Medicare Hospice Care: Modifications to Payment Methodology May Be Warranted
GAO-05-42
Published: Oct 15, 2004. Publicly Released: Oct 15, 2004.
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Highlights
The Medicare hospice benefit provides care to patients with a terminal illness. For each patient, hospices are paid a per diem rate corresponding to one of four payment categories, which are based on service intensity and location of care. Since implementation in 1983, the payment methodology and rates have not been evaluated. The Medicare, Medicaid, and SCHIP Balanced Budget Refinement Act of 1999 directed GAO to study the feasibility and advisability of updating Medicare's payment rates for hospice care. In this report, GAO (1) compares freestanding hospices' costs to Medicare payment rates and (2) evaluates the appropriateness of the per diem payment methodology. Because of Medicare data limitations, it was not possible to compare actual payments to costs or examine the services provided to each patient.
Recommendations
Recommendations for Executive Action
| Agency Affected | Recommendation | Status |
|---|---|---|
| Centers for Medicare & Medicaid Services | The Administrator of CMS should collect comprehensive, patient-specific data on the visits and services being delivered by hospices and the costs of these services. |
In October 2004, we noted that the Centers for Medicare & Medicaid Services (CMS) had not evaluated the hospice payment methodology and resulting per diem payment rates since they were implemented in 1983. We reported that the type of care provided during a hospice stay appears to be different than the care provided when the per diem payment rates were developed and that comprehensive data to evaluate the number of visits or costs of services during a Medicare hospice stay were not available. In order to determine the relationship between payments and costs and whether the per diem methodology is consistent with current patterns of care, we recommended that the Administrator of CMS collect comprehensive, patient-specific data on the visits and services being delivered by hospices and the costs of these services. CMS agreed with GAO's recommendation and stated that it recognized the need for this type of analysis. Effective July 1, 2008, CMS requires hospice providers to report the number of visits by nurses, physicians, social workers, home health aides, and nurse practitioners on their claims for Medicare payment.
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| Centers for Medicare & Medicaid Services | The Administrator should determine whether the hospice payment methodology and payment categories need to be modified, including any special adjustments for small providers. |
In accordance with the Patient Protection and Affordable Care Act (PPACA) CMS is to reform hospice payments no earlier than October 2013. As of June 2012, CMS reported that it had awarded a contract to study this potential payment reform. The contractor is to develop alternative payment models and assess whether such models need to incorporate certain adjustments to account for patient and provider characteristics. As of June 2016 this contractor continues to conduct comprehensive data analysis of utilization and cost report data from hospices. Additionally, beginning fiscal year 2016, CMS created two payment rates for routine home care--one of four payment rate categories for hospice care--that resulted in a higher payment rate for the first 60 days of hospice and a reduced payment rate for subsequent days. At the same time, CMS created a service intensity add-on payment for services provided during the last 7 days of life based on the number of hours of direct patient care provided by a registered nurse or social worker. The fiscal year 2017 payment rule for hospice, finalized in August 2016, contained no additional changes to the payment rate categories for hospice care, but did state that CMS plans to continue monitoring the effects of hospice payment and policy changes. Monitoring the effect of hospice payment and policy changes, as well as changes in hospice utilization and patient characteristics, will be important to ensure that hospices are being paid according to their costs.
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| Centers for Medicare & Medicaid Services | The Administrator should implement those modifications that would not require a change in Medicare law and submit a legislative proposal to the Congress for those that do. |
Regarding the hospice payment methodology and payment categories, CMS has not submitted a legislative proposal to the Congress for changing the hospice payment methodology and payment categories. In accordance with the Patient Protection and Affordable Care Act (PPACA) CMS is to reform hospice payments no earlier than October 2013. As of June 2012, CMS reported that it had awarded a contract related to this payment reform, and that the contractor was to develop alternative payment models that do not require a change in Medicare law and assess whether there was a need to submit a legislative proposal to modify the Medicare law. Beginning fiscal year 2016, CMS modified the payment rate methodology by creating two payment rates for routine home care--one of four payment rate categories for hospice care--that resulted in a higher payment rate for the first 60 days of hospice and a reduced payment rate for subsequent days. At the same time, CMS created a service intensity add-on payment for services provided during the last 7 days of life based on the number of hours of direct patient care provided by a registered nurse or social worker. The fiscal year 2017 payment rule for hospice, finalized in August 2016, contained no additional changes to the payment rate categories for hospice care, but did state that CMS plans to continue monitoring the effects of hospice payment and policy changes. Monitoring the effect of hospice payment and policy changes, as well as changes in hospice utilization and patient characteristics, will be important to ensure that hospices are being paid according to their costs.
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Comparative analysisHealth care costsHealth care programsHome health care servicesHospicesHospital care servicesMedical economic analysisMedical services ratesMedicarePatient care servicesPaymentsPer diem allowancesEnd-of-life issues