  The estimate does not include consideration of non-reimbursable costs for bereavement and volunteer services, which would reduce the average margin by an additional 1.7%. It is important to note that in 2014 not for profit hospice providers had a -0.7% average profit margin. Profit margins were also significantly lower for rural hospices (3.6% compared to 8.2% margins for hospices in urban areas). 

LeadingAge believes it is premature to recommend no payment update for hospice and to estimate average financial margins because MedPAC still does not have data that reflects the impact of the new two-tiered payment system for routine home care (RHC) and the service-intensity add-on (SIA) that was instituted in January 2016. 

Future Discussions

At future MedPAC meetings, Commissioners plan on discussing policy changes that might address incentives that drive long lengths of stay and high live discharge rates in hospice. It was noted that nonprofit hospices have average lengths of stay of 65 days compared to for-profit hospices that have average lengths of stay of 105 days. Another interesting statistics is that in 2015, the average length of stay by hospice services in a person's home was 89 days compared to 105 days in nursing facilities and 152 days in assisted living facilities. Overall, the live discharge rate decreased from 18.4% in 2013 to 17.2% in 2014 to 16.7% in 2015. The top 10 percent of hospices had live discharge rates of 50 percent or more in 2015.