With the publication of the proposed FY 2018 hospice wage index and payment update, CMS indicates further scrutiny and less compensation for hospices. Here are some key points:

Expenditures on Hospice. Medicare hospice expenditures continue to grow, with FY 2016 at $16.5 billion. CMS expects hospice to continue to grow at seven percent (7%) due primarily to an increasing number of Medicare beneficiaries. While growth is built in given U.S. demographics, growth will also be viewed suspiciously by an agency already strapped for resources.

Length of Stay. Although length of stay is holding steady at about 80 days for any single continuous period, CMS is now also looking at “lifetime” length of stay, which is higher at 96 days (accounting for multiple admissions for certain patients).

Payment Adjustment / Hospice Cap. Payment rates are being increased by one percent (1%). With the statutory amendment that adjusts the cap allowance only by payment rate increase (instead of CPI Urban Healthcare), the cap will see its lowest increase in a long time, also just one percent (1%).

Part D Drug Expenditures. CMS continue to believe that hospice should cover all healthcare for its patients. CMS remains focused on Part D drug expenditures for patients on hospice. Part D payments for patients then on hospice remain, in their view, high at approximately $300 million (or an average of $250 per hospice patient per year; though the distribution of such expenditures is not disclosed, and is likely quite skewed). CMS draws particular attention to things like insulin, asthma medications, and beta blockers.

Many Americans have diabetes. And, newer insulin treatments can be quite expensive. In many cases, diabetes is unrelated to the terminal diagnosis, such as for patients with cancer or COPD. But, hospices should expect CMS to try to force hospices to cover these maintenance treatments.

Certifying Terminal Illness. Although CMS continues to acknowledge that assessing life expectancy is not an exact science, CMS believes that a material percentage of patients admitted to hospice are not appropriate. CMS points its finger at hospice physicians, suggesting that they are too likely to certify terminal illness.

CMS floats the idea that, in admitting patients, hospices should be required to rely nearly exclusively on the prior medical record and not as much (or perhaps even at all) on a current assessment. Such a rule would tacitly discriminate against patients without a stable existing primary care relationship leading into hospice.

Hospices should object to this concept as a general rule, while recognizing the importance of such records, where available. If adopted generally, this rule will increase the risk of audit reversals and limit access to hospice to a material subset of American seniors. It’s the sort of rule that can help CMS indirectly limit access to the benefit while at the same time insulating CMS from criticism.

If CMS thinks too many patients are certified for hospice, it has many more direct, respectable tools available such as: (a) publishing objective National Coverage Determinations for hospice; or (b) pre-authorizing admission. CMS refuses to take up this responsibility.

Live Discharges. CMS notes that the rate of live discharge has been slowly falling over the past five years from 22% to about 17% today. Although CMS understands that the live discharge rate will not be zero, hospices should expect CMS auditors to continue to focus on discharged patients for post-payment audit purposes.

Reporting Requirements. Hospice managers need advanced degrees to understand the growing thicket of reporting requirements. These include reporting arising under the Hospice Quality Reporting Program (HQRP), such as the Hospice Item Set (HIS) (to be expanded apparently into a Hospice Evaluation & Assessment Reporting Tool (HEART), as well as the new Consumer Assessment of Healthcare Providers and Systems (CAHPS).

Each time new reporting requirements are added, CMS asserts a fantastically low forecast for incremental labor burden to complete the additional paperwork, while at the same time establishing significant reimbursement penalties for non-compliance.

By many of these mechanisms, CMS continues to drive our healthcare system towards a future where smaller providers will have no place. At the same time, these requirements provide opportunity for competitive advantages to large hospice groups, so further consolidation in this space should be expected.