On January 14, 2015, OIG published a report that analyzes Medicare payments for hospice care in assisted living facilities (ALFs). OIG concluded that CMS should implement measures to reform Medicare payments to hospices, including minimizing financial incentives for hospices to focus on beneficiaries with certain diagnoses and in certain care settings, such as patients likely to have long stays like those in ALFs.

OIG specifically highlights the following facts in its report:

  • Medicare payments for hospice care in ALFs more than doubled in 5 years, totaling $2.1 billion in 2012. Hospices provided care much longer and received much higher Medicare payments for beneficiaries in ALFs than for beneficiaries in other settings.
  • Hospice beneficiaries in ALFs often had diagnoses that usually require less complex hospice care. 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.
  • For-profit hospices received higher Medicare payments per beneficiary than nonprofit hospices.

OIG said that the report “raises concerns about the financial incentives created by the current payment system and the potential for hospices to target beneficiaries in ALFs because they may offer the hospices the greatest financial gain.” In response, the OIG issued five specific recommendations for reform:

(1) reform payments to reduce the incentive 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. The report is available here.