Simione™ Healthcare Consultants

Back

Are You Ready for the Two-Tiered Payment for Hospice Home Care?


Published in the Federal Register on August 6, 2015, the Centers for Medicare & Medicaid Services (CMS) FY 2016 Hospice Wage Index and Payment Rate Update and Hospice Quality Reporting Requirements) Final Rule (CMS-1629-F) encompasses payment rates, non-hospice spending, diagnosis coding on claims, and quality reporting and compliance. The final rule reflects the ongoing efforts of CMS to support hospice payment reform. Simione Healthcare Consultants has prepared a two-part overview to help hospice organizations prepare for key changes, which will be effective January 1, 2016.  The focus of this first article is on the change to a two-tiered payment model for routine hospice home care effective January 1, 2016.  Key areas include the implications for billing and claims processing, and the potential challenges expected with this new model for hospice payment.

Hospice Wage Index and Payment Update

This is the first major update for the hospice wage index since CMS introduced a new methodology in 1998. The year 2016 marks the last year of seven-year Budget Neutrality Adjustment Factor (BNAF) phase-out, and includes a market basket increase of 2.4%, negative productivity adjustments of .5% and .3%, requirements for hospice quality reporting, and changes to the Core-Based Statistical Area (CBSA) geographic designations. The net increase for FY 2016 is 1.6% calculated as follows:  2.4% less (0.5) less (0.3) equals 1.6%. 

With 2016 as the last year of the BNAF, it’s important to note that the BNAF is a reduction in the amount of the BNAF increase applied to the hospice wage index value; it is not a reduction to the hospice wage index value or in the hospice payment rates.  Other key factors are a payment reduction of 2% for hospice providers that fail to report quality data, and variations in the wage index by geographical service areas due to CBSA changes.

With a net increase of 1.6%, hospice organizations are receiving a transition rate for routine home care between October 1 and December 31, 2015, calculated as follows:

Transition Rate for Routine Home Care

 

FY 2015 Payment Rate

FY 2016 Payment Update Percent

October 1, 2015 to December 31, 2015 Payment Rate

Routine Home Care

$159.34

1.016

$161.89

The establishment of the two-tiered hospice payment rate, effective January 1, 2016, for routine home care provides:

  • A higher rate of payment for days 1 through 60
  • A lower rate of payment for days 61+
  • An adjustment to the labor portion for “average wage weighted minutes for RHC/overall rate average wage weighted minutes”
    • 1-60 days: $21.96/$17.21 = 1.2603*
    • 61+ days: $15.01/$17.21 = .8722*
    • A further adjustment for budget neutrality

CMS’ Technical Study used for the proposed and final rule illustrates Table 16 on page 47166 of the Federal Register, an Average Wage Weighted Minutes per RHC day for FY 2014 that determined $17.21 as the “Overall Average Wage Weighted Minutes Per Day Across All RHC Days”.  CMS then used 2013 Bureau of Labor Statistics average hourly wage values for relevant disciplines of SN, PT, OT, ST, MSW and Aides to develop an Average Wage Minute Cost for Days 1 – 60, which is $21.69, and an Average Wage Minute Cost for Days 61+, which is $15.01. The Labor portion of the RHC rate is 68.71% of the total rate.  The labor portion of the 2015 RHC rate is multiplied by the product of the Average Wage Weighted Minutes for RHC differential rate/overall rate Average Wage Weighted Minutes, so for days 1-60 you have x 1.2603 and days 61+, you have x .8722. This result is then further adjusted by a budget neutrality factor.

When determining the count of days and applicable payment rate, hospice organizations must understand that hospice days follow the patient. Therefore, if a patient is transferred from one hospice to another, the rate of payment incorporates any previous stay. CMS has designed this to mitigate the potential for a high rate of discharge and admission by hospices to qualify for the higher rate of payment in the first 60 days. The hospice episode of care includes the hospice election period or periods separated by no more than a 60-day gap.  The hospice payment tier 1 would restart only if the patient had a greater than 60-day break in all hospice services. CMS intends this to reflect higher costs at the beginning of care and lower costs associated with patients with a longer length of stay.

