Hospice Nursing Labor Shortages, Quality Measures Reporting, and Aggregate Cap Calculations Create Hospice Reimbursement Conundrum
This Compliance Guidance has been gathered and interpreted by No World Borders from various resources, including CMS, Medicare Administrative Contractors (MACs), Medicaid, and Tricare, and the National Hospice and Palliative Care Organization (NHPCO), and is provided for informational purposes. This should not be viewed as the official CMS or the Medicare Administrative Contractors (MACs). It is always the provider’s responsibility to determine and comply with applicable CMS, MAC, and other payer requirements.
Hospice care for end-of-life Medicare Beneficiaries costs the Medicare Trust fund $billions per year. In California alone in the most recent Medicare reporting period, over 1,400 hospice care organizations billed Medicare over $2.5 billion and received over $550 million in reimbursement.
Medicare and Medicaid Hospice Eligibility
Hospice care helps patients with a terminal illness live the highest quality of life possible for as long as possible.
CMS Guidance provides:
Patients with Medicare Part A can get hospice care benefits if they meet the following criteria:
- They get care from a Medicare-certified hospice
- Their attending physician (if they have one) and the hospice physician certifies them as terminally ill, with a medical prognosis of 6 months or less to live if the illness runs its normal course
- They sign an election statement to elect the hospice benefit and waive all rights to Medicare payments for the terminal illness and related conditions
After certification, the patient may elect the hospice benefit for:
- Two 90-day periods followed by an unlimited number of subsequent 60-day periods.
- After the second, 90-day period, the recertification associated with a hospice patient’s third benefit period, and every subsequent recertification, must include documentation that a hospice physician or a hospice nurse practitioner had a face-to-face (FTF) encounter with the patient. The FTF encounter must document the clinical findings supporting a life expectancy of 6 months or less.
All hospice care and services offered to patients and their families must follow an individualized written plan of care (POC) that meets the patient’s needs. The hospice interdisciplinary group establishes the POC together with the attending physician (if any), the patient or representative, and the primary caregiver.
Items & Services Included in the Hospice Benefit
The Medicare hospice benefit includes these items and services to reduce pain or disease severity and manage the terminal illness and related conditions:
- Services from a hospice-employed physician, nurse practitioner (NP), or other physicians chosen by the patient
- Nursing care
- Medical equipment
- Medical supplies
- Drugs to manage pain and symptoms
- Hospice aide and homemaker services
- Physical therapy
- Occupational therapy
- Speech-language pathology services
- Medical social services
- Dietary counseling
- Spiritual counseling
- Individual and family or just family grief and loss counseling before and after the patient’s death
- Short-term inpatient pain control and symptom management and respite care
Method of Certification for Eligibility
- Generally, Medicare Local Coverage Determinations require two licensed clinicians, both a hospice physician and a primary care physician must certify eligibility for hospice, and there are episodic 60-day reimbursements.
- Tricare provides for hospice in two 90 periods and subsequent 60 day periods. Each episode of care is a new eligibility period that must be assessed to maintain coverage for hospice care. An interdisciplinary team (IDT) of professionals focus on medically necessary care for physical, behavioral needs. There are bereavement services available as well in many hospice organizations, although these are not reimbursable by Medicare.
Medicare Guidance States:
The hospice admits a patient only on the recommendation of the medical director in consultation with, or with input from, the patient’s attending physician (if any). In reaching a decision to certify that the patient is terminally ill, the hospice medical director must consider at least the following information: (1) Diagnosis of the terminal condition of the patient. (2) Other health conditions, whether related or unrelated to the terminal condition. (3) Current clinically relevant information supporting all diagnoses.
Telehealth Examinations for Eligibility during COVID
CMS modifies payment policies, wage indices, reporting and quality measures regularly. The hospice market is challenged by complex regulatory and reimbursement mechanisms, nursing shortages, and caps on reimbursement with requirements to reimburse CMS for unused episodic payments. During the pandemic, hospice organizations performed telehealth hospice admissions.
Opioids for Chronic Pain and Hospice
In those hospice organizations who reported patients taking opioids, between 54% and 100% of the patients were on pain management analgesic medications.
Hospice Aggregate Cap Calculations for RHC, CHC, IRC, and GIP
On July 31, 2019, the Centers for Medicare & Medicaid Services (CMS) issued a final rule (CMS-1714-F) regarding hospice payment. This pertained to both inpatient and aggregate caps as well as to four levels of care.
