On August 6, 2015, CMS is publishing its final rule to update Medicare hospice payment rates and the wage index for fiscal year (FY) 2016.  CMS estimates that the final rule will increase overall payments to hospices by about 1.1%, or $160 million, in FY 2016.  This increase reflects a 1.6% hospice payment update percentage, which in turn is reduced by the use of updated wage index data and the last year of the phase-out of the wage index budget neutrality adjustment factor (-0.7% decrease), and increased as a result of a transition to new Office of Management and Budget Core Based Statistical Area (CBSA) delineations for the FY 2016 hospice wage index (0.2% increase).

In the final rule, CMS adopts its proposal to create two different payment rates for routine home care (RHC), effective January 1, 2016.  Under this policy, CMS will apply a higher base payment rate for the first 60 days of hospice care and a reduced base payment rate for subsequent days. CMS also adopted a service intensity add-on (SIA) payment for services provided in the last 7 days of a beneficiary’s life, if the following criteria are met:  (1) the day must be billed as a RHC level of care day; (2) the day must occur during the last 7 days of life (and the beneficiary is discharged dead); and (3) direct patient care must be provided by a registered nurse or a social worker.  In a change from the proposed rule, CMS will consider episodes provided in a skilled nursing facility or nursing facility to be eligible for the SIA payment.  The SIA payment will equal the continuous home care (CHC) hourly rate multiplied by the hours of nursing or social work provided (up to 4 hours total per day) that occurred on the day of service.  The SIA payment provision also is effective January 1, 2016. The RHC rates and the SIA payment are being implemented on a budget-neutral basis and will not result in an overall payment impact for the Medicare program or hospices.

CMS intends for the RHC and SIA payment policies to more accurately align Medicare payments the typically greater visit intensity and costs associated with providing care in the first 60 days of hospice care and the last 7 days of hospice care, respectively. Commenters on the proposed rule expressed concerns, however, that hospices will attempt various methods for “gaming” the new reimbursement methodology, e.g., accepting patients in order to receive the initial, higher RHC rates and then discharging them. CMS states in the preamble that it will “monitor the impact of this proposal, including trends in discharges and revocations, and propose future refinements if necessary,” and it also reminds hospices that there are limited circumstances during which they permissibly can discharge patients. In response to commenters’ concerns with hospices “churning” patients by discharging and then readmitting them, the final rule – as with the proposed rule – states that the 60-day count of days reimbursed at the higher initial rate will follow the patient. While gaming is still possible if hospices seek to transfer patients to second hospices at the close of the 60 day period (i.e., the first hospice keeps the patient long enough to receive the higher rate), CMS stated “Allowing for a higher payment for the first seven days of a new hospice election without a gap in hospice care of greater than 60 days goes against our intent to mitigate the incentive to discharge and readmit patients at or around day 60 for the purposes of obtaining a higher payment. As we stated above, we will monitor the impact of the new RHC rates policy based on claims data, including trends in discharges and revocations….”

In addition to these payment rate changes, the final rule, among other things:  implements changes to the aggregate cap calculation as mandated by the Improving Medicare Post-Acute Care Transformation Act of 2014 (IMPACT Act); aligns the cap accounting year for both the inpatient cap and the hospice aggregate cap with the federal fiscal year starting in FY 2017; makes changes to the hospice quality reporting program; and clarifies that hospices must report on the hospice claim all diagnoses identified in the initial and comprehensive assessments on hospice claims, whether related or unrelated to the terminal prognosis of the individual.