FY 2022 Hospice Wage Index and Payment Rate Update ...

Medicare Program; FY 2022 Hospice Wage Index and Payment Rate Update, Hospice Conditions of Participation Updates, Hospice and Home Health Quality Reporting Program Requirements Proposed Rule Summary

Table of Contents

I. Introduction and Background

1

II. Provisions of the Proposed Rule

2

A. Hospice Utilization and Spending Patterns

2

B. FY 2022 Labor Shares

5

C. Routine FY 2022 Hospice Wage Index and Rates Update

6

D. Regulation Text Changes for the Hospice Election Statement Addendum

10

E. Hospice Waivers Made Permanent Conditions of Participation

11

F. Hospice Quality Reporting Program

12

G. January 2022 HH QRP Public Reporting Display Schedule

28

III. Requests for Information: Digital Quality Measurement and Health Equity

32

IV. Advancing Health Information Exchange

34

V. Regulatory Impact Analysis

35

I. Introduction and Background

On April 8, 2021, the Centers for Medicare & Medicaid Services (CMS) placed on public display a proposed rule updating the Medicare hospice payment rates, wage index, the cap amount for fiscal year (FY) 2022 and the quality reporting requirements for FY 2022. Among other changes, this rule proposes to make permanent selected regulatory blanket waivers that were issued to Medicare-participating hospice agencies during the COVID-19 public health emergency (PHE) and updates the hospice conditions of participation. This rule also includes a Home Health Quality Reporting Program proposal that proposes changes beginning with the January 2022 public reporting to address exceptions related to the COVID-19 PHE. The proposed rule will be published in the April 14, 2021 issue of the Federal Register. Comments on the proposed rule are due by June 7, 2021.

CMS estimates that the overall impact of the proposed rule will be an increase of $530 million (2.3 percent) in Medicare payments to hospices during FY 2022.

CMS notes that wage index addenda for FY 2022 (October 1, 2021 through September 30, 2022) will be available only through the internet at

The proposed rule reviews the history of the Medicare hospice benefit, including hospice reform policies finalized in the FY 2016 hospice final rule (80 FR 47142); this rule, among other things, differentiated payments for routine home care (RHC) based on the beneficiary's length of stay and implemented a service intensity add-on (SIA) payment for services provided in the last 7

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days of a beneficiary's life. CMS also reviews hospice policies it finalized in the FY 2020 hospice final rule (84 FR 38487). This includes rebasing the continuous home care (CHC), inpatient respite care (IRC), and general inpatient care (GIP) payment rates. To offset these increases, CMS reduced RHC payment rates by 2.7 percent. CMS also finalized a policy to use the current year's pre-floor, pre-reclassification hospital inpatient wage index as the wage adjustment to the labor portion of the hospice rates. It also finalized modifications to the hospiceelection statement content requirements at ?418.24(b) for implementation in FY 2021. CMS alsonotes that the Consolidated Appropriations Act (CAA) of 2021 extended the provision that currently mandates the hospice cap be updated by the hospice payment update percentage (hospital market basket update reduced by the multifactor productivity adjustment) rather than the CPI-U until October 1, 2030.

II. Provisions of the Proposed Rule

A. Hospice Utilization and Spending Patterns

This section of the proposed rule describes current trends in hospice utilization and provider behavior including lengths of stay, live discharge rates, skilled visits during the last days of life, and non-hospice spending. It also includes a comment solicitation on analysis of hospital utilization and spending trends.

1. General Hospice Utilization Trends

In examining trends, CMS notes that there has been substantial growth in Medicare hospice utilization. The number of Medicare beneficiaries receiving hospice services has grown from 584,438 in FY 2001 to over 1.6 million in FY 2019. Similarly, Medicare hospice expenditures have risen from $3.5 billion in FY 2001 to an estimated $20 billion in FY 2019. Similar to the increase in the number of beneficiaries using the benefit, the total number of organizations offering hospice services also continues to grow with for-profit providers entering the market at higher rates than not-for-profit providers. CMS states, based on a MedPAC findings, that this is because long stays in hospice have been very profitable and attracted new provider entrants with revenue-generating strategies specifically targeting these patients.1 Growth in share of for-profit hospitals had increased from 61 percent in FY 2014 to 68 percent by 2019.