Inpatient and Aggregate Caps
Types of annual limits in Medicare payments to hospice providers:
- the inpatient cap
- the aggregate cap
The inpatient cap limits the number of days of inpatient care for which Medicare will pay to 20 percent of a hospice’s total Medicare patient care days, and a hospice must refund to Medicare any payment amounts in excess of the inpatient cap.
The aggregate cap limits the total aggregate payments that any individual hospice can receive in a cap year to an allowable amount based on an annual per-beneficiary cap amount and the number of beneficiaries served. Any amount paid to a hospice for its claims in excess of the aggregate cap is considered an overpayment and must be repaid to Medicare.
Medicare administrative contractors (MACs) oversee the capping process, and hospices must file their self-determined aggregate cap determination notice with their MAC no later than five months after the end of the cap year and remit any overpayment due at that time.
The aggregate cap limits the overall payments per patient made to a hospice annually. The final hospice cap amount for the FY 2020 cap year will be $29,964.78, which is equal to the FY 2019 cap amount ($29,205.44) updated by the final FY 2020 hospice payment update percentage of 2.6 percent.
Four Levels of Care Addressed in the Cap
The final rule updated hospice payment rates, wage indices, and the cap amount for fiscal year (FY) 2020. It adjusted four levels of care:
- Routine Home Care (RHC)
- Continuous Home Care (CHC)
- Inpatient Respite Care (IRC0
- General Inpatient Care (GIP)
Routine Home Care (RHC)
Routine Home Care (RHC) is paid the routine home care rate for each day the patient is under the care of the hospice. The RHC level of care is billed for each day the patient is under the care of the hospice and not receiving one of the other levels of care. According to NGS MAC, “The payment for each day of RHC is made without regard to the volume or intensity of routine home care services provided on any given day.” The RHC level of care is reported with revenue code 0651. The units reflect the number of days of routine home care furnished to the patient during the billing cycle. When billing the RHC level of care, and HCPCS site of service location code is required to reflect the location where the services were provided. Additional information on the HCPCS site of service location codes can be found in our Hospice Site of Service HCPCS Codes Job Aid on our website.
Each time the level of care changes, report separate line items for the level of care. For example, if a patient begins the month receiving routine home care followed by a period of general inpatient care and then later returns to routine home care all in the same month, in addition to the one line reporting the general inpatient care days, there should be two separate line items for routine home care. Each routine home care line reports a line-item date of service to indicate the first date that level of care began for that consecutive period.
Continuous Home Care (CHC) is
Continuous Home Care (CHC) is paid the continuous home care rate when continuous home care is provided in the patient’s home. This rate is paid only during a period of crisis and only as necessary to maintain the terminally ill individual at home. Continuous home care is not intended to be used as respite care. Continuous home care labor is primarily focused nursing care, covered for at least 8 hours, and up to 24 hours per 24-hour period, beginning and ending at midnight. Homemaker or hospice aide labor to provide a patient are, or both may be covered during a 24-hour continuous period during “periods of crisis” (see § 418.204(a)). Still, care must be predominantly nursing care. CHC is focused on palliation and management of acute medical symptoms.
- 418.204(a) Special coverage requirements provide,
(a) Periods of crisis. Nursing care may be covered continuously for as much as 24 hours a day during periods of crisis as necessary to maintain an individual at home. Either homemaker or home health aide (also known as hospice aide) services or both may be covered on a 24-hour continuous basis during periods of crisis but care during these periods must be predominantly nursing care. A period of crisis is a period in which the individual requires continuous care to achieve palliation and management of acute medical symptoms.
A continuous home care (CHC) day is a day in which an individual who receives hospice care is:
- not in an inpatient facility
- receives hospice care consisting predominantly of nursing care for at least 8 hours in a 24-hour period at home.
According to NHPCO, there are specific Standards regarding labor classifications that provide care and how a hospice provider may retain their services.
Social worker and pastoral counseling are not reimbursable.
- 418.204(c) Special coverage requirements provide,
(c) Bereavement counseling. Bereavement counseling is a required hospice service, but it is not reimbursable.
Inpatient Respite Care (IRC)
For IRC, the hospice is paid at the inpatient respite care rate for each day in which the beneficiary is in an approved inpatient facility and is receiving respite care. Payment for respite care may be made for a maximum of 5 continuous days at a time, including the date of admission but not counting the date of discharge.
- 418.204(b) Special coverage requirements provide,
(b) Respite care.
(1) Respite care is short-term inpatient care provided to the individual only when necessary to relieve the family members or other persons caring for them.
