(304) 241-1261 contact@healthgroup.com

Volume 21.03

The Medicare Payment and Advisory Commission (“MedPAC”) recently recommended that “For fiscal year 2022, the Congress should eliminate the update to the 2021 Medicare base payment rates for hospice and wage adjust and reduce the hospice aggregate cap by 20 percent.”

Our exposure to hundreds of hospices annually clearly indicates that the number of hospices exceeding the CAP continues to grow. According to MedPAC, “In 2018, about 16 percent of hospices exceeded their CAP.” We expect the number of hospices exceeding the CAP for the 2018 CAP Year to exceed MedPAC’s estimate of 16%. Even so, it is apparent that MedPAC is encouraging the government to use the CAP as a means for penalizing hospices that are reporting, in their opinion, excessive Medicare margins (payments over costs) created primarily because of long episodes of care. Based on the MedPAC report, the following summarizes hospice episodes of care by length:

Episodes 5 days or less 25%
Episodes of 6-18 days 25%
Episodes of 19-85 days 25%
Episodes of 86-265 days 15%
Episodes of 266 days or more 10%

MedPAC estimates that the modification to the CAP would cause 28% of hospices to exceed the CAP, thereby generating a 3.2% reduction in Medicare payments, assuming no changes in utilization. While such a change would generally affect hospices with higher margins, before repayment of the CAP liability, the change would also significantly impact many rural providers unable to survive payment reductions that would result.

The MedPAC Report also provides discussion regarding the establishment of multiple routine home care rates covering days 1-7, days 8-14, days 15-30, days 31-60, and days 61+. Under such an alternative payment structure, payments would increase for the first 7 days, remain the same for days 61+, and decrease for all other groups. The Report also discusses the merit of making a payment adjustment for very long hospice stays and the establishment of episodic payments rather than a daily payment.

The Report refers to the 2018 margins of hospices exceeding the CAP at 21.8%, but then makes the point that, after repaying the CAP, the margins are 10.1%. This means margins are not 21.8%, rather they are 10.1%. It is important that Congress understand that reducing the CAP by an arbitrary 20% will have significant financial consequences to many hospices and will negatively impact access to care for many patients. This is not the proper approach to address excessively long hospice episodes of care. Rather this approach is not different than penalizing an entire group based on the actions of one member of the group.

There are many other forms of payment reduction and/or modification that would focus on the problem of excessively long episodes of care, and the margins these episodes may generate, rather than potentially penalizing all hospice providers.

Geographical adjustment to the CAP, with some phase-in period is justifiable and eliminates the discriminatory nature of the CAP itself; however, any such change must be transparent in calculation.

We encourage hospices to familiarize themselves with the MedPAC Report to Congress.


The Health Group, LLC has scheduled to return to live programming on September 13-14, 2021 with the Hospice Financial Management Academy. This program will be held at the Paris Hotel & Casino, Las Vegas, Nevada. There will be limited attendance. More details will be forthcoming; however, expect significantly expanded CAP discussion including hands-on monthly monitoring of CAP and potential CAP liabilities.