On January 14, 2015, the U.S. DHHS Inspector General’s Office (the “OIG”) released a report (OEI-02-14-00070) entitled “Medicare Hospices Have Financial Incentives to Provide Care in Assisted Living Facilities.”

The report is significant as a road map to the issues the OIG has been concerned with relating to Medicare hospice services provided to beneficiaries in assisted living and other institutional settings.  The OIG continues to be concerned with long length of stay patients, patients with diagnoses of ill-defined conditions, such as failure to thrive or unspecified debility, and its perception of the inappropriate incentives that may exist with payments for services relating to these types of patients.

The OIG advises that the conclusions of the report raise concern about the financial incentives that might be created by the current Medicare hospice payment system and the potential for hospices to target beneficiaries in ALFs because they may offer the hospices the greatest financial gain.

The report discusses several significant findings, these findings include:

  • Medicare payments for hospice care in ALFs more than doubled in 5 years, totaling $2.1 billion in 2012. The OIG looked at data from 2007 through 2012. According to the OIG, Medicare paid $2.1 billion for hospice care provided in ALFs in 2012, an increase of 119 percent since 2007. During that time, Medicare spending for hospice care provided in settings other than ALFs increased 38 percent, from $9.3 billion to $12.9 billion.
  • Hospices provided care much longer and received much higher Medicare payments for beneficiaries in ALFs than for beneficiaries in other settings. According to the OIG, hospices provided care to beneficiaries in ALFs much longer than to beneficiaries in any other setting. Beneficiaries in ALFs received hospice care for a median of 98 days, which is almost twice as long as that received by beneficiaries in nursing facilities and more than twice as long as that received by beneficiaries at hom Thirty-six percent of beneficiaries in ALFs spent more than 180 days in hospice care, compared to 28 percent of beneficiaries in nursing facilities and 22 percent of beneficiaries at home. Eighteen percent of beneficiaries in ALFs received hospice care for more than a year. In comparison, 14 percent of beneficiaries in nursing facilities and 10 percent of beneficiaries at home received hospice care for more than a year. Five percent of beneficiaries in ALFs received hospice care for 2 years or more. The median amount Medicare paid for hospice care provided from 2007 through 2012 to beneficiaries in ALFs was $16,195, more than twice as much as the median amounts for beneficiaries in nursing facilities and beneficiaries at home.
  • Hospice beneficiaries in ALFs often had diagnoses that usually require less complex care. The OIG found that 60 percent of beneficiaries who received care primarily in ALFs had diagnoses of ill-defined conditions, mental disorders, or Alzheimer’s disease as their terminal illness. Mental disorders include dementia.  Ill- defined conditions include, among other things, adult failure to thrive, senility without psychosis, and unspecified debility. Beneficiaries with these types of diagnoses typically receive less complex hospice care than beneficiaries with other diagnoses. Beneficiaries in ALFs were six times more likely to have these diagnoses than a diagnosis of cancer.  Beneficiaries in ALFs were more than twice as likely as beneficiaries in the home to have one of these diagnoses.
  • Hospices typically provided fewer than 5 hours of visits and were paid about $1,100 per week for each beneficiary receiving routine home care in ALFs. The OIG found that routine home care accounted for nearly all the care hospices provided in ALFs in 2012. Hospices billed for routine home care for 99 percent of the days they provided care in ALFs during the year.  Hospices provided an average of 4.8 hours of visits per week to these beneficiaries. These visits ranged from 0 to 66 hours per week. Most hospice visits in ALFs were from aides. On average, of the 4.8 hours of visits per week to beneficiaries, 2.8 hours were for hospice aide services, 1.7 hours were for nursing services, and 0.3 hours were for medical social services.  80 percent of beneficiaries were not provided hospice physician services while they were in ALFs other than supervisory and/or care planning services.

To conduct its study of hospice services in Assisted Living Facilities, the OIG took a look at claims data from 2007 to 2012, cost reports and provider enrollment data.  It defined long length of stay patients as those patients who received care between 180 and 365 days and more than 365 days.

Following its conclusions in the report, the OIG recommends to CMS that it (1) reform the hospice payment system to reduce incentives for hospices to target beneficiaries with certain diagnoses and those likely to have long stays, (2) target certain hospices for review, (3) develop and adopt claims-based measures of quality, (4) make hospice data publicly available for beneficiaries, and (5) provide additional information to hospices to educate them about how they compare to their peers. CMS concurred with all five recommendations.

Medicare hospice providers have experienced an increase in scrutiny relating to hospice patient who reside in institutions. This report will provide further justification for that increase. Providers can expect additional and significant scrutiny of long length of stay patients and whether or not beneficiaries with diagnoses of ill-defined conditions are ultimately eligible for the hospice benefit.