(2) Respite care may be provided only on an occasional basis and may not be reimbursed for more than five consecutive days at a time.
General Inpatient Care (GIP)
A hospice has a per day per diem and is only provided at a Medicare certified hospice facility, hospital, or skilled nursing facility. GIP care is Short-term care that provides pain and symptom management that cannot be accomplished in another setting. GIP may be provided in a Medicare-participating hospital, skilled nursing facility (SNF), or hospice inpatient facility.
MACs initiated surveys (“initiatives”) to determine potential causes for extended lengths of stay for GIP, data collection including Medicare Administrative Contractor (MAC) compiled GIP comparative billing reports (CBRs) based on providers billing for the GIP level of care and there focus areas were identified:
Evaluation, Discharge Planning, and Documentation. Pain management documentation and symptom change documentation guidelines were published. Therefore, coverage criteria include documentation of the medical need for stabilizing treatment and or medication adjustments.
Hospices must either provide this type of care directly in their hospice inpatient unit or must contract with one of the other acceptable facilities:
- The Medicare-certified hospice that meets the conditions of participation for providing inpatient care directly as specified in §418.110
- Medicare-certified hospital or a skilled nursing facility that also meets the standards specified in §418.110(b) and (e) regarding 24- hour nursing services and patient areas
GIP level of care is reported with revenue code 0656
Billing begins with a notice of election for an initial hospice benefit period; followed by claims with types of bill 81X or 82X
CMS 2020 Guidance Regarding Reimbursement with and without Quality Data
Payment formulae for hospice care are complex, and there is downward pressure on reimbursement rates and penalties for failing to report quality measures.
Medicare updates the payment rates for hospice care, the hospice cap amount, and the hospice wage index annually. Section 1814(i)(1)(C)(ii)(VII) of the Social Security Act (“the Act”) requires CMS to use the inpatient hospital market basket,  adjusted for Multifactor Productivity (MFP)  and other adjustments, as specified in the Act, to determine the hospice payment update percentage.
CMS updates the hospice cap amount annually in accord with Section 1814(i)(2)(B) of the Act and provides for an increase (or decrease) in the hospice cap amount. For accounting years that end after September 30, 2016, and before October 1, 2025, the hospice cap is updated by the hospice payment update percentage. CMS uses the hospice wage index to adjust payment rates to reflect local differences in wages. CMS updates the hospice wage index annually, as discussed in hospice rulemaking.
Section 3004 of the Affordable Care Act amended the Social Security Act to authorize a quality reporting program for hospices. Section 1814(i)(5)(A)(i) of the Act requires that beginning with the Fiscal Year 2014 and each subsequent Fiscal Year:
- the Secretary shall reduce the market basket update by two (2) percentage points for any hospice that does not comply with the quality data reporting requirements concerning that fiscal year.
- The hospice payment update percentage for Fiscal Year 2020 is based on the estimated inpatient hospital market basket update of 3.0 percent.
- Sections 1886(b)(3)(B)(xi)(II) and 1814(i)(1)(C)(v) of the Act, requires an inpatient hospital market basket update for the Fiscal Year 2020 of 3.0 percent. This must be reduced by an MFP adjustment as mandated by Affordable Care Act (currently estimated to be 0.4 percentage point for the Fiscal Year 2020).
- As a result, the hospice payment update percentage for Fiscal Year 2020 is 2.6 percent.
The Fiscal Year 2020 the Rural Health Care per diem payment rates are the Fiscal Year 2019 rebased payment rates, reduced by a budget neutrality factor as a result of rebasing of the Continuous Home Care (CHC), Inpatient Respite Care (IRC), and General Inpatient Care (GIP) payment amounts, adjusted by the Service Intensity Add-On (SIA) budget neutrality factor, adjusted by the wage index standardization factor, and increased by the 2.6 percent hospice payment update percentage.
The Fiscal Year 2020 rebased CHC, IRC, and GIP per diem payment rates are equal to the Fiscal Year 2019 rebased payment rates, adjusted by the wage index standardization factor and increased by the hospice payment update percentage (2.6 percent).
The Fiscal Year 2020 hospice payment rates are effective for care and services furnished on or after October 1, 2019, through September 30, 2020. See the Medicare Claims Processing Manual, Chapter 11, Processing Hospice Claims, Section 30.2, for more information on hospice payment rates. The Fiscal Year 2020 hospice payment rates are shown in Tables 1 and 2 below.