CMS ongoing analyses continue to show that that there has been a significant increase in the reporting of neurological-based diagnoses, including Alzheimer's disease and other related dementias. Beneficiaries with these terminal conditions tend to have longer hospice stays, which have historically been more profitable than shorter stays.2

CMS analyses show that there have only been slight changes over time in how hospices have been utilizing the different levels of care. RHC consistently represent the highest percentage of total hospice days and payments. In 2019, RHC accounts for 98.3 percent of all hospice days and 93.8 percent of payments.

1 Report to Congress, Medicare Payment Policy. Hospice Services, Chapter 12. MedPAC. March 2020. . 2 MedPAC 2020 March Report, Chapter 12

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2. Trends in Hospice Length of Stay, Live Discharges and Skilled Visits in the Last Days of Life Analysis

Hospital Length of Stay

The number of days that a hospice beneficiary receives care under a hospice election is referred to as the hospice length of stay. The hospice length of stay is variable and depends on a multitude of factors including disease course, timing of referral, decision to resume curative treatment, and/or stabilization or improvement where the individual is no longer certified as terminally ill. CMS examined length of stay during a single hospice election and total lifetime length of stay ? the sum of all days of hospice care across all hospice elections.

In FY 2019, the average length of stay in hospice was 77 days and average lifetime length of stay in hospice was 99 days, about a 3 percent growth from prior year. The median (50th percentile) length of stay was 20 days. CMS also examined average lifetime length of stays associated with hospice principal diagnosis in FY 2019. See Table 6 in the proposed rule (page 22 of the display copy). Hospice beneficiaries with a primary diagnosis of Alzheimer's, Dementia, and Parkinson's had the longest average lifetime length of stay at 169 days and Chronic Kidney Disease had the shortest average length of stay at 44 days.

Hospice Live Discharges

CMS notes that federal regulations limit the circumstances in which a Medicare hospice provider may discharge a patient from its care; it is permissible (under ?418.26) when a patient moves out of the provider's service area, is determined to be no longer terminally ill, or for cause. The hospice cannot discharge the patient at their discretion, even if the care may be costly or inconvenient. To better understand the characteristics of hospices with high live discharge rates, CMS examined hospice live discharge rates over time and by length of stay.3 Overall, CMS found that between 2010 and 2019, the overall rate of live discharges has decreased from 19.3 percent in 2010 to 17.5 percent in 2019. CMS also indicates that the proportion of live discharges occurring between length of stay intervals has remained relatively constant from FY 2016 to FY 2019.

Service Intensity Add-On (SIA) Payment

In the FY 2016 Hospice final rule (80 FR 47142), CMS established two different payment rates for RHC to reflect the cost of providing hospice care throughout the course of a hospice election: a higher base payment rate for the first 60 days and a reduced base payment rate for days 61 and later. CMS also implemented a SIA payment to reflect the higher costs associated with the last 7 days of life when direct patient care is provided by a RN or social worker. The SIA payment is equal to the CHC hourly rate multiplied by the hours of nursing or social work provided on that day of service (up to four hours).

CMS examined claims since the implementation of the SIA payment to determine if there was an increase in RN and social worker visits in the last seven days of life. The data show modest improvement in beneficiaries receiving more skilled nursing and social worker visits during the

3 CMS does not expect the rate of live discharges to be zero, given the uncertainties of prognostication and the ability of beneficiaries and their families to revoke the hospice election at any time.

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last days of life. In 2019, 80.4 percent of beneficiaries received a skilled visit on the last day of life compared with 77 percent in 2015 (the year preceding the SIA payment). SIA payments, on the other hand, have increased from $88 million to $150 million during this period. There were also only modest changes in the average number of minutes provided in the last seven days of life by skilled nursing and social workers on RHC days from CY 2015 to CY 2019. MedPAC reported similar trends in its March 2020 report to Congress.4

3. Non-Hospice Spending During a Hospice Election

CMS also analyzed data on non-hospice spending for hospice beneficiaries during an election using FY 2019 data. CMS emphasizes that hospice services are intended to be comprehensive and inclusive and that since the creation of this benefit, it has reiterated that "virtually all" care needed by the terminally ill individual should be provided by the hospice and that it would be unusual and exceptional for services to be provided outside of the hospice for these individuals.

