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Study Says Medicare Cuts Will Send Hospice Industry into Profit Loss

Hospice group, NHPCO, backed study says 88 percent could have negative margins by 2019

March 7, 2011 The profit margin for companies providing hospice care could decline from the two percent it achieved in 2008 to a negative 14 percent by 2019 due to recent cuts to Medicare reimbursements, according to the results of a survey released today by the National Hospice and Palliative Care Organization. The independent study was commissioned by NHPCO.

The organization cites the two recent cuts in the Medicare pay for hospice care as being in the regulatory and statutory areas. The study analysis also concludes that 88 percent of hospice programs could have negative margins by the 2019 date.


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Hospices caring for Americans in rural areas would be the most severely affected, with median profit margin decreases ranging from minus 2 percent in 2008 to minus 19 percent by 2019.

The NHPCO said the study is part of its ongoing work to protect patient access to hospice in America.

"This analysis confirms our worst fears," said J. Donald Schumacher, president and CEO of NHPCO.  "With the entire hospice community rural and urban, large and small, community-based and multi-state being hit by the same devastating slope downward, there is no way for patient access to not be negatively impacted."

The Centers for Medicare and Medicaid Services initiated a seven-year phase out of the Budget Neutrality Adjustment Factor beginning in 2009 (FY2010). The BNAF is a key element in the Medicare hospice wage index calculation. The phase out of the BNAF will ultimately result in a permanent reduction in hospice reimbursement rates of approximately 4.2 percent.  

The 2010 Patient Protection and Affordable Care Act (ACA) imposed an additional change to the Medicare hospice rate formula that will further cut hospice payments by approximately 11.8 percent over the next ten years through the introduction of a "productivity adjustment" that is applied to the annual payment updates for hospice.   Hospices care almost exclusively for Medicare and Medicaid beneficiaries.

NHPCO's advocacy and lobbying affiliate, the NHPCO Hospice Action Network (www.hospiceactionnetwork.org) is currently pursuing legislation that will soften the cuts to hospice programs.  Additional advocacy efforts also include promoting accountability and transparency within hospice, while ensuring access to high quality end of life care for future generations of Americans.  

The hospice community's largest and most representative annual lobby day is April 6, with hundreds of Hospice Advocates expected to be on the Hill asking for relief from the cuts.  The effort will be supported by thousands of Hospice Advocates who will participate through a virtual lobby day event that week.  The nation's hospices employ approximately 200,000 medical professionals, administrators, social workers and clergy nationwide.  

"NHPCO and the Hospice Action Network have been engaged in a long-term, multi-phased strategy to soften the cuts to hospice reimbursement since the first cuts were announced in 2008," said Jonathan Keyserling, executive director of the NHPCO Hospice Action Network.

"Congress should expect to hear a unified hospice voice on Capitol Hill next month, asking for relief on behalf of the 1.5 million patients, and their families, who depend on high-quality, compassionate end-of-life care each year."

The trend analysis was performed by The Moran Company using 2008 Medicare Healthcare Cost Report Information System (HCRIS) and the 2008 Medicare Hospice Claims Standard Analytic File (SAF) (100%), in addition to information provided by NHPCO that projects annual estimated changes in hospice reimbursement rates outlined in the ACA and the proposed rule.


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