 The Inpatient hospital market basket is composed of statistics from:
- Inpatient Prospective Payment System (IPPS) Hospital Market Basket (the base year 2014) – updates inpatient hospital operating, outpatient PPS payments, hospice PPS payments; updates cost limits for children’s hospitals, cancer hospitals, religious non-medical health care institutions, and short-term acute care hospitals located in U.S. Virgin Islands, Guam, the Northern Mariana Islands, and American Samoa. Effective for CY 2019 to CY 2023, updates Ambulatory Surgical Center Prospective Payment System payments.
- Hospital Capital Market Basket (the base year 2014) – updates inpatient hospital capital Prospective Payment System payments
- Skilled Nursing Facility Market Basket (the base year 2014) – updates skilled nursing facility PPS payments
- Home Health Agency Market Basket (the base year 2016) – updates home health agency PPS payments
- Long-Term Care Hospital Market Basket (the base year 2017) – updates long-term care facilities PPS payments
- End-Stage Renal Disease Market Basket (the base year 2016) – updates end-stage renal disease facilities PPS payments
- Inpatient Rehabilitation Facility Market Basket (the base year 2016) – updates inpatient rehab facilities Prospective Payment System payments
- Inpatient Psychiatric Facility Market Basket (the base year 2016) – updates inpatient psych facilities Prospective Payment System payments
- Federally Qualified Health Center Market Basket (the base year 2017) – updates federally qualified health center Prospective Payment System payments
- Medicare Economic Index (the base year 2006)
 Section 3401 of the Affordable Care Act (ACA) requires that the market basket percentage under the Medicare prospective payment systems be reduced annually by the productivity adjustment. The ACA defines the productivity adjustment to be equal to “the 10-year moving average of changes in annual economy-wide private nonfarm business multifactor productivity (as projected by the Secretary for the 10-year period ending with the applicable fiscal year, year, cost-reporting period, or another annual period).” The Bureau of Labor Statistics (BLS) publishes the official measure of private nonfarm business multifactor productivity (MFP)
 See Hospital Multifactor Productivity: Updated Presentation of Two Methodologies. February 22, 2016
Medicare Local Coverage Determination (LCD) for Hospice Eligibility
Medicare LCDs provide guidance in determining medical necessity of services. Medicare Administrative contractors such as CGS developed a hospice LCDs such as ID# L34538 “Hospice Determining Terminal Status,” using the National Hospice and Palliative Care Organization’s (NHPCO) guidelines. Refer to CGS Medical Policies page to access the hospice LCD.
The local coverage determination:
- Allows for the decline of a beneficiary to be a factor in determining prognosis.
- Consists of three parts, and a disease specific appendices:
- Part I is related to the decline in a beneficiary predictive of a six-month prognosis.
- Part II is related to the functional limitations of a beneficiary and is used in conjunction with the disease specific appendices. Part II does not stand alone in prediction of a limited prognosis.
- Part III discusses co-morbidities that may be helpful in predicting and documenting a six-month prognosis.
The LCD Is used by MAC Medical Review staff as a guideline to aide in consistency of reviews.
Hospice Nursing Shortages and Exemptions
CMS Stated that it was making these reductions to align reimbursement rates with actual costs of providing care. The CMS policy is ironic since it also acknowledges a critical nursing labor shortages.
Findings from the Bureau of Labor Statistics continue to forecast a shortage of nurses through 2022, with a job growth rate that is faster than the average (19 percent, compared to 11 percent for all occupations). “Extraordinary circumstance” exemptions have been made available to hospice providers. In order to qualify for an “extraordinary circumstance” exemption, a hospice must notify the State Survey Agency (SA) responsible for licensing and certification that it intends to elect an exception under the “extraordinary circumstance” authority. Documentation is required, including:
The CMS Survey and Certification Group (S&C) published memorandum 15-01-Hospice on October 13, 2014, providing for
- An estimate of the number of patients that the agency has not been able to admit during the past three months due to the nursing shortage and the current and desired patient/nurse ratio for the agency;
- Evidence that the hospice has made a reasonable faith effort to hire and retain nurses, including:
- Copies of advertisements in local newspapers and Web postings that demonstrate recruitment efforts;
- Copies of reports of telephone contacts with potential hires, professional schools, and organizations, recruiting services, etc.;
- Job descriptions for nurse employees;
- Evidence that salary and benefits are competitive for the area;
- Evidence of any other recruiting activities (e.g., recruiting efforts at health fairs, educational institutions, health care facilities, and contacts with nurses at other providers in the area); and
- Ongoing self-analysis of the hospice’s trends in hiring and retaining qualified staff.
