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Hospice Proposed Rule Part 3: The Two-Tiered Routine Home Care Rate, Service Intensity Add-On & Operational Concerns


Two of the most significant changes outlined in the CMS FY 2016 Wage Index Proposed Rule involve hospice payment rates.  These changes are the two-tiered Routine Home Care (RHC) rate and the Service Intensity Add-On (SIA).  This appears to be the first phase in CMS’s incremental plan to address hospice payment reform as mandated by the Affordable Care Act.  It is important that hospice providers review this information and identify the impact of these proposed changes on their agency’s reimbursement through modeling against current agency operations.  Additionally, providers will need to prepare to implement changes to medical records, patient tracking and billing systems.

The Two-Tiered Routine Home Care Payment Model

In the FY 2016 Hospice Wage Index Proposed Rule, CMS has proposed that hospices will be reimbursed at a two-tiered rate for RHC level of care, depending on the length of stay for a hospice patient.  Under the proposed rule, hospices would receive a higher base payment rate for the first 60 days of care and a lower payment rate for days 61 and beyond of hospice care.  These two proposed rates for RHC are based on an extensive body of research concerning resource consumption and visit intensity during a hospice episode, and are likely the first step in addressing CMS’s mandate to implement hospice payment reform.  

MedPAC has been seeking payment reform since 2009; their studies and findings indicate that long stays in hospice are more profitable than short stays because visits and services are more intense at the beginning and the end of a hospice stay – yet the reimbursement is the same for each day whether services are provided or not on any given day. MedPAC believes this has led to hospice providers “selecting” patient populations that are more likely to have longer stays.  However MedPAC also recognizes that many hospice providers have patients with very short stays and may be reimbursed below their cost for high intensity of services under the flat per diem system.  CMS states the proposal for a two-tiered payment model attempts to better align RHC payment rates with resources used, and is not intended to place an arbitrary limit on hospice services.  The proposed base rates for RHC include the following:

  • 1-60 Days: $188.20
  • 61+ Days: $147.34

To implement the two-tiered RHC rate payment model, CMS has proposed to implement a “count of days”, which will follow the patient to mitigate potential misuse of the payment model resulting from high rates of live discharges and subsequent readmissions to the hospice program.  CMS proposes that the hospice day count would follow the patient for an episode of care.  Under the proposed rule, hospices would be paid at the higher rate for the first 60 days of hospice care, then the lower rate until discharge.  If a hospice patient is discharged after the 60th day and is then re-admitted within 60 days of discharge, the lower rate would continue to apply.  If a hospice patient has a gap in service between discharge and a subsequent readmission to hospice of more than 60 days, the episode would be reset and the hospice would again receive the higher rate.

This two-tiered model is viewed by many hospice providers as a positive step toward improving reimbursement, especially for hospices with shorter lengths of stay.  However, concerns remain from providers regarding adequacy of reimbursement for long length of stay patients who truly maintain eligibility for hospice services.  CMS has concerns that hospice providers may transfer or discharge and readmit patients in order to circumvent the lower payment rate after day 60, if there is no provision in the rule for a gap in service.  CMS will continue to monitor trends in discharges and revocations for future refinements to address potential gaming of the system and ensure through program integrity efforts that hospice patients are not inappropriately discharged at 60 days of hospice care.

Service Intensity Add-On

Another significant area for consideration is the proposed Service Intensity Add-On Payment for registered nurse and social work visits provided to a patient within the last seven days of life.  This proposal is designed to address an observed misalignment between varying levels of resource use and the flat per diem-associated Medicare payments.  The SIA would also be an incentive to improving patient care through the promotion of skilled visits at the end of life.  Under the CMS 2016 Hospice Wage Index Proposed Rule, hospices will receive an SIA payment amount equal to the Continuous Home Care (CHC) hourly rate in addition to the RHC daily rate.  This additional payment amount would apply for visits up to four hours total each day during the last seven days of life, providing the following criteria are met:

  • The day is billed as an RHC level of care day;
  • The day occurs during the last seven days of life and the beneficiary is discharged as deceased;
  • Direct patient care is provided by a registered nurse (RN) or a social worker.

CMS has proposed the creation of separate G-codes for skilled nursing visits to differentiate between RN and licensed practical nurse (LPN) visits to be able to make this adjustment.  Of note, the proposed SIA rate is not applicable to other services provided to the hospice patient, including LPNs, social work telephone calls, and visits by any other discipline, and is not applicable for patients receiving RHC services in a skilled nursing facility/nursing facility (SNF/NF).

There is concern regarding the exclusion of the SIA for patients who reside in a SNF/NF; hospice patients would have the same need for increased support and symptom management in the last days of life regardless of where they reside.  Additionally, excluding all other disciplines such as LPNs, hospice aides or spiritual counselors seems to conflict with the concept that the SIA is intended to mitigate the higher costs incurred by providers for hospice patients who require more intensive services at the end of life.  

Hospices should closely evaluate their agency utilization of all services within the last seven days of a patient’s life, not only to model the potential reimbursement impact, but also to ensure that hospice patients receive visits and services that are consistent with their advancing needs, and ensure appropriate care is provided in their final days.

Operational Concerns

From an operational perspective, the implementation of the two-tiered payment model will have an impact on operations, especially with discharge/admission procedures, verification of days, and determining the impact on reimbursement for long length of stay patients.  Providers should look at their current census and model the impact of these proposed changes to determine the effect on agency reimbursement.  To do this, providers should select a time span of at least six months to calculate the proposed reimbursement for their patient population and compare it to their current reimbursement.

Many hospice providers and industry representatives are concerned with the technical implementation issues associated with CMS and Medicare Administrative Contractor processing of claims, as well as the timeliness and accuracy of the Common Working File.  This concern is based on the experience providers have had regarding the implementation of the Notice of Election requirements and the ongoing transition from Individuals Authorized Access to CMS Computer Services (IACS) to Enterprise Identity Management (EIDM), which provides access to the Provider Statistical and Reimbursement system (PS & R).  The requirement for sequential billing will also potentially lead to frequent billing and payment adjustments, as a patient’s last seven days of life could overlap two billing periods.  Additionally, many unanswered questions remain regarding how hospice days will be counted for beneficiaries who are in an active hospice benefit election period during/on the effective date of the proposed new rule of October 1, 2015.