In FY 2019, the agency found that Medicare paid $692 million for Part A and Part B items or services while a beneficiary was receiving hospice care. Notably, non-hospice spending has increased by 19 percent from FY 2016. In addition, total drug spending by Medicare, states, beneficiaries, and other payers in FY 2016 under Part D was $616 million for hospice beneficiaries during a hospice election (of which $499 million was paid by Medicare). For a prescription drug to be covered under Part D for an individual enrolled in hospice, the drug must be for treatment of an illness or condition completely unrelated to the terminal illness or related conditions. CMS states that the use of prior authorization by Part D sponsors has reduced certain drug categories typically used to treat common symptoms during the end of life, but the use of maintenance drugs (for which Part D sponsors do not use prior authorization based on current policy) has increased.5

Thus, in total, non-hospice Medicare expenditures occurring during a hospice election was $692 million for Parts A and B spending, plus $499 million for Part D spending, or about $1.2 billion in FY 2019. Further, hospice beneficiaries had $170 million in cost-sharing for items and services that were billed to Medicare Parts A and B, and $59 million in cost-sharing for drugs that were billed to Medicare Part D, while they were in a hospice election.

4. Comment Solicitation on Analysis of Hospice Utilization and Spending Patterns

CMS solicits comments on all aspects of the analysis presented in this proposed rule regarding hospice utilization and spending patterns. It is particularly interested in how this change in patient characteristics ? from primarily patients with cancer to patients with neurological conditions and organ-based failure - may have influenced any changes in the provision of hospice services. CMS also solicits comments regarding skilled visits in the last week of life, particularly, what factors determine how and when visits are made as an individual approaches the end of life.

4 MedPAC 2020 March Report, Chapter 12 5 Examples of maintenance drugs include those used to treat high blood pressure, heart disease, asthma, and

diabetes.

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CMS continues to be concerned about the potential "unbundling" of items, services, and drugs from the Medicare hospice benefit. That is, there may be items, services, and drugs that should be covered under the Medicare hospice benefit but are being paid under other Medicare benefits. It is soliciting comments as to how hospices make determinations as to what items, services and drugs are related versus unrelated to the terminal illness and related conditions. That is, how do hospices define what is unrelated to the terminal illness and related conditions when establishing a hospice plan of care. Likewise, CMS solicits comments on what other factors may influence whether or how certain services are furnished to hospice beneficiaries. Finally, CMS is interested in stakeholder feedback as to whether the hospice election statement addendum has changed the way hospices make care decisions and how the addendum is used to prompt discussions with beneficiaries and non-hospice providers to ensure that the care needs of beneficiaries who have elected the hospice benefit are met.

B. FY 2022 Labor Shares

For the FY 2022 proposed rule, CMS proposes to rebase and revise the labor shares for CHC, RHC, IRC and GIP using Medicare Cost Report (MCR) data for freestanding hospices for 2018. The current labor shares for CHC and RHC were established with the FY 1984 Hospice benefit implementation based on the wage/nonwage proportions specified in Medicare's limit on home health agency costs (48 FR 38155 through 38156). The labor share for IRC and GIP were based on skilled nursing facility wage and nonwage cost limits and skilled nursing facility costs per day. CMS proposes to continue to establish separate labor shares for CHC, RHC, IRC, and GIP and base them on the calculated compensation cost weights for each level of care from the 2018 MCR data. CMS states that it did explore the possibility of using facility-based hospice MCR data to calculate the compensation cost weights; however, it found that very few of these reports passed all the necessary edits and were usable.

CMS proposes to derive a compensation cost weight for each level of care that consists of five major components: (1) direct patient care salaries and contract labor costs, (2) direct patient care benefits costs, (3) other patient care salaries, (4) overhead salaries, and (5) overhead benefits costs. For each level of care, CMS proposes to use the same methodology to derive the components; however, for the (1) direct patient care salaries and (3) other patient care salaries, it proposes to use the MCR worksheet that is specific to that level of care (that is, Worksheet A-1 for CHC, Worksheet A-2 for RHC, Worksheet A-3 for IRC, and Worksheet A-4 for GIP). Technical details of the proposed methodology and the specific line items used from the MCR for deriving the compensation cost weights for each level of care can be found in the proposed rule (see pages 35-40 of the display copy).