- The hospice must also demonstrate that it has a training program in place to assure that contracted staff is trained in the hospice philosophy and the provision of palliative care before patient contact.
- The hospice must ensure that contracted staff is providing care that is consistent with the hospice philosophy and the patient’s plan of care.
- Contracted nurses are used to supplement the hospice nurses employed directly. Contracted nurses should not be used solely to provide the continuous nursing level of care or on-call service.
- The hospice is expected to continue its recruitment efforts during the period that it is contracting for nurses.
Hospice care providers submit claims to Medicare regional home health intermediaries (RHHIs) for hospice services provided to Medicare beneficiaries.
Medicare payment for hospice use four predetermined rates. Medicare claim systems are required to ensure that hospice claims provide for revenue codes 651, 652, 655, and 656, as well as HCPCS codes in Q5001 – Q5009.
The level of care (LOC) are:
- Level of care 651 Routine home care paid for each hospice day but not receiving hospice care in another category. The rate for LOC 651 does not require documentation of volume or intensity of routine home care services provided. LOC 651 is applicable when a patient receives outpatient care for a condition unrelated to the hospice eligibility terminal condition.
- Level of care 652 Crisis care applies when a patient receives continuous home care and is not payable during a hospital, skilled nursing, or inpatient hospice facility stay. It only applies when care plans to maintain a terminally ill insured at home. LOC 652 rate is divided by 24 hours to determine an hourly rate for a minimum of 8 hours. More than half of the episodes must include nursing care. An RN must be provided to deliver care. Alternatively, care may be provided by a licensed practical nurse (LPN) during a 24-hour day. The one-day period begins and ends at midnight. Under the LOCD 652 Standard, this modality of care is not necessarily continuous (i.e., four hours in the morning or four hours in the evening), but the documentation should demonstrate the patient’s medical necessity in a crisis. The same fractional hour determination in 15-minute increments is used. For 32 or more units should be rounded to the nearest 15 minutes. Homemakers (or home health aide/hospice aide) can be provided to supplement nursing care but may not be discounted. All care provided by the interdisciplinary clinical care team must be documented in the medical record.
- Level of care 652 is documented in Medicare Payment Manual Number 100-02, Chapter 9, Section 40.2.1.
- Level of care 655 is an underutilized category. Inpatient respite care provides coverage when a caregiver needs to take a recess from their duties. LOC 655 is paid on each day that the patient is in an approved inpatient facility receiving respite care for a maximum of five continuous days, including the date of admission, excluding discharge date. LOC 655 covers a maximum of five dates per episode.
- Level of care 656 General inpatient care covers general inpatient care at a Medicare-certified hospice, hospital, or skilled nursing facility. When a patient is discharged and deceased, the inpatient rate is paid for the discharge date.
- Q5001 PATIENT’S HOME/RESIDENCE
- Q5002 ASSISTED LIVING FACILITY
- Q5003 NURSING LONG TERM CARE FACILITY (LTC) OR NON-SKILLED NURSING FACILITY (NF)
- Q5004 SKILLED NURSING FACILITY (SNF)
- Q5005 INPATIENT HOSPITAL
- Q5006 INPATIENT HOSPICE FACILITY
- Q5007 LONG TERM CARE HOSPITAL (LTCH)
- Q5008 INPATIENT PSYCHIATRIC FACILITY
- Q5009 PLACE NOT OTHERWISE SPECIFIED (NOS)
Hospice Additional Development Request (ADR) from a Medicare hospice intermediaries are important and should be responded to. Typical reasons that ADRs are denied, leading to recoupment requests:
- Eligibility: the documentation does not support expected prognosis of death within six months.
- The Face‐to‐face encounter requirements were not met
- Physician narrative is not present or not valid
- Untimely recertification
- Untimely certification
- Physician did not sign and date documentation
- No Medicare certification for facility
- No documented plan of care (POC) with date
- POC is not updated within 15 days
- Patient election statement incomplete or not documented
- Failure to respond timely to ADR
Hospice care medical coding and medical billing for Medicare, Tricare and Medicaid require an understanding of episodic care certifications, types of care and nursing recruitment and labor issues. These in addition to quality care delivery and the reporting of quality measures to maximize reimbursement are essential competencies for hospice care providers.
Medicare billing expert witness
Home Health Patient Driven Groupings
Home Health Attendant Care and Respite Care