Hospice in Medicare Advantage – Accept or Deny? Threat or Opportunity?

There’s a long history regarding the potential inclusion of hospice in Medicare Advantage (MA), and it seems there’s strong momentum yet again. According to Home Health Care News, this topic was discussed again as recently as late last year.

“There is some political inevitability to carving hospice into Medicare Advantage,” said Andrew MacPherson, principal with Washington, D.C.-based Healthsperien, a consulting and legal services firm…“If you’re on an MA plan, if you elect to go on hospice, for all intents and purposes you’re no longer on your MA plan,” Gurian said.

The Medicare Payment Advisory Commission (MedPAC) has long advised that this should be changed. The commission has said that leaving hospice out of MA plans causes fragmentation of care, rather than increasing coordination and integration of services which is the goal of MA.

Hospice is currently delivered through traditional fee-for-service Medicare. If hospice gets included in the benefit package for Medicare Advantage enrollees, the financial impact on hospices in the short term could be disastrous.

Medicare likely will take the dollars spent on hospice in a given region plus a gross up and incorporate them both into the monthly premiums paid to the Medicare Advantage plans.

Then to maximize its margins, Medicare Advantage plans will contract with hospices, offering less than the Medicare fee-for-service (FFS) rate in their area. In highly competitive areas, the discount could be very significant. Since Medicare Advantage represents 27% of all Medicare-eligible patients, these hospices could experience meaningful decline in their overall revenues. This could push these hospices into negative results.

Some areas of the country could be particularly hard hit because of high levels of Medicare managed care plans. In Allegheny County, PA (Pittsburgh), for example, 62% of Medicare-eligible patients are in managed-care plans. Also, Medicare Advantage plans may be reluctant to approve for hospice early stages of diagnoses, such as dementia and take off hospice patients who have stabilized

Clearly, the idea of moving Hospice into Medicare Advantage is not going to die.  Some in the industry believe that it is inevitable.  Given that, hospices must decide if it is a threat or opportunity.

On the threat side, this potential policy change is a direct hit to the top line, because it will probably mean less than Medicare rates.  Further, it cannot be countered by simply reducing costs or resource utilization. Instead, hospice may look to increase the size of their organization in order to spread overhead expenses over a broader base.

On the opportunity side, hospices need to find ways to take advantage of the situation by

  • Working closely with HMO’s Advanced Illness Management Department to identify patients
  • Encouraging HMO’s to promote to members having advanced directives in place and make them available to medical professionals in treatment settings
  • Training and rewarding physicians to have advanced directives discussion with the panel of patients

Healthcare Market Resources’s Dual Eligible/Managed Care Report can show hospices if MCO’s are valuing hospice and which competitors are addressing this market locally.