Hospice Payment Reforms Are A Modest Step Forward, But More Changes Are Needed

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On August 6, 2015, the Centers for Medicare & Medicaid Services (CMS) issued a final rule to update the Medicare hospice payment rates and wage index. This change was made in response to Section 3132(a) of the Affordable Care Act (ACA), which called on the Secretary of Health and Human Services to reform Medicare’s hospice payment system.

Although the reforms are described by the National Hospice and Palliative Care Organization as “the first significant changes to hospice payment methodology since the Medicare benefit went into effect in 1983,” the scope of reforms in the final rule was quite modest. The rule increased payment at the beginning and very end of Medicare enrollees’ hospice stays but left the current per-diem payment structure otherwise intact. The 2015 final rule leaves several fundamental issues unaddressed and should be viewed as a modest first step toward meaningful hospice payment reform.

Motivation For The Reforms

Over the course of its three decade existence, the Medicare hospice benefit has been transformed in nearly every way: in the types of patients who use it, the providers that deliver it, and the dynamics of where and for how long services are used. Yet, the benefit’s eligibility criteria—that patients have an expected prognosis of six months or less to live and that they forgo life extending therapies for their terminal condition—and the way it pays providers—a flat per-diem payment that does not adjust for patient case-mix or setting—have remained largely unchanged.

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