CMS Releases FY 2012 Final Rule for Hospice Payment

02 August 2011 Publication
Authors: Donald H. Romano

AHLA e-Alert

On July 29, 2011, the Centers for Medicare & Medicaid Services (CMS) released the fiscal year (FY) 2012 payment rule for hospices. The changes made by the rule are effective on October 1, 2011. Four newsworthy items that came from the final rule are: (1) the annual update to the hospice payments; (2) changes to the methodology used to determine the number of Medicare beneficiaries used in the aggregate cap calculation; (3) CMS' initial implementation of the PPACA-mandated quality reporting system; and (4) clarifications to the face-to-face encounter requirement.

Payment Update

For FY 2012, hospices will realize a 2.5 % increase in their Medicare payments. The increase is a net result of a 3.0% increase in the hospital market basket (which is used as a proxy for an indicator of hospice industry-related price increases), offset by an estimated 0.5% decrease in payments to hospices due to updated wage index data and the third year of CMS' seven-year phase-out of a wage index budget neutrality adjustment factor (BNAF).

Aggregate Cap Calculation

The statute requires that CMS impose a limit on the aggregate Medicare payments a hospice provider receives annually. CMS calculates each hospice's aggregate cap by multiplying the number of patients served by the hospice in a cap year by a cap amount. Medicare payments made to a hospice during the cap year that exceed the hospice's aggregate cap must be refunded to Medicare. With respect to the adjustment necessary to account for situations in which a beneficiary's election to receive hospice care overlaps two accounting periods, CMS counts a beneficiary only in the reporting year in which the preponderance of the hospice care would be expected to be furnished rather than attempt to perform a proportional adjustment. That is, according to its regulation, CMS does not provide for the proportional allocation of individual beneficiaries, but instead counts an individual only in a single year, the one in which he or she first elected the hospice benefit. Several courts, including two courts of appeals, have invalidated CMS' methodology as inconsistent with the statute. The final rule, upon its effective date, revises how CMS calculates each hospice's yearly aggregate cap. Under the final rule, CMS will:

  • Change the way it counts hospice patients for the 2012 cap accounting year and future years. Under the final rule, the cap is calculated based on the number of days of care the beneficiary received in that cap year for each hospice. The final rule also provides that this new counting method will be applied to past cap years in certain instances.
  • Allow hospices that do not want a change in their patient counting method to elect to continue using the current method.

Quality Reporting

Section 3004(c) of the Patient Protection and Affordable Care Act (PPACA) requires that hospices begin submitting quality data, based on measures to be specified by the secretary, for FY 2014 and subsequent fiscal years. Beginning in FY 2014, hospices that fail to report quality data identified by the secretary will have their market basket update reduced by two percentage points. The final rule implements Section 3004(c) of PPACA by identifying two quality measures that hospices are required to report on (or have their payments reduced). The quality measures adopted in the FY 2012 final rule for FY 2014 are a measure endorsed by the National Quality Forum related to pain management, and one structural measure that assesses whether a hospice administers a Quality Assessment and Performance Improvement (QAPI) program that contains at least three indicators related to patient care. Under the final rule, hospices are required to begin collecting quality data in October 2012, and must submit the data in 2013. Hospices may also voluntarily begin collecting data on the QAPI measure in October 2011 for submission in 2012.

Face-to-Face Encounters

PPACA amended the statute to require that for Medicare to cover and pay for hospice services, a physician or nurse practitioner must have a face-to-face encounter with the beneficiary as part of the recertification process prior to the third benefit period recertification and each subsequent recertification, in order to gather clinical findings to determine continued eligibility for hospice care. Due to industry concerns, CMS delayed enforcement of this requirement from January 1, 2011, through March 31, 2011. The final rule clarifies that any hospice physician is permitted to perform the face-to-face encounter regardless of whether that physician recertifies the beneficiary's terminal illness and composes the recertification narrative. The final rule also clarifies that the face-to-face encounter must occur prior to, but no more than thirty calendar days prior to, the third benefit period recertification, and every benefit period recertification thereafter.

A link to the final rule, which will be published in the Federal Register on August 4, 2011, is available on CMS' website.

Copyright 2011 American Health Lawyers Association, Washington, DC. Reprint permission granted.

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