On April 30, 2015, the Centers for Medicare & Medicaid Services (“CMS”) issued a proposed rule that would update fiscal year (“FY”) 2016 Medicare payment rates and the wage index for hospices serving Medicare beneficiaries (the “Proposed Rule”). CMS estimates that the Proposed Rule would result in a 1.3 percent ($200 million) increase in hospice payments for FY 2016. The highlights of the Proposed Rule are summarized below. 


The Proposed Rule would implement the final year of the seven-year phase out of the Budget Neutrality Adjustment Factor (“BNAF”). The BNAF was implemented in 1997, when CMS moved from an outdated wage index to the more current method for determining hospice payments. The FY 2010 Hospice Wage Index final rule finalized a schedule to phase-out the BNAF over seven years, reducing it by 10 percent in FY 2010 and by 15 percent each year from FY 2011 through FY 2016. For FY 2016, the BNAF would be reduced by an additional and final 15 percent.


The Proposed Rule would create two different payment rates for routine home care (“RHC”) that would result in a higher base payment rate for the first 60 days of hospice care and a reduced base payment rate days 61 or over of hospice care. CMS states that the purpose of the differential payment rates is to more accurately align the per diem payments with visit intensity and the cost of providing care.


The Proposed Rule would add 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 is billed as a RHC level of care day;
  2. the day occurs during the last 7 days of life (and the beneficiary is discharged dead);
  3. direct patient care is provided by a registered nurse or a social worker that day; and
  4. the service is not provided in a skilled nursing facility/nursing facility.

According to CMS, the SIA payment (1) encourages visits to patients at the end of life and improves provider accountability and (2) begins to address industry concerns regarding the need for increased payment for more resource intensive days. The proposed SIA payment would be equal to the Continuous Home Care (“CHC”) hourly payment rate (currently $38.75 per hour for FY 2015), multiplied by the amount of direct patient care provided by a RN or social worker for up to 4 hours total, per day, as long as the four criteria listed above are met. The proposed SIA payment would be paid in addition to the current per diem rate for the RHC level of care.


The Proposed Rule would implement changes to the aggregate cap calculation, which were mandated by the Improving Medicare Post-Acute Care Transformation Act of 2014 (the “IMPACT Act”). The hospice aggregate cap is an amount set by CMS each year that limits the maximum amount that a hospice will be reimbursed for Medicare hospice services. The aggregate cap is calculated by multiplying the adjusted cap amount set by CMS by the total number of Medicare beneficiaries for a given cap year.

The cap amount has previously been adjusted for inflation or deflation by using the percentage change in the medical care expenditure category of the Consumer Price Index for urban consumers that is published by the Bureau of Labor Statistics (the “CPI-U”). The IMPACT Act requires that the hospice aggregate cap be updated by the hospice payment update rather than using the CPI-U for a specified period of time. The proposed rule provides that the 2016 cap year, which starts on Nov. 1, 2015 and ends on Oct. 31, 2016, would be updated by the FY 2016 percentage update for hospice care. In addition, the Proposed Rule would align the cap accounting year for both the inpatient cap and the hospice aggregate cap with the fiscal year for FY 2017 and later. CMS believes that this would allow for the timely implementation of the IMPACT Act changes while better aligning the cap accounting year with the timeframe described in the IMPACT Act.


In the Proposed Rule, CMS clarifies that hospices are required to report all diagnoses identified in the initial and comprehensive assessments on hospice claims, whether related or unrelated to the individual’s terminal prognosis. This would also include the reporting of any mental health disorders and conditions that would affect the plan of care. CMS notes its concern that some hospices are neither conducting a comprehensive assessment nor updating the plan of care to recognize the conditions that affect an individual’s terminal prognosis.