Table 11 (reproduced below) provides the proposed labor share for each level of care based on the compensation cost weights CMS derived using its proposed methodology. CMS proposes that the labor shares be equal to three decimal places consistent with the labor shares used in other Prospective Payment Systems (PPS) (such as the inpatient prospective payment system (IPPS) and the Home Health Agency PPS). The proposed labor shares are significantly higher for CHC, RHC and IRC, and slightly lower for GIP.

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CMS invites comments on its proposed methodology to derive the labor shares for each level of care.

Table 11: Proposed and Current Labor Shares by Level of Care

Proposed Labor Shares

Current Labor Shares

Continuous Home Care Routine Home Care Inpatient Respite Care General Inpatient Care

74.6% 64.7% 60.1% 62.8%

68.71% 68.71% 54.13% 64.01%

C. Routine FY 2022 Hospice Wage Index and Rates Update

A summary of key data for the proposed hospice payment rates for FY 2022 is presented below with additional details in the subsequent sections.

Summary of Key Data for Proposed Hospice Payment Rates for FY 2022

Market basket update factor

Market basket increase

+2.5%

Required multi-factor productivity (MFP) adjustment

-0.2%

Net MFP-adjusted update reporting quality data

+2.3%

Net MFP-adjusted update not reporting quality data

+0.3%

Hospice aggregate cap amount

$31,389.66

Hospice Payment Rate Care Categories Labor Share FY 2021 Proposed FY 2022

Federal Rates Federal Rates Per

Per Diem

Diem

Routine Home Care (days 1-60)

64.7%

$199.25

$203.81

Routine Home Care (days 61+)

64.7%

$157.49

Continuous Home Care, Full Rate = 24

74.6%

$1,432.41

hours of care, $61.07 hourly rate

Inpatient Respite Care

60.1%

$461.09

General Inpatient Care

62.8%

$1,045.66

Proposed Service Intensity Add-on (SIA) payment, up to 4 hours Note: RHC days account for most of hospice days--98.3 percent in FY 2019.

$161.02 $1,465.79

$474.43 $1,070.35 $61.07 per hour

1. FY 2022 Hospice Wage Index

In FY 2020, CMS finalized its proposal to use the current FY's hospital wage index data to calculate the hospice wage index values. For FY 2022, CMS proposes to use the hospice wage index based on the FY 2022 hospital pre-floor, pre-reclassified wage index. This wage index uses hospital cost reporting periods beginning on or after October 1, 2017 and before October 1, 2018 (FY 2018 cost report data). The appropriate wage index value is applied to the labor portion of the hospital payment rate based on the geographic area in which the beneficiary

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resides when receiving RHC or CHC and applied based on the geographic location of the facility for beneficiaries receiving GIP or IRC.

For the hospice wage index CMS uses the Core Based Statistical Areas (CBSA) labor market area definitions, which are established by the Office of Management and Budget (OMB). They are generally subject to major revisions every 10 years to reflect information from the decennial census, but OMB also issues minor revisions in the intervening years through OMB Bulletins. CMS has previously adopted OMB changes to CBSA delineations for purposes of the hospice labor market areas. On March 6, 2020, OMB issued Bulletin No. 20-01, which provided updates to and superseded OMB Bulletin No. 18-04 that was issued on September 14, 2018.

After reviewing these changes in Bulletin 20-01, CMS has determined that these changes would not affect the Medicare wage index for FY 2022. It notes that while it is proposing to adopt the updates set forth in OMB Bulletin No. 20-01, specific wage index updates would not be necessary for FY 2022 as a result of adopting these updates.

CMS also proposes to continue to apply current policies for handling geographic areas where there are no hospitals. For urban areas of this kind, all CBSAs within the state would be used to calculate a statewide urban average pre-floor, pre-reclassified hospital wage index value for use as a reasonable proxy for these areas. For FY 2022, there is one CBSAs without a hospital from which hospital wage data can be derived: 25980, Hinesville-Fort Stewart, Georgia. The FY 2022 wage index value for Hinesville-Fort Stewart, Georgia is 0.8649. For rural areas without hospital wage data, CMS has used the average pre-floor, pre-reclassified hospital wage index data from all contiguous CBSAs to represent a reasonable proxy for the rural area. However, the only rural area currently without a hospital is on the island of Puerto Rico, which does not lend itself to this "contiguous" approach. Because CMS has not identified an alternative methodology, the agency proposes to continue to use the most recent pre-floor, pre-reclassified hospital wage index value available for Puerto Rico, which is 0.4047.

