HOSPICE AGGREGATE PAYMENT LIMITATION (“CAP”) INCREASINGLY REDUCING MEDICARE HOSPICE PAYMENTS

Hospice News/Volume 21.03

The Medicare Payment and Advisory Commission (“MedPAC”) recently recommended that “For fiscal year 2022, the Congress should eliminate the update to the 2021 Medicare base payment rates for hospice and wage adjust and reduce the hospice aggregate cap by 20 percent.”

Our exposure to hundreds of hospices annually clearly indicates that the number of hospices exceeding the CAP continues to grow. According to MedPAC, “In 2018, about 16 percent of hospices exceeded their CAP.” We expect the number of hospices exceeding the CAP for the 2018 CAP Year to exceed MedPAC’s estimate of 16%. Even so, it is apparent that MedPAC is encouraging the government to use the CAP as a means for penalizing hospices that are reporting, in their opinion, excessive Medicare margins (payments over costs) created primarily because of long episodes of care. Based on the MedPAC report, the following summarizes hospice episodes of care by length:

Episodes 5 days or less 25%
Episodes of 6-18 days 25%
Episodes of 19-85 days 25%
Episodes of 86-265 days 15%
Episodes of 266 days or more 10%

MedPAC estimates that the modification to the CAP would cause 28% of hospices to exceed the CAP, thereby generating a 3.2% reduction in Medicare payments, assuming no changes in utilization. While such a change would generally affect hospices with higher margins, before repayment of the CAP liability, the change would also significantly impact many rural providers unable to survive payment reductions that would result.

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