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National and regional hospice chains seem unfazed by proposed Medicare payment rebasing for fiscal year 2020—confident that the updates will not adversely affect their businesses—though smaller organizations may take a more significant hit.
The U.S. Centers for Medicare & Medicaid Services (CMS) in late April released its annual proposed rule that outlines the agency’s regulatory priorities for hospice in the coming year, including payment rates. The rule called for a 2.7% cut in routine home care payments and a corresponding 2.7% increase in payments for continuous home care, general inpatient care, and inpatient respite care.
According to the Affordable Care Act, Medicare payment increases must be budget neutral, requiring CMS to compensate for any increases with comparable cuts in other areas. If the rule becomes final, the per diem routine home care rate would fall to $195.65 per patient in FY 2020, down from the 2019 rate of $196.21.
Though this sounds like small change, the financial impact can add up to considerable amounts when multiplied by the number of patients and number of days care is provided.
“I expect it to have a negative impact on those hospice programs with a heavy reliance on routine home care, regardless of size,” Jon Wood, chief financial officer for Las Vegas-based Nathan Adelson Hospice told Hospice News. “Those programs with a large census could be in a position to absorb it depending on their cost structure, but I would expect it to still have a negative impact. Smaller programs with most, or all of their census at [the routine home care level] would be impacted the greatest.”
Routine home care comprises 97.6% of all hospice care, with the three levels of care that received increases representing a much smaller volume of patients.
Despite the drop in routine home care payments, executives at large hospice companies voiced few concerns about the proposed payment levels.
“While the majority of our hospice revenues fall under the [routine home care] category, the impact to LHC Group is slightly positive according to the CMS impact file,” said Don Stelly, president and chief operating officer for LHC Group (NASDAQ: LHCG) in a first quarter earnings conference call. “As a reminder, hospice currently makes up 10.3% of our total revenue.”
Hospice and home health provider Amedisys Inc. (NASDAQ: AMED) estimated that the cuts, if made final, could have a 1% impact on 2020 revenue. In line with the industry, most of the hospice care Amedisys provides is at the routine home care level. Nevertheless, CEO Paul Kusserow said the move would be positive for the industry at large.
“A positive update for hospice payments is a positive move for our industry as we see expanded use of the Medicare Hospice Benefit,” Kusserow said in the company’s Q1 earnings call. “All of this is positive for Medicare beneficiaries and Amedisys.”
The proposed rule is not final, though it gives strong indicators of the direction CMS intends to go. The agency typically publishes the final rule governing payments in August each year, with an effective date of Oct. 1.
A factor contributing to smaller organizations’ concerns is rising costs associated with routine home care that could be exacerbated by the reduced payments.
“I would anticipate costs to go up, either for salaries—due to annual merit increases, competition with other local health care organizations for the same resources, and so forth, benefits, and other general operating costs—as well as hospice providers who face increased regulation and governmental oversight, which likely result in additional legal and consulting costs,” Wood told Hospice News.
CMS previously rebased hospice payments in 2016, resulting in payment levels for continuous home care, general inpatient care, and inpatient respite care to fall below providers’ costs for those care levels.
Currently, payments for those three levels of care amount to less than the cost or providing them. The cost of providing 24 hours of general inpatient care is $1,363.00, for example, but the current reimbursement rate is $997.00.
Some in the industry see the proposed 2020 rebasing as a course correction.
“It appears to us that CMS kind of recognized the distance that they inadvertently created on high acuity care, and they’re correcting for that,” said David Williams, executive vice president and chief financial officer of Chemed Corp. (NYSE: CHEM), parent company of VITAS Healthcare in Chemed’s first quarter earnings call.
On this point, many smaller organizations agree, several have praised the increases for high-acuity care, but they remain concerned about proposed cuts.
“We applaud CMS for recognizing the importance of paying appropriately for all four levels of care,” Mollie Gurian, chief strategy officer for the National Partnership for Hospice Innovation, told Hospice News. “We do have concerns that CMS’ proposed payment policy is not aligned with their current program integrity efforts, which could undermine the intent of the payment policy as well as about the disproportionate impact of any cuts on community-based, not-for-profit programs.”Read More