CMS Should Reduce Incentives for Hospices Targeting Assisted Living Facilities, OIG Says

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Jan. 14 — The CMS should take several steps to reform Medicare payments to hospices, including reducing financial incentives for hospices to target beneficiaries with certain diagnoses and those likely to have long stays, such as those in assisted living facilities, according to a report released Jan. 14 by the Department of Health and Human Services Office of Inspector General.

The OIG said Medicare payments for hospice care in assisted living facilities more than doubled in the five years ending in 2012, reaching $2.1 billion. Hospices provided care much longer and received much higher Medicare payments for beneficiaries in assisted living facilities (ALFs) than for beneficiaries in other settings, it said.

Hospice beneficiaries in those facilities often had diagnoses that require less complex care, the report said. Hospices typically provided fewer than five hours of visits and were paid about $1,100 per week for each beneficiary receiving routine home care in assisted living facilities. For-profit hospices received much higher Medicare payments per beneficiary than nonprofit hospices, according to the report.

“This 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,” the report, “Medicare Hospices Have Financial Incentives to Provide Care in Assisted Living Facilities” (OEI-02-14-00070), said.

William A. Dombi, vice president for law at the National Association for Home Care & Hospice, told Bloomberg BNA Jan. 14 that “the report adds to the information that will be of value as Medicare continues its work developing a new payment model.”

“In itself, the report is helpful,” he said, “but a more detailed analysis would be needed to fully understand the service and cost differences for patients residing in an ALF.”

Profitable Stays

The goals of hospice care are to help terminally ill beneficiaries with a life expectancy of six months or less continue living with minimal disruption and to support beneficiaries’ families and other caregivers throughout the process, the report said.

The care may be provided to individuals and their families in various settings, including a skilled nursing facility, a private home or another place of residence, such as an ALF, it said.

The OIG said little is known about hospice care provided in ALFs, although its report noted the Medicare Payment Advisory Commission has found that very long stays in hospice care are more profitable for providers than shorter stays.

“Hospices are paid a daily rate for every day a beneficiary is in hospice care, regardless of whether services are provided on a particular day,” it said. “Therefore, a hospice stands to gain financially if it provides minimal services to a beneficiary over a long period of time.”

The report said the Centers for Medicare & Medicaid Services should target for review hospices that receive a high percentage of payments from providing care to beneficiaries in ALFs, hospices with a high percentage of beneficiaries receiving care for over 180 days, hospices with a high percentage of beneficiaries with certain diagnoses, and those with a high percentage of beneficiaries who rarely receive hospice visits.

The agency also should develop and adopt claims-based measures of quality, make hospice data publicly available for beneficiaries, and provide additional information to hospices to educate them about how they compare with their peers, the report said.

The CMS in the report agreed with the recommendations, saying it is analyzing possible reform options focusing on new payment models.

The CMS also said “it supports the development of Fraud Protection System models targeting hospices that have high percentages of beneficiaries who rarely receive visits, as well as considering hospices that provide high percentages of their beneficiaries at the continuous care level.”

The OIG report is at


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