The Medicare hospice benefit, providing coverage and payment for care that recognizes a change in focus from curative to palliative, continues to attract considerable interest among health care providers, both for-profits and nonprofits. Established by the U.S. Congress in 1983, the benefit has seen impressive and continuing growth in both participating providers and in Medicare beneficiaries utilizing the coverage. Based upon information from the National Hospice and Palliative Care Organization (www.nhpco.org), the patient population for hospice continues to expand. Effective January 1, 2005, coverage of a new consultation benefit to evaluate an individual’s need for hospice was added by the Medicare Modernization Act of 2003 (MMA). In addition, the MMA requires hospital discharge planners to evaluate a patient’s need for hospice care and post-hospital extended care services. State Medicaid plans have been permitted to add a hospice benefit to their Medicaid program, and many states do.
An individual, who is a Medicare beneficiary, is eligible for the benefit if the individual has been diagnosed with a terminal illness with a life expectancy of six months or less and elects to receive hospice, waiving right to coverage of services related to the treatment of the individual’s condition with respect to which a diagnosis of terminal illness has been made. (The life expectancy of six months or less relates only to diagnosis for purposes of eligibility for the benefit and not to the period of coverage under the hospice benefit.) Medicare will continue to pay for services furnished by the patient’s non-hospice attending physician and for the treatment of conditions unrelated to the terminal illness. Payment for hospice is made on a per diem under four categories of services, subject to an overall dollar cap, which is currently $18,661.29 for the cap year ending October 31, 2003, as provided in CMS Transmittal A-03-057 (July 3, 2003). The cap will be updated for 2004 later this year, after certain information is available to CMS. This CMS Transmittal also contains the per diem rates for the four categories of hospice care, updated for services on or after October 1, 2003, through September 30, 2004. The four categories of hospice care are: routine home care day, when an individual receives care in his home and is not receiving continuous home care; continuous home care day, when an individual has elected to receive hospice care not in an inpatient facility, receiving hospice care (predominantly nursing care) at home; inpatient respite care day, when an individual who has elected hospice care receives care in an approved facility on a short-term basis for respite of family members; and general inpatient care day, when an individual who has elected hospice care receives general inpatient care in an inpatient facility for pain control or acute or chronic symptom management that cannot be managed in other settings. Payment is made on a claims basis, subject to the overall cap on hospice payment. Freestanding hospice facilities file cost reports for informational purposes only, and there is no "settlement" by Medicare intermediaries of a hospice’s cost report. Balanced against this favorable picture of hospice care and level of Medicare payment have been concerns about patient eligibility for hospice care, incentives to actual or potential referral sources (e.g., physicians, nursing homes, hospitals), inadequate hospice services and premature discharges of individuals from hospice care, which has been interpreted in some cases as meaning that the individual was not qualified for hospice care in the first place. (See, for example, Barron’s, "Troubling Odyssey", April 12, 2004, page 20; OIG Compliance Program Guidance for Hospices, Federal Register/Vol. 64, No. 192 (October 5, 1999), page 54031.)
In light of congressional support of the hospice benefit, most recently evidenced in the MMA, and continued consumer interest in the benefit, McDermott anticipates continued growth of hospice programs under both the for-profit and nonprofit model. The new coverage of a hospice consultation, provided in the MMA, whereby a physician employed by (or serving as medical director of) a hospice will evaluate a terminally ill Medicare beneficiary’s need for pain and symptom management, need for hospice care and counseling regarding hospice and other care options, should mean increased awareness and corresponding utilization of the benefit. Under MMA, payment for the physician consultation will be equivalent to payment for an office or outpatient visit for evaluation and management associated with presenting problems of moderate severity and requiring medical decision making of low complexity. Evaluation of the need for hospice in hospital discharge planning, as required by MMA, should also increase awareness of the hospice benefit.
More recently, the investment community has approached hospice services as an opportunity, evidenced by the recent IPO of Odyssey, a private U.S. hospice provider, and the expansion, through acquisition, of two other for-profit, publicly traded hospice companies, Vitas and VistaCare. These companies have expanded through acquisitions of existing for-profit and nonprofit hospices. The investment community views hospice as an attractive niche for several reasons, including the fragmented nature of the market, with inherent pricing inefficiencies; almost three-quarters of the hospices are nonprofits, without the full benefits of dedicated business infrastructure for purchasing, intake of individuals into the benefit, human resource management and financial controls; and the demographic of an aging "baby boomer" population. Currently, SG Cowan estimates that only 25 percent of eligible Medicare beneficiaries used hospice where it was available. Also, and perhaps most importantly, hospice continues to be encouraged by the U.S. government, evidenced by the recent MMA provisions, and also represents significant savings to the Medicare program, as opposed to the cost of intensive care services in an inpatient setting, even if only a small portion of patients receive services at the end-of-life in a hospice program. While hospice has gained ground, especially in rural and non-urban markets, as hospice becomes more accessible and accepted in the United States the utilization of services covered under the hospice benefit should continue to grow.