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Assistance in Managing Your Hospice CAP

Annual payments by the Medicare program to a hospice for services to Medicare program beneficiaries are subject to a cap on aggregate payments (“CAP”), which is prescribed by law.  Each year (November 1st through October 31st) payments made by the Medicare program are compared against the CAP and, to the extent payments exceed the computed payments, the hospice is responsible for repaying the Medicare program the excess of payments received over the computed CAP.

The existing method for counting Medicare beneficiaries, which is used to compute the CAP (“Streamlined Method”), has been the subject of substantial litigation.  A number of district courts and two appellate courts have ruled that the current CMS methodology for computing the number of Medicare program beneficiaries is not consistent with the statute.  As a result, CMS has issued final rules to provide an alternate computation and to allow hospices certain election opportunities regarding the two methods of computing the CAP.

The two methods for computing the CAP are as follows:

Streamlined Method – The current method being used for computing the CAP is being referred to as the Streamlined Method.  Under this method the number of program beneficiaries used to compute the CAP represents those initial admissions between September 28th and September 27th of each year.  The computed CAP is then compared against payments for services rendered to Medicare program beneficiaries during the period of November 1st and October 31st of each year (referred to as the CAP Year).  To the extent that the CAP is less than the payments made and to be made, a liability is determined which is to be repaid to the Medicare program.

Patient by Patient Proportional Methodology – Under the Proportional Methodology a hospice includes in its number of Medicare program beneficiaries only that fraction that represents the portion of a patient’s total days of care in all hospices and all years that was spent in that hospice in the applicable CAP Year.  This methodology has been inferred in the litigation which triggered the proposed rules.

The Rule implements the computation change and election as follows:

Hospices Currently Eligible for the Proportional Methodology – CMS issued a Ruling (1355-R) on April 15, 2011.  This Ruling provides that any hospice which has filed a timely administrative appeal of the current CAP computation method (Streamlined Method) is eligible to have the CAP computed under the Proportional Method and that the MAC is to recalculate the CAP for the year under appeal.

CAP Years Ending on or Before October 31, 2011 – Ruling 1355-R only applies to those hospices that have received an overpayment determination and filed a timely administrative appeal.  These hospices once receiving relief and having the CAP determined on the Proportional Method, are subject to having all future CAP computations made under the Proportional Method and cannot revert to the Streamlined Method.  Those hospices not receiving relief under Ruling 1355-R, which have never received a CAP determination, may elect to have the October 31, 2011 CAP computed under the Proportional Method.  This election is to be made during the period beginning October 1, 2011 but before receipt of the 2011 (or prior) cap year determination and, once made, would apply to all future CAP computations.  Those not making the election as of  would continue to have the Streamlined Method used for the CAP year ending October 31, 2011 and prior years.

CAP Years Ending on or After October 31, 2012 – For CAP Years Ending on or After October 31, 2012 all CAP computations will be made under the Proportional Methodology; however, hospices that have not previously elected to have the Proportional Method used may elect to continue to have the Streamlined Method applied to them.  This election to continue to use the Streamlined Methodology must be made no later than 60-days following the receipt of the 2012 CAP determination.  Newly created hospices will have their CAP computations made under the Proportional Method and, accordingly will not have an election to apply the Streamlined Method.    Hospices that elect to retain the Streamlined Methodology may later elect to use the Proportional Method by making an appropriate election or appealing a CAP computation calculated under the Streamlined Method.  Once the Proportional Method is applied to any CAP year the hospice may not revert to the Streamlined Method.

Be Careful What You Ask For – As discussed in the Rule; “past cap year determinations may be adjusted to prevent the over-counting of beneficiaries, notwithstanding the ordinary limitations on reopening.”  The reopening period has been defined as three (3) years.  It is possible that making the October 1, 2011 election could expose you to a CAP liability that did not exist under the Streamlined Method.

Hospices need to make computations as quickly as possible regarding the impact that conversion to the Proportional Method would have on previously computed CAPs to ensure that the hospice is not exposed to an overpayment that did not exist under the Streamlined Method (October 1, 2011 is currently the first election date for certain hospices).  To the extent that the CAP amount computed under the Streamlined Method exceeds the actual payments received, such excess is not available for inclusion in future CAP computations; in essence it is lost.  For hospices approaching the CAP under the Streamlined Method, an election to the Proportional Method, assuming no overpayment is created in prior years, may be wise to have such additional amounts available for future computations.

Regardless, hospices need to revisit prior years and current year computations using admission dates, days of services by CAP year (including other hospice days when such hospices may have served those patients), and annual per-beneficiary CAPs for purposes of making their historical and annual computations to better ensure that it makes an appropriate election.  This computation must be made using information for all Medicare patients served.  Remember, once the Proportional Method is accepted or subsequently elected, the hospice can never again, under the Proposed Rule, return to the Streamlined Method.

The election, or failure to make an election, can have a significant impact on the hospice’s reimbursement for prior years, the current year, and future years.  Even those hospices that have never been impacted by the CAP need to take the proposed changes and alternatives available very seriously.  Assuming October 1, 2011 is the first election opportunity for certain hospices, there is little time to be prepared if an election on that date is to the hospice’s economic advantage.  Those hospices having until 2012 to make an election should be making historical computations now while data is more readily available.  All hospices will need to continue to make computations under the Proportional Method; (1) those hospices that elect to continue with the Streamlined Method after 2012 should make computations on a continuous basis for purposes of continuing assessment of the potential election and (2) those converting to the Proportional Method need to continue to make computations for liability awareness and recognition.

The Health Group, LLC is available to provide you with a Special Report regarding your CAP election.  This report will provide estimates regarding your current CAP status, retention of the Streamlined Method or election of the Proportional Method.  If you are interested in having this Special Report prepared for your hospice please contact me.  My email address is ted.cuppett@healthgroup.com.  The following information is needed to complete the Special Report:

 (1)    Electronic spreadsheet that includes the following information on Medicare patients (the list is to identify those patients that were served by other hospices in addition to your hospice):

  1. a.       List of patient admitted from September 28, 2007 through the present time,
  2. b.      Date of admission to the program,
  3. c.       Date of death or discharge from the program,
  4. d.      Billings for each patient for services rendered during the following periods:
    1.    i.      November 1, 2007 through October 31, 2008,
    2.    ii.      November 1, 2008 through October 31, 2009,
    3.    iii.      November 1, 2009 through October 31, 2010, and
    4.    iv.      November 1, 2010 through date information is submitted to us.

(2)    Letter from Medicare Administrative Contractor regarding CAP for years ended October 31, 2008, 2009, and 2010 if received, and

(3)    PSRR Reports for years ending October 31, 2008, 2009, and 2010, and from November 1, 2010 through the date information is submitted,

We do not recommend making the election without assessing the information and estimating the historical impact, if any.  However, you will be able to make a follow-up election at the time you receive your next CAP letter from the MAC; however, it not totally clear at this time if you will be able to have the Proportional Method applied to the CAP year ending October 31, 2011 without making the election.  Accordingly, this information is necessary to make appropriate decisions.  It is clear that you will have an opportunity to again elect the Proportional Method within 60-days of receiving your October 31, 2012 CAP determination letter.  If you have already perfected an administrative or other action resulting in the application of the Proportional Method, you have no election available.  Likewise if you are a newly certified hospice you have no election available.

Inasmuch as the electronic spreadsheet contains patient specific information, we will sign a Business Associate Agreement relating to the privacy of that information.

If you have any questions regarding this letter or this matter, do not hesitate to contact us.  This issue will be covered at our upcoming educational program scheduled for October 31 – November 2, 2011.