Hospices to see 1% increase in Medicare payments

Hospices are slated to receive an increase in their Medicare payments in the coming fiscal year under a final rule issued Friday by the CMS (PDF).

Under the rule, hospices will see a 1% increase in payments, totaling $160 million beginning Oct. 1.

According to the CMS, the increase was the net result of the agency updating its hospice payment percentage to 1.7%, coupled with a 0.7 of a percentage point cut as it continues its change in how hospice rates are calculated.

The phasing out of the CMS' “budget neutrality adjustment factor”—implemented in 1997 as a shift away from its old index to its current model for calculating hospice payments—calls for the adjustment factor to be reduced by 15% through fiscal 2016.

Also included in the final rule was a change in coding guidelines that would require hospices to no longer use any nonspecific diagnoses that are not principal diagnoses in the billing codes. According to the CMS, “hospices should code the principal diagnosis using the underlying condition that is the focus of the patient's care,” the rule stated. The CMS stated it will delay returning claims to providers until Oct. 1.

Another change applies penalties on hospices that fail to meet quality reporting requirements, as part of the Patient Protection and Affordable Care Act. Violators will receive a 2% reduction to their market base update beginning Oct. 1. Beginning in 2016, the rule eliminates the requirement for hospices to report on a pain management measure and a structural measure as part of a Quality Assessment and Performance Improvement program.

The rule also implements a new patient data collection system called the Hospice Item Set, which hospices will have to obtain from all patients upon admission and discharge beginning July 1, 2014. Failure to do so could affect payments for fiscal 2016, according to the rule.

Hospices also will begin using a new quality-reporting survey starting in 2015 that will track hospice provider communications with the patients and their families, quality of care and an overall rating of hospices. The CMS plans to make participation in the survey a requirement in order for hospices to receive their full annual payment update beginning in fiscal 2017. Final requirements for the care survey will be published in the CMS' fiscal 2015 rulemaking.

As part of the final rule, the CMS will provide updates on Medicare hospice payment reform efforts no later than this October, which include a discussion of reform model options; highlights from recent reform research; and an update on data collection efforts.

The latest rates come amid rapid growth in Medicare beneficiary use of hospices from 513,000 in fiscal 2000 to more than 1.3 million in fiscal 2012. Medicare spending on hospices has risen from $2.9 billion in fiscal 2000 to $14.7 billion in fiscal 2012.

The increase is partly due to an increased average length of stay for beneficiaries, according to the CMS, from 54 days in 2000 to 86 days in fiscal 2010, up nearly 60%.

Follow Steven Ross Johnson on Twitter: @MHSjohnson