Hard data give hospice advocates an edge
Study indicates per diem rate isn’t enough
For the first time since hospices began saying Medicare’s reimbursement is too low to cover the cost of providing palliative care to dying patients, they have reliable data to back up their claim.
Although hospice leaders have been telling the Health Care Financing Administration (HCFA) that its per diem payment is scarcely enough to cover everything from nursing services to drugs — not to mention nonreimbursable bereavement care provided to families for a year following the patient’s death — the industry has had nothing more than anecdotal evidence to prove its point.
According to a new study of 10,000 patients cared for in large hospice settings, the current reimbursement rate does not cover the costs incurred by hospices. The study further asserts that the gap between what hospices are paid and how much it costs to deliver care poses a real threat to hospice programs nationwide.
A first look at the numbers
The Alexandria, VA-based National Hospice and Palliative Care Organization (NHPCO) hired the actuarial and consulting firm Milliman and Robertson to study expenses and reimbursement among hospices. While the study has not been released in its entirety, Milliman and Robertson gave the NHPCO a first glimpse at the data in June.
"Our interim results show that current Medicare reimbursement is not adequate to cover costs of care for hospice patients," Milliman and Robertson wrote to NHPCO president Karen Davie. "In our 1998-1999 study sample, surveying larger and presumably more cost-effective programs, we note that the current Medicare reimbursement for routine home care, which accounts for 95% of Hospice days utilized by Medicare beneficiaries, does not cover the costs incurred by hospice organizations to deliver this service. Continuing shortfalls pose significant financial threats to the hospice programs across the country."
The study compared cost data from 1982, when the Medicare hospice benefit was first established, to cost figures from 1998-1999. The study pointed out a number of areas in which Medicare has failed to keep up with hospice costs:
•Later hospice enrollment. With patients electing the hospice benefit closer to the time of death, there is less revenue opportunity for hospices. According to the study, the average length of service (LOS) has dropped to 40 days, while the original Medicare hospice benefit set the rate based on a 70-day LOS.
• New technology. Advances in technology, breakthrough therapies, and prescription drugs have increased the cost of hospice care far beyond Medicare’s annual market basket update, which is used to determine annual reimbursement increases. While the hospice per diem rate has doubled since the early 1980s, prescription drug costs, for example, have risen 1,500% — from about $1 of the per diem rate in 1982 to $16 of the per diem rate in 1999.
• An increase in outpatient hospital therapies. The advent of palliative care chemotherapy and radiation treatment increased costs to more than $17 per day. Medicare originally envisioned outpatient therapies to be about $3 of the per diem reimbursement cost.
In 1982, when hospice care was added to the Medicare benefit, the routine home care rate was set at $41.46 per day. At the time, the reimbursement rate did not include an annual inflationary update. It wasn’t until subsequent congressional action that a specific rate increase was included when legislation tied it to the hospital market basket.
Convincing Congress
Armed with the best evidence the industry has ever had, the NHPCO is now trying to persuade Congress to raise per diem rates to reflect today’s needs.
"[The data] are being utilized in our advocacy efforts on Capitol Hill," says Jonathan Keyserling, JD, director of public policy for the NHPCO. "I can say that it has been met with great interest."
Currently there is no legislation that would change the hospice payment rate, but Keyserling says there is support in Congress to increase all four per diem rates — routine home care, inpatient care, continuing care, and respite care. At press time, Keyserling said he was confident that legislation would be introduced in September.
The prospect of a rate change seems bolstered by the recent release of a General Accounting Office report on hospice costs in September, which Keyserling believes will support Milliman and Robertson’s findings.
"We’re not asking for a specific increase," says Keyserling. "We’re couching this argument as the current rate is inadequate.’ We also understand that there isn’t an open checkbook, but I think a 10% rate increase is possible."
Beyond the market basket
The NHPCO is taking a three-point message to lawmakers to argue the need for more money:
• Increasing cost of prescription drugs. New technology, including breakthrough therapies and prescription drug advancement, has increased hospice costs well beyond Medicare’s market basket update, which accounts for cost increases and adjusts reimbursement rates for all Medicare providers.
In 1982, when the hospice benefit was established, prescription drug costs amounted to about $1 of the $41.46 per diem payment. Today, the prescription drug costs have soared, totaling $16 per day of a $98.96 per diem payment.
"Drug costs have skyrocketed, making pain relief and symptom management — cornerstones of hospice care — much more expensive. Many of the most effective and widely used drugs for relief of cancer patients’ discomfort are shockingly expensive," the NHPCO wrote in a press release that followed the unveiling of Milliman and Robertson’s interim study results.
Prescription medication is a hot topic across the health care landscape and among lawmakers; many want to see beneficiaries get a break from rising drug costs. Depending on the source of information, drug costs are increasing 15% to 20% per year. Hospice drug costs are rising 18.3% per year, according to Hospice Pharmacia, a Philadelphia-based consulting firm. Because drug costs make up a significant portion of a hospice’s direct costs, the firm predicts those expenses will likely double in three to five years if left unattended.
Experts blame a combination of factors for the rising cost of drugs: higher drug utilization, inappropriate drug utilization, and an increasing aging population.
• Declining LOS. When the rates for hospices were set in the early 1980s, HCFA based them on a length of service almost twice as long as current LOS most hospices are experiencing.
"Average length of service has dropped to 40 days while the original Medicare Hospice Benefit set the rate based on a 70-day LOS," the interim report stated.
Hospices have suffered from short LOS and have equally struggled to come up with ways to bring patients into care sooner. Most blame current eligibility requirements, which force physicians to make the uncertain prediction that a patient will die within six months as a result of their illness. In addition, reimbursement rules also mean physicians lose revenue as a result of a hospice referral.
Declining LOS exacerbates the already low reimbursement rate, widening the gap between cost and reimbursement. That’s because hospices encounter higher costs in the first few days following admission and in a patient’s final days. Per diem payments are often not enough to cover the cost of program introduction at admission and intensive care at the end of a patient’s life.
"The 43% decrease in the LOS is significant," the NHPCO wrote. "For a variety of reasons, more and more patients are being admitted to hospice programs very late in their illness, when they require a greater intensity of services. The original Medicare hospice benefit envisioned hospice providers being able to balance the high cost days associated with bringing pain and symptoms under control, usually the greatest when a patient is first referred to hospice and just before death, against lower cost days. Unfortunately, given the dramatic decline in lengths of service, these lower cost days are almost nonexistent."
• Outpatient hospital therapies. The advent of more innovative and expensive palliative care methods has contributed largely to the increase in hospice costs. Among them are palliative chemotherapy and radiation treatments. According to Milliman and Robertson’s report, these types of outpatient therapies have grown to more than $17 per day, while Medicare originally allocated about $3, a 500% increase.
The Milliman and Robertson report represents the first of a series of new hospice data. With hospices filing cost reports this year, HCFA will soon have its own cost data to help determine future reimbursement. While critics scoff at the reliability of cost report data, at least for the first few years, Keyserling welcomes more data.
"The more data that are collected, the better we will be able to show what hospices are going through," he said. "The [Milliman and Robertson] report is an attempt to show that current reimbursement does not reflect current practices."
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