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Hospice Reform: 5 Practical Options


The word “hospice” often conjures up negative feelings in patients, families and physicians. Simply put, hospice has a marketing problem—it is associated with death, defeat and, worst of all, giving up hope. However, hospice is not about giving up hope. It is about making the most of the time we have left.


President Carter’s recent publicity and experience with Hospice is helpful, but Hospice's marketing problem goes deeper. Medicare regulations actually discourage the use of hospice but there are practical options to reform them:

  1. The first regulatory barrier is the requirement that physicians certify a patient will die in six months. This barrier has no scientific basis behind it - there is no evidence that physicians can accurately predict a patient’s death six months in advance. This requirement has a chilling effect on physicians discussing hospice care with patients. What physician wants to tell a patient they believe the patient will die in six months? The answer is none. As a result, the typical hospice stay is a mere 18 days, because the physician has delayed enrollment until the patient is at death’s door. There is a simple way to change the regulation on eligibility for hospice, which is to follow the criteria used by the original hospice: make any patient with a terminal diagnosis eligible for the hospice benefit.

  2. The second regulatory barrier is the requirement that patients give up their regular Medicare coverage to receive hospice care. The alleged rationale is that Medicare cannot afford to give patients both of these benefits. Again, this health policy has a chilling effect on patients, families and physicians. It is viewed as giving up hope because patients give up the security of regular Medicare coverage and future treatment. The evidence, however, does not support Medicare’s stinginess. Medicare ran a multi-year pilot project where patients were allowed to keep both benefits (traditional Medicare and Hospice). What was the result? Patients appreciated this flexibility and gradually the patients only used the hospice benefit. In fact, Medicare saved money: Costs for patients in the pilot program were one-third lower than patients staying on the regular Medicare.

  3. The third regulatory barrier relates to fraud and abuse laws. Medicare assumes that patients who are in hospice for more than six months are suspect and should either be discharged from the hospice benefit or go through a recertification process to continue using the benefit. When President Carter surpassed the six-month mark in hospice, I somehow doubt he went through this bureaucratic recertification process. Why should he? And more to the point, why should anyone else? The thinking behind this requirement is penny-wise and pound-foolish. A recent study by the University of Chicago documented that patients in hospice save Medicare $3.2 billion annually. In fact, the longer the hospice stay, the more Medicare saved. Why should we care about patients staying longer than six months in hospice?

  4. The fourth regulatory barrier is the reimbursement formula used to pay hospice providers. Hospice was meant to be affordable and low-tech. Unfortunately, Medicare makes Hospice complex by using an excessively burdensome coding system to pay for this benefit. Coding is volume-driven and has been shown to encourage fraud. All of a sudden, the private equity and venture capitalists have discovered hospice as a profit opportunity because of the coding payment formula. Today, 70 percent of hospice providers are for-profit and doing quite well with margins of 15-20 percent. Meanwhile, non-profit hospices are declining and experiencing margins of 1-3 percent. Why the difference? The for-profits will say they are more efficient. Of course, that depends on what you mean by efficient. The for-profits focus on maximizing coding revenue, cherry-picking the high-margin patients and skipping labor costs (i.e. patient care). The evidence would support these observations. There is a simple solution to this dilemma - and it is not more fraud and abuse oversight. Pay for hospice services by using a cost reimbursement payment model - not the complex coding model. This payment model would eliminate the profit motive, eliminate fraud (because volume is no longer the basis for payment) and eliminate the cherry-picking of patients (because all patients are paid the same - according to their cost). Moreover, it would be easier and more cost-efficient to administer.

  5. The fifth regulatory change would be to enhance home care benefits for hospice. Families taking care of patients at home need more support. Medicare gladly pays for ICU, transplants, renal dialysis, ventilators and feeding tubes for dying patients. These treatments are generally ineffective and exceedingly expensive. All of these costly services are avoided in hospice (as evidenced by the multibillion-dollar savings noted in the University of Chicago study). Medicare should allocate some of those savings to homecare and offer patients a lifetime benefit of 600 hours of homecare.

President Carter’s recent experience with hospice is a wonderful illustration of how beneficial hospice is for patients, families, and society. These five medicare reforms would go a long way to making hospice more accessible and patient/family friendly for all Americans. It would also save billions annually for Medicare.



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