The Medicare Payment Advisory Commission (MedPAC) meets each year in December and January to consider Medicare payment recommendations for inclusion in its annual March Report to Congress. Last week the Commission met to consider, among other topics, the adequacy of payments under Medicare to hospice providers. In response to the findings presented, it appears that MedPAC will finalize, at its January meeting, a staff recommendation that Congress eliminate the update for hospice payments for FY2019. Imposition of a zero update – or any update change — for hospice providers would require a statutory change. Under current law for FY2019 hospice payment updates would be increased by a factor equal to the annual market basket less a “productivity adjustment”, with a subsequent 2 percent reduction due to the automatic sequester.
In developing payment recommendations, MedPAC considers payment adequacy, which takes into account access to care (supply of providers, volume of services), quality of care, access to capital, and payments and costs.
The latest data analyses by MedPAC indicate the following for 2016:
• Over 1.4 million beneficiaries used hospice services (up 3 percent from 2015)
• Nearly ½ of Medicare beneficiaries who died in 2016 used hospice services (49.7 percent, up from 48.6 percent in 2015)
• Medicare certified hospices totaled approximately 4,400 (up 4 percent from the previous year)
• Growth in number of hospices fueled entirely by for-profit entities
• Total expenditures were about $16.8 billion
• Average length of stay increased slightly both at the median and at the 90th percentile
• Average length of stay varies by profit status, freestanding vs. facility –based, diagnosis, and patient location
o Average length of stay for non-profit providers was 66 days as compared with for-profit providers, which was 106 days
o Average length of stay for freestanding providers was 91 days as compared with 63 days for provider-based
• Live discharge rates edge upward (16.9 percent, as compared with 16.7 percent in 2015) (Note: the top 10 percent of hospices had live discharge rates of 53 percent or more)
Relative to quality, MedPAC acknowledged that limited measures are publicly available, but for those that are 75 percent of hospices scored at least 93 percent for six of the seven measures. Given the scoring these measures are expected to “top out” in relatively short order, but others will be coming online in the future. MedPAC also notes that access to capital should be available to for-profit providers given they are viewed favorably by the investment community, and facility-based hospices should have access to capital through their parent organization.
Data Analysis of Costs by Level of Care, Margins, and Impact of New Payment System.
Earlier this year CMS published preliminary analysis of data gathered from freestanding hospices under the new cost reporting forms that estimated costs by level of care; MedPAC has begun similar analyses that have yielded almost identical results, and has similarly raised the issue as to whether or not payment rates should be recalibrated among the different levels of care. Such a recalibration would transfer dollars from routine home care to general inpatient, continuous home care, and inpatient respite, and could have a significant impact on hospice providers.
Additional MedPAC analysis indicates that financial margins increased, on average, from 8.2 percent in 2014 to 10 percent in 2015. This figure excludes non-reimbursable costs for bereavement and volunteer services. If those costs were included, they would reduce margins by as much as 1.6 percentage points. As has historically been the case, MedPAC found that margins are variable by hospice type as well as based on average length of stay. Of note in MedPAC’s analysis is the first available data examining the impact of the payment changes that were instituted in January of 2016 – MedPAC found that on average payments increased about 3 percent for the quintile of hospices with the fewest long-stay patients while payment decreased approximately 3 percent for the quintile of hospices with the most long-stay patients.
MedPAC projects the 2018 hospice margin to be 8.7 percent. Based on the projected margin and other factors, the general consensus supported the staff recommendation of a zero update for FY2019. Given that consensus, the Commission will bring the recommendation back in January under an expedited approval process, which for the most part guarantees that it will be included in the March Report to Congress.
During discussion, Commission members raised a number of issues related to hospice, including:
• Ways that program integrity efforts might be targeted toward providers that game the system
• The variability of margins by provider type and the impact of the new payment system in moderating that variability
• The potential for recommending differential updates based on certain provider characteristics (which MedPAC has historically avoided)
• The potential for making additional recommendations to further moderate the variation in profitability
To explore the MedPAC discussion in greater depth, please see the Presentation Slides and the Transcript of the meeting (starting on page 339).
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