MedPAC Considers the Hospice Aggregate Cap

Interesting considerations of the Hospice Aggregate Cap.

Summary from Hospice News Today, 10/10/19:
MedPAC Considers Hospice Cap and PAC Regulations
Leading Age
October 8, 2019

As part of their October 2019 meeting, MedPAC (the Medicare Payment Advisory Commission) discussed policy options to modify the hospice aggregate cap and aligning benefits and cost-sharing under a unified payment system for post-acute care. MedPAC staff presented a new policy option for consideration by the Commission—wage adjusting the hospice aggregate cap and lowering it by 20%. … MedPAC focused on the following issues around hospice payment:

• The aggregate level of payment substantially exceeding the cost to provide care. …
• The payment system is out of balance by the level of care. …
• Margins of hospices with disproportionately long stays that exceed the cap are strong and have been increasing. Additionally, long stays in hospice are more profitable than short stays and MedPAC is concerned about both incentivizing profitability as well as how to deal with the growing number of short-stay patients.

The cap functions as a mechanism to reduce payments to hospices with long stays and high margins.

• MedPAC found that 12.7% of hospices exceeded the cap in 2016 and overpayments were the equivalent of 1% of total hospice payments to providers.
• Hospices above the cap had large margins—they had 20.2% margins prior to the return of cap overpayments and still maintained 12.6% margins after returning their cap overpayments.
• MedPAC also found that above-cap hospices tended to be for-profit, freestanding, urban, small, and recent entrants as well as substantially longer stays and higher live discharges.

In other words, MedPAC is connecting over-cap hospices to characteristics MedPAC has previously associated with bad behavior. Due to all of these factors, MedPAC proposed wage adjusting the cap in order to improve the equity of the cap across all providers. Additionally, they are proposing to reduce the cap by 20% (this was a modeled amount, MedPAC staff indicated they could model other reductions) with the policy goals of:

• Improving payment accuracy
• Reducing overpayments to providers with disproportionately long stays
• Lessening the attractiveness of a business model focused on long stays
• Generating savings for taxpayers and the Part A trust fund

Summary Hospice News Today, 10/5/19:
MedPAC Mulls 20% Cut to Hospice Payment Cap
Hospice News
October 4, 2019

The Medicare Payment Advisory Commission (MedPAC) is considering a recommendation that Congress reduce by 20% the annual aggregate payment cap for hospice care. Also under consideration is a potential recommendation to adjust the cap according to the wage index for different geographic regions to reflect the varying costs of care in different parts of the country. … About 12.7% of hospices exceeded the cap during 2016, according to MedPAC. These organizations were disproportionately for-profit, freestanding, urban and small. Hospice organizations that were made aware of the discussion were quick to oppose the notion of a 20% cut, though expressed some optimism about modifying payments based on the wage index. “The idea of wage indexing the aggregate cap is something that we are intrigued by, and that we want to talk more about with MedPAC. The devil is in the details, but that is generally a good idea. The cost of care in rural Georgia may be different than the cost of care in Miami, and it should be flexible in that way,” Edo Banach, president of the National Hospice & Palliative Care Organization, told Hospice News. “We are absolutely not in favor of a 20% across the board cut, because that’s ultimately going to deprive some folks of needed access to care.” The cap issue was first raised at the commission’s meeting earlier today. Though the panel has yet to make specific recommendations to Congress regarding the cap, a MedPAC representative told Hospice News that work on the issue would continue, and the commission may vote on the issue before the end of the year. Some stakeholders voiced concern that wage indexing the cap could lead to trouble if not implemented very carefully. … MedPAC’s goals for new policies related to the cap is to “improve the equity of the cap among providers, improve payment accuracy and reduce overpayment to providers as well as the attractiveness of business models that focus on long lengths of stay,” according to documents MedPAC provided to Hospice News.