Medicare:

Program Provisions and Payments Discourage Hospice Participation

HRD-89-111: Published: Sep 29, 1989. Publicly Released: Sep 29, 1989.

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Pursuant to a congressional request, GAO reviewed hospices that were not Medicare-certified, to determine: (1) the factors that influenced a hospice not to participate in Medicare; (2) whether the Health Care Financing Administration (HCFA) set reasonable prospective payment rates for hospices; (3) whether Congress could adopt additional standards to ensure that participating hospices provided quality care; and (4) whether HCFA and its intermediaries consistently administered the hospice benefit with program policies.

GAO found that: (1) enrollment in a Medicare hospice required certification that the patient was terminally ill and would die within 6 months; (2) a participating hospice must have a contract with an inpatient care facility that stipulates that hospice staff will assume care of a patient at that facility; (3) nonparticipating hospices believed that inpatient facility physicians would be reluctant to relinquish patient management to hospice physicians; (4) although some hospices believed that hospitals were reluctant to contract for patient care at the Medicare hospice inpatient rate, they seemed to have no problems in obtaining the contracts or in providing all inpatient services; (5) hospices had a payment cap of $9,010 times the number of enrolled patients, which some nonparticipating hospices thought could impose a financial risk, but HCFA data showed no instances where hospices reached the cap or filed claims that exceeded the cap; and (6) although some nonparticipating hospices had concerns that reimbursement was limited to no more than 20 percent of total care days as inpatient days, most hospices did not reach the 20-percent limit and did not believe that the limit had an adverse impact on their operations. GAO also found that: (1) it could not determine the reasonableness of payment rates, since hospice cost data included incomplete and inaccurate data on labor hours, and understated overhead costs, parent-organization costs allocated to operations, and inpatient service costs; (2) the HCFA formula for calculating unit costs, which apportions overhead to cost centers according to square footage, is not always appropriate; and (3) although Medicare required home health agencies to train employees and protect patient rights, the requirements applied only to their affiliated hospices.

Matter for Congressional Consideration

  1. Status: Closed - Not Implemented

    Comments: Congress had not acted as of its 1992 session. Whether action will occur in the future is uncertain.

    Matter: Congress should adopt, for all hospices, training and patients' rights provisions similar to those that the Omnibus Budget Reconciliation Act of 1987 specified for home health agencies. If Congress adopts these provisions, the Secretary of Health and Human Services may need to modify the regulations implementing the training and competency requirements for home health agencies to reflect any special circumstances faced by hospices.

Recommendations for Executive Action

  1. Status: Closed - Not Implemented

    Comments: HHS maintains that a requirement already exists for surveyors to report home visit results. However, as GAO reported, the survey form does not provide a place for surveyors to report results of home visits.

    Recommendation: The Secretary of Health and Human Services should direct the Administrator, HCFA, to require that state surveyors report all home visits made and their results.

    Agency Affected: Department of Health and Human Services

  2. Status: Closed - Not Implemented

    Comments: HHS stated that, because the Omnibus Budget Reconciliation Act of 1989 specifies the rate of increase in hospice rates, there is no need to audit cost reports. GAO believes that cost reports and audits are necessary to enable determining whether rates become unrelated to costs over time.

    Recommendation: The Secretary of Health and Human Services should direct the Administrator, HCFA, to conduct thorough audits of a representative sample of cost reports to ensure complete and accurate data for calculating unit costs and ultimately setting prospective payment rates.

    Agency Affected: Department of Health and Human Services

  3. Status: Closed - Not Implemented

    Comments: HHS maintains that, because the 1989 Budget Reconciliation Act requires that hospice rates be adjusted annually by the percentage change in the inpatient hospital market basket index, there is no need for accurate cost data for hospices. GAO believes there is still a need for accurate cost data to enable determining whether payment rates become unrelated to costs over time.

    Recommendation: The Secretary of Health and Human Services should direct the Administrator, HCFA, to use factors other than square footage (such as the share of direct costs attributed to a cost center) to apportion overhead costs to cost centers.

    Agency Affected: Department of Health and Human Services

  4. Status: Closed - Not Implemented

    Comments: The Department of Health and Human Services (HHS) stated it did not plan to implement this recommendation because it believed the cost report and instructions were adequate.

    Recommendation: The Secretary of Health and Human Services should direct the Administrator, HCFA, to take steps to improve the quality of cost data received from hospices. Based on the review of cost data, the Administrator should modify the cost-reporting form and instruction to ensure reporting of: (1) all appropriate labor hours used to provide services at patients' homes; (2) parent agency or hospital administration and general overhead costs attributable to the hospice; (3) hospital ancillary service costs for hospice patients; and (4) all inpatient service costs during the cost-reporting time period in which they were incurred.

    Agency Affected: Department of Health and Human Services

  5. Status: Closed - Implemented

    Comments: HCFA added the suggested wording to the certification statement in the Medicare Hospice Manual and issued a regulatory change in December 1990.

    Recommendation: The Secretary of Health and Human Services should direct the Administrator, HCFA, to change the wording in the Medicare regulations regarding the physician's certification of terminal illness to include the clarifying statement that the individual's medical prognosis is that his or her life expectance is 6 months or less "if the terminal illness runs its normal course."

    Agency Affected: Department of Health and Human Services

 

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