2. Hospice Payment Update Percentage

For FY 2022, the estimated inpatient hospital market basket update of 2.5 percent (the inpatient hospital market basket is used in determining the hospice update factor) must be reduced by a productivity adjustment as mandated by the ACA (currently estimated to be 0.2 percentage point). This results in a proposed hospice payment update percentage for FY 2021 of 2.3 percent; CMS proposes to revise this amount in the final rule if more recent data become available. It notes that CMS is proposing to rebase and revise the IPPS market basket in the 2022 IPPs proposed rule to reflect a 2018 base year.

CMS notes that the labor portion of the hospice payment rates is currently as follows: for RHC, 68.71 percent; for CHC, 68.71 percent; for GIP, 64.01 percent; and for IRC, 54.13 percent. As discussed in section III.B of this proposed rule, CMS proposes to rebase and revise the labor share for RHC, CHC, GIP and IRC using MCR data for freestanding hospices. The proposed labor portion of the hospice payment rates is as follows: for RHC, 64.7 percent; for CHC, 74.6 percent; for GIP, 62.8 percent; and for IRC, 60.1 percent.

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3. FY 2022 Hospice Payment Rates

In the hospice payment system, there are four payment categories that are distinguished by the location and intensity of the services provided: RHC or routine home care, IRC or short-term care to allow the usual caregiver to rest, CHC or care provided in a period of patient crisis to maintain the patient at home, and GIP or general inpatient care to treat symptoms that cannot be managed in another setting. The applicable base payment is then adjusted for geographic differences in wages by multiplying the labor share, which varies by category, of each base rate by the applicable hospice wage index.6

As discussed above, CMS made several modifications to the hospice payment methodology in FY 2016. CMS implemented two different RHC payment rates: one for the RHC rate for the first 60 days and a second RHC rate for days 61 and beyond and SIA payment when direct patient care is provided by an RN or social worker during the last 7 days of the beneficiary's life. The SIA payment is equal to the CHC hourly rate multiplied by the hours of nursing or social work provider (up to 4 hours total) that occurred on the day of the service. As required by statute, the new RHC rates were adjusted by a SIA budget neutrality factor--a separate factor for days 1-60 and for 61 days and beyond. CMS observes (as show in Table 5 in the proposed rule), that since FY 2016 there have been very minor adjustments needed as the utilization of the SIA from yearto-year remains relatively constant.

In the FY 2017 Hospice final rule, CMS initiated a policy to apply a wage index standardization factor to hospice payment rates to ensure overall budget neutrality when updating the hospice wage index with more recent hospital wage data.7 CMS uses the same approach in other payment settings such as under Home Health Prospective Payment System (PPS), Inpatient Rehabilitation Facility PPS, and Skilled Nursing Facility PPS. To calculate the wage index standardization factor, CMS simulated total payments using the FY 2022 hospice wage index and compared it to its simulation of total payments using the FY 2021 hospice wage index. By dividing payments for each level of care using the FY 2022 wage index by payments for each level of care using the FY 2021 wage index, CMS obtained a wage index standardization factor for each level of care (RHC days 1-60, RHC days 61+, CHC, IRC, and GIP). CMS also calculates a labor share standardization factor that uses the current labor shares in compared to the proposed revised labor shares.8 These factors are shown in the tables below.

Tables 12 and 13 of the proposed rule (reproduced below) lists the proposed FY 2022 hospice payment rates by care category and the proposed wage index standardization factors.

6 In FY 2014 and for subsequent fiscal years, CMS uses rulemaking as the means to update payment rates (prior to FY 2014, CMS had used a separate administrative instruction), consistent with the rate update process for other Medicare payment systems. 7 CMS uses 2020 claims data to calculate the wage index standardization factor (the most recent available). Due the potential effects of COVID-19 PHE, CMS examined whether using 2019 claims data would result in any significant differences but found minimal difference between using 2019 and 2021 claims data. 8 This factor is included in the table calculations because of the difference between the current and proposed labor shares in this year's rule.

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