Improving Care for the End of Life, Online Edition The Palliative Care Policy Center

Sourcebook : Improving Care for the End of Life : 9.3 Medicare Payments for Hospice Services

The Medicare hospice financing structure is very different from its other reimbursement programs. Most hospice payments are based on an all-inclusive per diem rate, except for physician services, which are mostly paid in the conventional manner (Part B physician billing). The Medicare hospice benefit is available only to individuals who are eligible for Medicare Part A, whose physicians certify that the prognosis is "less than six months," who understand the nature and purpose of palliative care, and who understand that by selecting hospice, they waive their right to certain other Medicare services. For qualified patients, the benefit includes most costs for prescription drugs, durable medical equipment, and care provided through an interdisciplinary team that assesses the needs of each patient and family and develops and implements an appropriate care plan. Hospice patients are distinctly less likely to have surgery, hospitalization, resuscitation, or other "high-tech" interventions (though these services are not explicitly precluded by the Medicare regulations).

When they were first established, the hospice rates covered virtually every service required, with the possible exception of long-term assistance by an aide. The BBA defines a covered hospice service as "any other item or service which is covered by Medicare and is indicated as necessary for the treatment of the terminal illness and related conditions." Medicare Part A will reimburse a hospice for two 90-day periods and then repeated 60-day periods during a patient's lifetime (so long as the patient remains eligible) and for services that the interdisciplinary team identifies as necessary for the palliation and management of their terminal illness. These services include:

The Medicare hospice benefit is paid at one of four rates:

For any one hospice program in one year, the aggregate number of inpatient days, both general and respite, may not exceed 20 percent of the aggregate total number of days of hospice care provided. This requirement makes it difficult for people to receive hospice services if they do not have a suitable home environment or a family caregiver. All payments to all providers for hospice patients are through the hospice program, except for non-employee physicians who submit conventional bills under Medicare Part B, and also except for a few billings for services for illnesses other than the terminal illness, such as an acute injury. Table 9.3 shows the average daily Medicare reimbursement rate.

Table 9.3 Daily Medicare Reimbursement Rate, 1999 (By Service Type)
Type of ServiceDaily Medicare reimbursement rate, 1999*
Routine Home Care Day - Individuals receiving hospice at home$97.11 per day
Continuous Home Care - Individuals in a crisis with skilled care for at least 8 hours within a 24 hour period, only for brief periods of crisis and only as necessary to maintain the individual at home$566.82/a day or $23.62/an hour
Inpatient Respite Care - May be provided for no more than five days at a time$100.46 per day
Inpatient Symptom Management Care - Care may be provided in a hospital, skilled nursing facility or freestanding inpatient hospice facility$432.01 per day
*Varies a little by area wage index

Hospices have generally competed on amenities and visibility, not on measures of quality or efficiency. The standards of hospice service are incomplete and not well studied. However, it seems likely that there are substantial variations in practice and in quality among hospices.

As hospice has evolved, so too has palliative care for patients at the end of life - including the development of several costly strategies. Palliative chemotherapies for cancer and pain medications can now cost more than the daily hospice rate, for example. Thus, hospices now need to evaluate ways to maintain financial viability while providing the necessary range of health care services.

In general, patients who are dying of a serious nonmalignant disease, such as congestive heart failure (CHF), do not qualify for the hospice benefit because they do not meet the prognosis requirement. Hospice benefits were designed around the disease trajectory for cancer, in which patients follow a fairly predictable course.

The National Hospice Organization wrote \I\Medical Guidelines for Determining Prognosis in Selected Non-Cancer Diseases\R\ (Stuart, 1994) for enrolling people with nonmalignant disease into hospice; most intermediaries use something similar. However, data from the SUPPORT study imply that these criteria will dramatically limit hospice availability without substantially helping to ensure that hospices do not enroll many patients who live much beyond six months (Fox et al., 1999). Under current rules, hospices can probably serve only about one-quarter of the patients who will die with CHF and obstructive lung disease. Because diseases such as heart failure are so common, and because many of these patients will live in hospice for more than a month, this seems to be a good opportunity for hospices to gain experience (with little financial risk) in meeting the needs of these patients. If good services can be designed, perhaps a modified benefit (or substitution of a different benefit) will eventually enable more access.

Hospice payment for nursing home residents is a thorny subject, primarily because Medicare will not reimburse both the hospice and the nursing facility for care provided to a nursing home resident. Facilities receive better payments from Medicare than from their next best alternative (usually Medicaid), so they are not eager to have patients or families consider hospice enrollment when the patient might qualify for Medicare skilled nursing facility benefits. However, Medicare does not pay for the core services of most nursing home residents, so this problem affects a limited number of patients, usually during their first few weeks in the nursing facility.

Since the beneficiary "holds" the hospice benefit, it would seem that hospice services should be available wherever a person lives. For many years, that was the case. A person living in a nursing home (and having that bill paid for privately or by Medicaid) was eligible for hospice services. Since the hospice per diem rate is almost the same as the usual nursing home daily rate, this could be a substantial infusion of money. However, the hospice payment requires that the hospice team control the plan of care, while nursing home licensure requirements insist that the nursing home team be in control of the plan. This obviously leads to a complex interaction. Now most Medicaid payments for nursing home stays for Medicare hospice patients are reduced to about 95 percent and are given to the hospice program. The hospice program and the nursing home must have a contract that spells out their relationship. Obviously, such arrangements vary by states and institutions.

This issue is controversial. Some people contend that nursing facilities should be able to provide hospice services and that the rates they receive should reflect their services. Others contend that nursing facilities are not now and are not likely to be good at end-of-life care and that a Medicare beneficiary who is a nursing facility resident should not be denied hospice care. For now, both funding streams are available and the attenuation, if combined, is not substantial.

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This online version of the book Improving Care for the End of Life: A Sourcebook for Health Care Managers and Clinicians is provided with permission of Americans for Better Care of the Dying [ ] and Oxford University Press. All rights reserved.

For further information on quality improvement in end-of-life care visit The Palliative Care Policy Center [ ].

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