Hospice Medicare benefit in need of changes

MedPAC changes offer new hope

In 1977, Hospital Home Health Care in Torrance, CA, began offering hospice services under the limitations of the home health Medicare benefit. That meant the home health agency provided home visits to dying patients who only had skilled nursing needs and were homebound. Clearly, this limited the number of terminally ill Medicare patients they could serve.

On the other hand, volunteer hospices did not rely on Medicare for reimbursement and were not subject to its regulations. Still, those same hospices, regarded as a novelty in the early days, struggled to raise enough money to care for more than a few patients at a time. Hospitals also tried opening inpatient hospice units. But for all their efforts, hospital hospice staff knew that many dying patients were going home to die rather than spending their last days in institutional surroundings.

Whether its leaders knew it or not, the hospice industry — barely a decade old in the United States at the time — was at a crossroads. Hospices were mostly either tiny volunteer organizations or branches of home health or hospital programs struggling for credibility. Change was set in motion in 1980 when 26 hospice programs took part in a Medicare hospice demonstration project that wound up largely defining how hospices are reimbursed today.

September marks the 20th anniversary of the Hospice Medicare Benefit, and for better or for worse it remains the most important development to take place in the industry since hospice was brought to the United States in the early 1970s.

"Physicians began to take notice," says Claire Tehan, MA, administrator for TrinityCare Hospice in Torrance, CA. Tehan was hospice director of Hospital Home Health Care during its participation in the demonstration project in the early 1980s. "We gained a lot of credibility with physicians. It was such a boost for us."

"It allowed us to take a part of the population — those who were dying at home — that we couldn’t reach, provide care, and get reimbursed for it," says Nancy Warner, MHA, RN, chief executive officer of Orleans-Essex Hospice in Newport, VT, which was one of four Vermont hospices that participated in the first hospice demonstration project.

"Our excitement was for the patient," says Judy Naghorn, MSW, a social worker with Unity Hospice in Green Bay, WI. Naghorn started with Unity as a volunteer in the 1980s, when it was Bellin Hospice, an inpatient program under Bellin Hospital.

"We sensed that a lot of people could be helped at home," says John Machek, MDiv, chaplain with Bellin Hospital. "But it was difficult to reach people at home because the homebound requirement was interpreted so strictly."

The good, the bad, the ugly

After two decades of being beholden to Medicare’s regulations, those who took part in the original demonstration that started it all say the Medicare hospice benefit was the best thing to happen to hospices.

"Absolutely. The hospice benefit has been a good thing," says Warner. "I feel that the conditions of participation [COPs] are not burdensome. The COPs give plenty of leeway for a hospice to come up with a care plan that is best for the patient."

Certainly, hospices have much to be grateful for. They are less strictly regulated than some health care providers, such as nursing homes, for example. Most of the elements of hospice care that the original participants value highly — an interdisciplinary approach, spiritual care, and the use of volunteers — remain part today’s benefit.

There have been changes, though, some of which threaten the survival of many hospices. During the demonstration project, no certification of terminal illness was required. It wasn’t until the Hospice Medicare Benefit was enacted in 1982 that the terminal illness requirement was included. "I remember people staying a lot longer back then — months, it seemed — rather than the few days we see now," says Tehan.

At the time, the certification seemed appropriate, but as therapies have improved, more patients are pinning their hopes on curative efforts. The result has been a steadily declining length of service since the benefit was enacted.

In addition to declining length of service, reimbursement for hospice care has failed to keep up with the changing times, including new pain relief therapies and the costs of drugs and supplies.

The National Hospice and Palliative Care Organization (NHPCO) in Alexandria, VA, commissioned actuarial firm Milliman & Robertson to study hospice reimbursement. The 2000 study compared cost data from when the Medicare Hospice benefit was first established to cost figures from 1998-1999. The study pointed out a number of areas in which Medicare has failed to keep up with hospice costs:

  • Patients are enrolling in hospices later. With patients electing the hospice benefit closer to the time of death, there is less revenue opportunity for hospices. According to the study, the average length of service has dropped to 40 days, while the original Medicare hospice benefit set the original rate based on a 70-day length of service.
  • New technology has increased costs. Advances in technology, breakthrough therapies, and prescription drugs have increased the cost of hospice care far beyond Medicare’s annual market basket update, which is used to determine annual reimbursement increases. While the hospice per diem rate has doubled since the early 1980s, prescription drug costs, for example, have risen 1,500%, from about $1 of the per diem rate in 1982 to $16 of the per diem rate in 1999.
  • The use of outpatient hospital therapies has increased. Palliative care chemotherapy and radiation treatment now costs more than $17 per day. Medicare originally allotted about $3 of the per diem reimbursement to cover this component.

In 1982, when hospice care was added to the Medicare benefit, the routine home care rate was set at $41.46 per day. At the time, the reimbursement rate did not include an annual inflationary update. It wasn’t until subsequent congressional action that a specific rate increase was included when legislation tied it to the hospital market basket.

While those who took part in shaping the Medicare Hospice Benefit agree that it has largely been a boon for the hospice industry, there is equal consensus regarding a need for change.

"[The Hospice Medicare Benefit] worked for a while," says Tehan. "But what has changed is the courses of therapy; they are a lot more expensive. How we are reimbursed needs to be revisited."

Chief among the issues that must be reviewed are the eligibility requirements for hospice, specifically the need for a terminal illness certification by a physician, and more timely access to hospice care.

Last June MedPAC, Congress’ advisory panel on health care delivery and financing, asked the U.S. Department of Health and Human Services (HHS) to evaluate the adequacy of Medicare’s payments to hospices for providing end-of-life care to patients and families. In its hospice report, MedPAC made two specific recommendations to HHS, which administers the Medicare program:

1. Evaluate hospice payment rates to ensure they are consistent with the costs of providing appropriate care.

2. Research differences in the care and resource needs of hospice patients and determine whether a case-mix adjusted payment system for hospice is feasible, and study ways to establish a high-cost outlier policy.

NHPCO advocates palliative care consultation

The NHPCO recently stepped up its efforts to improve the benefit by lobbying lawmakers to include palliative care consultations as part of the hospice benefit. The concept calls for the development of a series of palliative care consultations that could take place as soon as a patient is diagnosed with a life-threatening illness. At this early stage in the progress of the disease, the patient would probably not meet the hospice eligibility requirement that he or she must have a prognosis of six months or less to live. Under the palliative care consultation concept, a patient would not have to waive curative care in order to take advantage of this consultation.

One thing that will not change, despite the grumbling of hospice workers, is the need for documentation. Pioneers of the benefit say it’s a small price to pay for the credibility the benefit has brought the industry.

"When you take money from the government, you’re going to be regulated," says Tehan.