Establishment of a Two-Tiered Home Care Rate

All hospice rates are split into 2 portions: a labor portion that is subject to a geographic specific wage index and a non-labor portion. The two routine home care payment rates are calculated as follows:

 

Days 1 - 60

Days 60+

FY 2015 RHC Payment Rate

$159.34

$159.34

RHC Labor Portion

x .6871

x .6871

FY 2015 RHC payment Rate – Labor Portion

$109.48

$109.48

Average wage weighted minutes for RHC differential rate/overall rate Average Wage Weighted Minutes

x 1.2603

($21.69/$17.21)

x .8722

($15.01/$17.21)

Revised FY 2015 Labor Portion

$137.98

$95.49

 

Days 1 - 60

Days 60+

Revised FY 2015 Labor Portion

$137.98

$95.49

Budget Neutrality Factor

x .9978

x .9978

Revised FY 2015 Labor Portion with Budget Neutrality

$137.68

$95.28

FY Non-Labor Portion

$49.86

$49.86

FY 2015 Revised RHC Payment Rate

$187.54

$145.14

As an incentive to improve patient care at the end of life, the Service Intensity Add-on (SIA) payment is calculated with a budget neutrality factor for patients receiving routine home care.  The SIA is paid at the hourly continuous home care rate (base rate unadjusted for CBSA wage index: $39.44).  It applies to in-person visits made by a registered nurse or social worker during the last 7 days of a patient’s life when the patient is discharged as deceased.  New billing “G” codes have been developed to differentiate RN (G0299) from LPN (G0300) visits on the Medicare claims. 

The SIA payment encompasses a maximum of four (4) hours per day and includes patients residing in skilled nursing facilities. The CMS claims processing system will assess eligibility based on claim details, including patient’s deceased status, visits completed during the last 7 days of life, and discipline-specific care in 15-minute increments.

The final rule calculations for the other three levels of care – Continuous Home Care, Respite Inpatient and General Inpatient – are much simpler as illustrated:

 

FY 2015 Payment Rate

Final FY 2016 Update of 1.6%

Final  FY 2016 Payment Rate

Continuous Home Care – Day

$929.91

 x  1.016

$944.79

Continuous Home Care – Hour

$  38.75

 x  1.016

$  39.37

Inpatient Respite Care

$164.81

 x  1.016

$167.45

General Inpatient Care

$708.77

 x  1.016

$721.11

Additionally, the final rule incorporates new labor market delineations from the Office of Budget and Management, including some new and redefined CBSAs:

  • 37 urban counties become rural
  • 105 rural counties become urban
  • Some existing CBSAs are split
  • 4.0% will see an increase under new designations
  • 7.4% will dee a decrease under new designations
  • FY 2016 transition year: CMS issued a blended wage index of old and new (50/50)

Quality Reporting

Overriding other payment factors, CMS has issued a 2% penalty for providers who do not report quality data.  While this is known and understood by hospice providers, many are still facing the consequences of non-compliance.  We are seeing new agencies unprepared for quality reporting, as well as others with staffing changes, or providers who did not participate in the ‘dry run’ in 2015 and fully implemented CAHPS hospice survey data collection effective 04/01/2015.  Others did not verify with vendors that the reporting systems are working successfully.  With the CAHPS hospice survey data implementation in mid-2015, hospices should be fully up to speed on quality reporting requirements, and their teams well educated on the key issues related to providing care. This is a highly fixable problem and it needs attention right now – hospices will not survive if the expected 1.6% increase is consumed by a 2% penalty.  Rates for providers who do not report quality data are calculated as follows: 

 

Days 1 - 60

Days 60+

FY 2015 Revised RHC Payment Rate

$187.54

$145.14

SIA Budget Neutrality

 x  .9806

 x  .9957

2016 Hospice Payment Update Percent of 1.6% Minus 2%

 x  0.996

 x  0.996

FY 2016 Payment Rate

$183.17

$143.94

 

 

FY 2015 Payment Rate

FY 2016 Update of 1.6%

Proposed FY 2016 Payment Rate

Continuous Home Care – Day

$929.91

 x  0.996

$926.19

Continuous Home Care – Hour

$  38.74

 x  0.996

$  38.60

Inpatient Respite Care

$164.81

 x  0.996

$164.15

General Inpatient Care

$708.77

 x 0.996

$705.93

Money “left on the table” is illustrated as follows:

FY 2016 Payment Rate Routine Home Care

Days 1 - 60

Days 60+

With Quality Reporting

$187.54

$145.14

Without Quality Reporting

$183.17

$143.94

Variance

$4.37

$1.20

 

 

