Managed care revisited: How does it deal with hospice coverage?
June 1, 1998
Managed care revisited: How does it deal with hospice coverage?
Providers report mixed bag in benefits, understanding, strategy
Two years ago, advancing hospice's relationship with managed care was a major obsession for some industry leaders. But then managed care was pushed to the back burner by the more pressing demands of focused medical review, Operation Restore Trust (ORT), and the government's pursuit of fraud and abuse in Medicare, which is still hospice's primary payer. But since the most recent, upbeat report on hospice by the Office of Inspector General concludes that the industry is by and large acting as its founders intended (see story on p. 73), now is a good time to revisit managed care and find out what is happening on that front.
A series of interviews with hospice executives several years ago identified a lack of mutual understanding between hospices and MCOs, a reluctance by some plans to take hospice issues seriously because of hospice's relatively small size and utilization rates, and a tendency to push hospice coverage decisions down to the level of the individualized case manager, which made obtaining coverage very labor-intensive.
Some hospices were successful in pursuing managed care contracts, although in some cases the rationale for using an all-inclusive, Medicare-style per-diem reimbursement mechanism required vigorous defense. Others wondered whether it was necessary to pursue vertical or horizontal integration to achieve greater negotiating leverage - or would it even make a difference? Hospices also asked whether they would need to learn how to capitate their services under contracts paying pennies per month for each covered beneficiary.
Today, the picture has not changed drastically, although some providers are more upbeat than they were two years ago and some of the worst fears about managed care have not been realized. Huge disparities exist based on the local managed care climate and penetration rate, and lack of understanding about hospice is still a common refrain. Horizontal alliances appear to be helping their members, but capitation never quite materialized as a payment mechanism for hospice. (See related story on p. 71.)
Hospice's time finally arrives
"Managed care is still a bit slow in this part of the country, but all at once, in the last few months, three or four of the major managed care organizations have finally come through with contracts," says Pamela Barrett, ACSW, CEO of Hospice of Greensboro (NC). "Before that, we were asking for contracts and they weren't ready to talk to us. They had to put hospital and medical group contracts in place first. Now our efforts are finally paying off; they're good contracts, and we're pleased with them."
Barrett says it helps to be part of a 10-member hospice alliance, which employs a consultant to negotiate on behalf of its members. "We wouldn't have had any contracts if we hadn't aligned together," she asserts.
Connie Holden, RN, MSN, director of Boulder County Hospice in Boulder, CO, backs that up when she says belonging to an alliance of Colorado hospices has been vital in landing the dozen or so managed care contracts her agency now enjoys.
"We have very positive relationships with managed care organizations in Colorado. I would say they do 'get it' when it comes to hospice - we haven't had to convince them that we could prevent hospitalizations and save them money," Holden says. "It varies from company to company how closely they want to case-manage their hospice referrals, but as far as I know there are no HMOs in Colorado that don't offer a hospice benefit - and all are per-diem and modeled on the Medicare benefit."
Paul Lee, president of Strategic Health Care, a Columbus, OH, network management firm that represents the 21-member Hospice Alliance of Ohio, says the alliance has succeeded in negotiating over a dozen managed care contracts. "I think there has been a significant managed care learning curve in Ohio on the subject of hospice, what it is and what it can do. To date our largest commercial contract has been with Aetna, and it has produced quite a number of referrals and driven over a million dollars in revenues to alliance-member hospices," Lee reports. "It has taken 12 to 18 months to successfully educate managed care people. At first there was very little thought for ancillary services, and now most of the large HMOs have ancillary services managers."
Other hospices find tougher going
On the other hand, Cindy Siljestrum, executive director of Hospice of Contra Costa in Concord, CA, recently received a letter from a health network that had signed a statewide contract with a huge HMO for all home health, infusion, and hospice services. The network was seeking subcontractors to provide the contract services. This company offered Siljestrum's hospice a contract that covered only nursing, social work, and home health aide services, at a rate well below the hospice's costs. Meanwhile, the hospice's previous contractual relationship with the HMO was being phased out.
Siljestrum turned it down. "I told them to go find a home health agency to do terminal care for that rate," and explained that the hospice would be violating Medicare's conditions of participation to sign it, she relates. "But if this is a harbinger of business in our state, that does not bode well for hospice. I am on the Managed Care Committee of the California State Hospice Association, and we've had difficulty in pressing our case with managed care. Sometimes they make case-by-case referrals, which at least allows our nurse patient planner to have a conversation with the company. But if they have exclusive contracts, then we're out of the game."
"One of the big changes we see is a greater willingness to contract with hospice on an ongoing basis," says David Zwicky, MHA, vice president for network development at Hospice of Michigan. "But utilization is pretty low." The proportion of dying patients who elect hospice may be lower on the commercial side than in Medicare, because younger patients are more likely to fight the disease to the end, he adds.
Samira Beckwith, ACSW, LCSW, CEO of Hope Hospice and Palliative Care in Fort Myers, FL, says she has not seen a demand for a statewide hospice network in Florida, as providers once expected. The state's hospices, which tend to be large and enjoy the protection of certificate of need, are able to negotiate individually with health plans. "There still needs to be a coordinated effort to educate and collaborate with managed care at a national level," Beckwith says, but she says she believes referrals for hospice will always retain a local flavor.
HMOs are reluctant to be seen as pushing patients into hospice when the patient still might want to pursue curative treatment, because they are already fighting a negative image of excessive cost-cutting at the expense of human needs, observes Sue Wells, a hospice consultant in San Diego. "It's the people who make the referrals that really need to 'get it,'" she adds. "That's why the problem isn't in getting contracts - which hospices seem to have down - but in how to convert them to appropriate referrals. Not that you'd want the HMO to refer patients who aren't hospice-appropriate. I always tell hospices that they need to specify in the contract that they will control the admission decision."
Wells says hospices are challenged to develop relationships with HMOs - or with their contract medical groups - on the commercial side, even though most hospice business is in Medicare. In many cases the medical group practice is paid a capitated rate by the HMO, and thereby assumes the major financial management responsibility. These commercial contractual relationships will then influence where the senior risk patients go when they request hospice, she says.
Hospice still enjoys a carve-out from Medicare HMO risk contracts, although there is growing controversy about how long that circumstance might last, and indeed whether it is still a good thing for hospice. When a member who is eligible for hospice care elects it, the reimbursement flows directly from Medicare to the hospice, and the HMO no longer receives its per member per month rate. "Whether it's fair or not, whether patients have the right to choose their hospice, which they do [under Medicare], that argument won't get you very far in practice. The patient, by and large, will go where the medical group tells him or her. So the key is getting to the referral source," Wells says.
Peter Benjamin, a health care consultant in Miami, sees a growing influence for disease management approaches in managed care as more health plans get into the Medicare risk business and then find out they need help with these difficult and costly patients. "Hospices aren't paying attention to this trend yet because, with the focus on ORT, they've been insulated from it. It's also impossible to talk about managed care without talking about employers," who ultimately drive health care decision-making through the contracts they award to health plans, he says.
Benjamin points out that some nonprofit hospices have had success working behind the scenes in their communities, with influential board members approaching the health plan to say, "'Hey, you're asking this nonprofit hospice to do things we think are unreasonable.' That requires a recognition by the hospice that you need to play hardball. But if I donated money to a hospice and it turned around and subsidized a managed care organization [by signing a contract discounting payment below cost], I'd be very upset."
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