In this update, Sheppard Mullin reports on new hospice utilization data published in MedPAC’s annual Data Book and the Medicare hospice cap and payment update.

MedPAC Data Book

The Medicare Payment Advisory Commission, comprised of an administrative staff and 17 at large members, focuses on Medicare expenditures and drives Medicare reimbursement policy.  The members meet once a month to receive presentations from staff and pose questions.  Each summer, MedPAC staff releases a data book covering all Medicare expenditures, including hospice.  Due to slow data collection, MedPAC’s recent report focuses on new data for calendar year 2011, an 18 month lag.[1]

Here are some keynotes on MedPAC’s hospice data for 2011:

  • Total spending on hospice grew in 2011 by 6.8% to $13.8 billion.  MedPAC did not disaggregate this growth; but, it includes increases in reimbursement (25%), increase in the size of the Medicare population (40%), and modest increased utilization of hospice (44% of decedents v. 43% in 2010).
  • MedPAC reported that average length of stay was steady from 2010 at 86 days, with a declining median length of stay at 17 days (from 18 in 2010).  The majority of hospice stays are less than 3 weeks.
  • The number of hospices grew modestly by about 2% to approximately 3,600, markedly slower growth than has been seen in the past 10 years.
  • Length of stay varies widely by diagnosis, with cancer producing the shortest LOS and fewest stays over 180 days; by contrast, Alzheimer’s/dementia and COPD produce average LOS in excess of 100 days with the widest variation.
  • Medicare spends more than 50% of its hospice dollars on patients with LOS greater than 180 days.
  • The hospice cap in 2011 clawed back approximately $150 million of more than $8 billion spent on patients with longer than 180 day LOS.
  • Cap hospices are more likely to discharge patients live than non-cap hospices.
  • MedPAC asserts that nursing home-based hospices are more profitable.

From these findings, we believe MedPAC staff will:

  • Continue to tie growth in expenditure to hospice with long stay patients, without acknowledging the real difficulties in life expectancies for non-cancer diagnoses.
  • Continue to ignore whether hospice saves Medicare money versus more traditional end of life care.
  • Advocate for more scrutiny of hospices with long stay patients, hospices that have higher rates of live discharge, and hospices associated with nursing homes.

Payment Rate and Cap Update

CMS recently released its annual update to the hospice cap and payment rates for 2014.

The cap amount has increased by 3.1% to $26,157.50, showing that the CPI adjustment accounts for increased operating expenses; meanwhile, the payment rates have been adjusted by the lower amount of 1.7%, with a baseline payment rate of $156.06 for routine home care.  While reimbursement is increasing, it is not keeping pace with the medical care expenditure category of the Consumer Price Index (inflation).[2]  With these differences, cap liability may decrease but hospice margins will continue to erode.

[1] The full report is available at:

[2] Note: Hospices that are not timely submitting quality data will receive a net reduction from 2013 rates of .3 (+1.7% -2.0% (penalty))..  For information on quality data, reporting, see