Metrics Matter: Will Hospices Benefit from a Multiyear Calculation of the Hospice Cap?

The Medicare hospice benefit has a regulation that requires a hospice to repay excess Medicare reimbursements when its per admission expenditures in a given year exceed a predetermined hospice cap. Traditionally, Medicare has only counted patients admitted to hospice in the chosen time frame. Several hospices challenged Medicare in court about the fairness of this approach and won. In order to forestall further lawsuits, Medicare has proposed a multiyear method of calculating a hospice’s cap performance. Will hospices benefit from a multiyear calculation of the hospice cap? That’s what we analyze in this month’s metric.

Hospice Cap Calculation: A Comparison of a 1-Year Approach Versus a 2-Year Approach
 

Healthcare Market Resources calculated the hospice cap for all hospices in the United States by:

  1. using the current 1-year approach for calendar year 2007
  2. using a 2-year approach for calendar years 2006 and 2007.

The findings of our analysis are summarized below:

  • There were 260 hospices that exceeded the cap using the 1-year approach and 305 using the 2-year approach.
  • The list of states where the “offending” hospices are located varies little between the two calculations.

Prior to this analysis, industry experts may have predicted that the 2-year calculation would be more beneficial for the industry. This prediction is likely based on the belief that some hospices exceeding the cap are victims of adverse patient selection in a given year. Our results indicate, however, that exceeding the hospice cap is accepted by some as a cost of doing business with a particular hospice, flirting with either side of the line from year to year. This observation is based on Healthcare Market Resources’ research on cap performance for several years that shows between 60% and 65% of hospices exceeding the single-year limit are “repeat offenders.”

While some hospices will avoid exceeding the cap using the multiyear calculation, many more will find themselves caught in its grasp than under the previous method.

Click here or call 215-657-7373 to learn more about this metric, as well as the many ways you can use Healthcare Market Resources’ data to help identify industry trends and achieve business success.