FY 2016 Payment Rate With Quality Reporting

FY 2016 Payment Rate Without Quality Reporting

Variance

Continuous Home Care - Day

$944.79

$926.19

$18.60

Continuous Home Care – Hour

$  39.37

$  38.60

$0.77

Inpatient Respite Care

$167.45

$164.15

$3.30

General Inpatient Care

$720.11

$705.93

$14.18

Since July 2014, hospices have been required to collect Hospice Item Set (HIS) Admission and Discharge data and submit this data to CMS within 30 days. With the 2016 Final Rule, CMS is implementing 70% compliance threshold for timely submission of HIS admissions and discharge data for all HIS assessments completed as of January 1, 2016. Hospices failing to meet these compliance thresholds will be subject to a 2% reduction in payment rates. In a second article next week, Simione will summarize the impact on the final rule regarding non-hospice spending, diagnosis coding on claims, hospice quality reporting and program integrity.

Changes to the Aggregate Cap

Equally important are the changes to the aggregate cap on hospice services.  The first change is related to methodology, and the second change involves realignment of time periods.  For methodology, the historical calculation has been $6,500, adjusted annually since 1983 by the Consumer Price Index for all urban consumers (CPI-U).  The Improving the Medicare Post-Acute Care Transformation (IMPACT) Act of 2014 requires the hospice cap be updated by the hospice payment update percent (1.6%) rather than the change in the CPI-U. Beginning November 1, 2015, the cap amount will be calculated under this methodology until cap years ending after September 30, 2025, at which time the 2016 provision will “sunset”.  The cap calculations for each time period are as follows:

  • November 1, 2014 through October 31, 2015 will use March 2015 CPI-U:
    • March 2015 CPI-U = 444.020 divided by
    • 1984 CPI-U = 105.4
    • 4.212713
    • $6,500 x 4.212713 = $27,382.63
  • November 1, 2015 through October 31, 2016 will use hospice payment update percent:
    • $27,382.63 x 1.016 = $27,820.75

In addition to changing the methodology for calculating the annual aggregate cap amount, the 2016 rule also changes the current cap year from November through October to align it with the federal fiscal year, which is October through September.  CMS is also aligning the timeframes in which beneficiaries and payments and days of hospice care are counted as follows:

Hospice Aggregate Cap Timeframes for Counting Beneficiaries and Payments for the Alignment of the Cap Accounting Year with the Federal Fiscal Year (Source: CMS)

Cap Year

Beneficiaries

Payments

 

Streamlined method

Patient-by-patient proportional method

Streamlined method

Patient-by-patient proportional method

2016…………………………..

2017(transition year).......

2018…………………………..

9/28/15-9/27/16

9/28/16-9/30/17

10/1/17-9/30/18

11/1/15-10/31/16

11/1/16-9/30/17

10/1/17-9/30/18

11/1/15-10/31/16

11/1/16-9/30/17

10/1/17-9/30/18

11/1/15-10/31/16

11/1/16-9/30/17

10/1/17-9/30/18

Considerations for Hospice Providers

Many state and national associations, providers and consultants have concerns over the ability of CMS and the MACs to be ready to implement all these changes on time.  We have seen the problems with implementing the five-day deadline on NOE and NOTRs, and are not sure providers and hospice software vendors will have enough time from now until the January 1, 2016 implementation date to prepare adequately. While CMS has assured the industry that their systems will be ready, it’s questionable how accurate or timely the Common Working File will be. While CMS has claimed responsibility for the count of days and tracking, we recommend that providers do their own tracking, and communicate with their IT vendors to determine what changes they may or may not be implementing to accommodate counting days, accounting for multiple rates and qualifying for SIA payments.

State Medicaid Readiness

While the two-tiered system applies to both Medicare & Medicaid, the status of readiness varies from state to state for implementing changes into their Medicaid systems.  CMS released a memo of instructions to state Medicaid agencies on September 1, but many questions have arisen as to whether they can adapt their systems on time.  Some of the current deficiencies in state Medicaid systems include lack of discipline visit and time detail on claims, inability to track and count days, inability to pay two different rates for same level of care, and an inability to pay differently for not complying with quality reporting requirements.  Providers should contact their respective state agencies for clarification on readiness and financial planning.

