On July 29, 2011, the Centers for Medicare & Medicaid Services (CMS) issued the fiscal year 2012 final payment rule for hospices, which takes effect on October 1, 2011. The final rule implements four noteworthy changes to CMS reimbursement for hospice services: (1) the annual update for hospice payments; (2) adoption of a new method to determine the number of Medicare beneficiaries used in the aggregate cap calculation; (3) revisions to the face-to-face encounter requirement; and (4) implementation of a quality reporting system, as required by the Patient Protection and Affordable Care Act (PPACA).  

Hospice Payment Update

Effective for fiscal year 2012, CMS will increase reimbursement for hospice services by 2.5%. This increase is the net result of (i) a 3.0% increase in the hospital market basket (which is used as a proxy for an indicator of hospice industry-related price increases) and (ii) a 0.5% decrease in payments to hospices due to updated hospital wage index data (which is used as a proxy for hospice wage index data) and CMS’ continued phase-out of a wage index budget neutrality adjustment factor (which is scheduled to be completely phased out in fiscal year 2016).  

Aggregate Cap Calculation Methodology

CMS imposes a limit on the aggregate Medicare payments that a hospice provider may receive each fiscal year. CMS calculates each hospice provider’s aggregate cap by multiplying the number of patients served by the hospice in a cap year by a cap amount. Any Medicare payments received by the hospice in excess of the aggregate cap must be refunded to Medicare. This final rule addresses the accounting adjustment that is necessary for patients that receive hospice services in two consecutive fiscal years. Under the current system, CMS counts a patient only in the reporting year in which the patient is expected to receive the majority of his/her hospice services (i.e., there is no proportional allocation for patients receiving hospice services in two consecutive fiscal years). This method of calculation is referred to in the final rule as the “Streamlined Methodology.”  

In response to mounting litigation challenging the validity of the “Streamlined Methodology,” CMS adopted the “Patient-by-Patient Proportional Methodology” in this final rule, which will be applied in fiscal year 2012 and beyond. Under the “Patient-by-Patient Methodology,” the aggregate cap is calculated based on the number of days of care the patient received in each cap year for each hospice. However, if hospice providers wish to continue to use the “Streamlined Methodology” for fiscal year 2012 and beyond, they may make a one-time election to do so by notifying CMS no later than 60 days following the receipt of the hospice provider’s 2012 cap determination.  

Face-to-Face Encounters

Pursuant to Section 3132(b) of PPACA, hospice providers are now required to have either a physician or nurse practitioner (NP) perform a face-to-face encounter with every hospice patient prior to the third benefit period recertification (i.e., the 180-day recertification) of the patient’s terminal illness to determine continued eligibility. The final rule clarifies that any hospice physician is permitted to perform the face-to-face encounter regardless of whether that physician recertifies the patient’s terminal illness and composes the recertification narrative. The final rule also provides that the face-to-face encounter must occur no more than 30 calendar days prior to the start of the third benefit period and no more than 30 calendar days prior to every subsequent benefit period thereafter.  

Quality Reporting

Section 3004(c) of PPACA requires that hospice providers begin submitting quality data, as prescribed by CMS, for fiscal year 2014 and all subsequent fiscal years. CMS will reduce the market basket payment update by two percent (2%) for any hospice provider that does not comply with the quality data submission requirements. The final rule identifies two quality measures for which hospice providers are required to begin collecting data in October 2012: (1) a quality measure endorsed by the National Quality Forum (NQF) that analyzes the percentage of patients who were uncomfortable because of pain upon admission to the hospice and whose pain was brought to a comfortable level within 48 hours; and (2) a structural measure that assesses whether a hospice provider administers a Quality Assessment and Performance Improvement (QAPI) Program, a program which addresses at least three indicators related to patient care. The first mandatory reporting cycle for these quality metrics will consist of data collected from October 1, 2012, through December 31, 2012. All subsequent hospice quality reporting cycles will be based on a calendar year.

Here is the link to the final rule, as published in the Federal Register: http://www.gpo.gov/fdsys/pkg/FR-2011-08-04/html/2011-19488.htm