Medicare Payment Policy

measures, it is likely that the vast majority of providers
will report in 2013.
For future reporting years, CMS has expressed interest
in developing a more comprehensive set of hospice
quality measures for payment years after 2015. CMS has
indicated that a standardized patient assessment instrument
might be needed to support the collection of a broader
set of quality measures. CMS has indicated that it is in
the early stages of developing and testing a patient-level
data set and may consider implementation as early as
calendar year 2014. The patient assessment instrument that
CMS is testing includes items that would support several
new quality measures recently endorsed by the National
Quality Forum, including process measures related to
pain screening and assessment, dyspnea assessment and
treatment, and provision of a bowel regimen for patients
receiving opioids. CMS has also expressed interest in
developing a bereaved family member survey.
As discussed in our March 2012 report, in November
2011 we convened a technical panel of hospice clinicians,
researchers, quality experts, and other stakeholders to
provide input on hospice quality measurement (Medicare
Payment Advisory Commission 2012). Several panelists
indicated that Medicare claims data might be a source of
quality care indicators. For example, claims data showing
hospices that provided few visits in the last days of life,
provided no higher acuity hospice care (general inpatient
care or continuous home care) to any patients, or had
unusually high live-discharge rates could signal potentially
poor quality and indicate the need for further CMS
scrutiny.
providers’ access to capital: Access to capital
appears to be adequate
Hospices in general are not as capital intensive as other
provider types because they do not require extensive
physical infrastructure (although some hospices have
built their own inpatient units, which require significant
capital). Overall access to capital for hospices appears
adequate.
Some freestanding hospices are part of large publicly
traded chain providers. Recent financial reports for these
hospices have been favorable, with strong margins and
cash flow. In 2011 and 2012, publicly traded hospice
companies made investments to expand operations, either
through acquisition of other hospice providers or through
investments in new inpatient units, suggesting adequate
access to capital among these providers. Also, a few
publicly traded nursing home companies have reported
expanding into the hospice sector through acquisitions,
citing favorable margin opportunities.
Less information is available on access to capital for
privately held providers. Among private equity groups,
the number of merger and acquisition transactions for
hospice providers, which increased in 2009, 2010, and
2011, declined in the first half of 2012. Some analysts
have characterized this decline as a natural lull after a
period of high acquisition activities rather than a reflection
of reduced interest in the sector (Braff Group 2012a, Braff
Group 2012b). The continued growth in the number of
for-profit providers suggests adequate access to capital
for these providers. Less is known about access to capital
for nonprofit freestanding providers, which may be more
limited. Hospital-based and home-health-based hospices
have access to capital through their parent providers,
which also appear to have adequate access to capital.
Medicare payments and providers’ costs
As part of the update framework, we assess the
relationship between Medicare payments and providers’
costs by considering whether current costs approximate
what efficient providers are expected to spend on
delivering high-quality care. Medicare margins illuminate
the relationship between Medicare payments and
providers’ costs. We examined margins through the 2010
cost-reporting year, the latest period for which cost report
data and claims data are available. To understand the
variation in margins across providers, we also examined
the variation in costs per day across providers.
Hospice costs
Hospice costs per day vary substantially by type of
provider (Table 12-9, p. 278), which is one reason for
differences in hospice margins across provider types. In
2010, hospice costs per day were $143 on average across
all hospice providers, a very slight increase from $142 per
day in 2009. 17 Freestanding hospices had lower costs per
day than home-health-based hospices and hospital-based
hospices. For-profit, above-cap, and rural hospices also
had lower costs per day than their respective counterparts.
The differences in costs per day among freestanding,
home-health-based, and hospital-based hospices largely
reflect differences in average length of stay and indirect
costs. Our analysis of the Medicare cost report data
indicates that, across all hospice types, those with
longer average lengths of stay have lower costs per day.
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