Billing

As far as billing Medicare goes, the hospice provider does not need to do anything different in actual billing and claim submission to account for whether the services fall under days 1-60 or days 61 and beyond. Hospices will need to determine if their software will accommodate the two different routine home care rates or if they will be booking rate adjustments. If your system does recognize the two rates, determine how you will handle adjustments when the actual count of days is different than you anticipate.  If you are expecting 60 days of the higher rate and then find out via the remit advise (RA) that you actually got 50 days at the higher rate and 10 days at a lower rate, will your system correct without a manual intervention?  Billing staff will need to review every RA very carefully to reconcile any differences.  Also, will your billing software automatically calculate any SIAs based on claim (visit and time) data or will your billing staff be making adjustments for that when payment are received as well?

Budgeting: Counting Days & SIA

As for budgeting, you could do several things: you could assume a RHC rate of the transition rate of $161.89 for all days, which may understate your revenue.  It would be better to use historical data on actual length of stay in the 1-60 and 61+ day categories.  Unless you have the technical ability to go back and evaluate the criteria of visits in the last 7 days of life by discipline and by length of visit, you are going to have a difficult time predicting any SIA payments.    Most providers will be reduced to accepting any type of SIA as “gravy” rather than budgeting specifically for it.

For example, we can look at the following assumptions: actual 2015 data, which shows us that of 21,600 RHC days, approximately 58% were between 1 & 60 days and 15,500 RHC days or 42 % were over 61 days.  Additionally, the provider was able to determine that there were 2,000 hours of RN and MSW direct visit time within the last seven days of life.

Actual 2015

Number of Hospice Days by Level of Care

Days

Daily Rate

Revenue

Days  1-60

Daily Rate

Revenue

Days 61+

Daily Rate

Revenue

Total

Routine Home Care

37,100

$183.72

$6,815,891

21,600

 

 

15,500

 

 

$6,815,891

Continuous Home Care (Hours)

905.50

44.67

40,452

 

 

 

 

 

 

40,452

Inpatient Respite Care

120

183.97

22,077

 

 

 

 

 

 

22,077

General Inpatient Care

50

808.81

40,441

 

 

 

 

 

 

40,441

Total Days

38,176

 

$6,918,861

21,600

 

 

15,500

 

 

$6,918,861

 

 

 

 

 

 

 

 

 

 

 

Service Intensity Add-on

RHC Hours

Rate

Revenue

 

 

 

 

 

 

Total

 

2,000

 

 

 

 

 

 

   Total Revenue   $6,918,861

  

PROJECTED 2016

Number of Hospice Days by Level of Care

Days

Daily Rate

Revenue

Days  1-60

Daily Rate

Revenue

Days 61+

Daily Rate

Revenue

Total

Routine Home Care**

9,275

$187.86

$1,742,364

16,200

$216.81

$3,512,286

11,625

$170.38

$1,980,673

$7,235,322

Continuous Home Care (Hours)

906

45.68

41,364

 

 

 

 

 

 

41,364

Inpatient Respite Care

120

187.90

22,548

 

 

 

 

 

 

22,548

General Inpatient Care

50

808.05

40,402

 

 

 

 

 

 

40,402

Total Days

10,351

 

$1,846,678

16,200

 

$3,512,286

11,625

 

 $1,980,673

$7,339,636

 

 

 

 

 

 

 

 

 

 

 

Service Intensity Add-on***

RHC Hours

Rate

Revenue

 

 

 

 

 

 

 

 

1,500

45.68

68,520

 

 

 

 

Total

$68,520

 

 

 

 

 

 

 

 

Total Revenue           $7,408,156

7% CHANGE

 

In budgeting, you could safely assume about 25% (or less if you are budgeting for aggressive growth) of total days will be applicable to the time period 10/1/15 to 12/31/15, and then use 75% or the remaining percent of the days applicable to each time period (or day span, meaning 1-60 or 61+) to come up with your total by span of days.  In the following table, we have projected that 9,275 days will be paid at the transition rate between 10/01/15 and 12/31/2015, then 16,200 days will be paid at the higher RHC rate, and the remaining 11,625 days will fall under the lower RHC rate applicable after day 61.  We also projected that 75% (after 01/01/2016) of the RHC days will have visits qualifying for SIA payments, for 1,500 hours.

Part two of the hospice final rule update will focus on non-hospice spending, diagnosis coding, hospice quality reporting program requirements and hospice program integrity. 

Contact Simione at 844.215.8822 to find out how we can assist you with your hospice needs.