Avoiding the Cap Trap What Every Hospice Needs to Know. Matthew Gordon, CPA Principal Consultant / Founder Cap Doctor Associates, Inc.

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1 Avoiding the Cap Trap What Every Hospice Needs to Know Matthew Gordon, CPA Principal Consultant / Founder Cap Doctor Associates, Inc.

2 Overview 11% of hospices exceeded the cap in 2012 with an average overage of $510K (Medpac, Report to the Congress: Medicare Payment Policy, March 2015) Many hospice have very little visibility into cap liability until long after the cap year ends Hospices sometimes aren t notified of a liability until several years after a cap year ends Solution needed to track and manage cap risk during the cap year on a proactive basis

3 Why Is There a Cap? A way for the government to protect the savings expected from hospice utilization Guard against misuse of hospice care

4 What is the current cap amount? For cap year 2016, the cap amount is $27,821 per beneficiary (lifetime amount granted to providing hospice(s), regardless of if patient is on hospice care for 4 days or 4 years) This equates to around 180 days of hospice care using standard RHC rates Cap will increase each year based on the hospice payment update percentage For cap year 2017, the $27,821 cap will be increased by the payment update percentage of 2.1% to $28,405 Although measured as a lifetime amount at the patient level, cap is calculated in aggregate at the provider level

5 Proportional vs. Streamlined Unless you made a one-time election in 2012 to stay with the streamlined method, you now report based on the proportional method (or if you started business after 2012) Proportional beneficiary credit is allocated among hospice providers and cap years based on actual dates of service Streamlined full beneficiary credit (1.0) given in cap year of admission, as long as patient has not (and does not in the future) receive any hospice care from another provider Once this happens, that patient is reported via the proportional method NOTE: 2017 is a transitional 11-month cap year to align with the federal fiscal year end of 9/30. Streamlined hospices will get to count 12 months of beneficiary credits against just 11 months of reimbursement.

6 Example #1 Admit & Death in same cap year 11/1/14 12/20/14 7/12/15 11/1/15 Admit Death Hospice receives credit of 1.0 in cap year 2015

7 Example #2 Death in next cap year 11/1/14 12/20/14 11/1/15 1/26/16 Admit Death Hospice credit is prorated by days between cap year 2015 and 2016 Cap 2015 Cap 2016 Total Days Cap Credit Cap Dollars $ 21,359 $ 6,120 $ 27,479 (if streamlined, hospice gets full 1.0 credit in first cap year)

8 Example #3 Revocation & new hospice 11/1/14 12/20/14 11/1/15 1/26/16 3/29/16 7/14/16 Admit Revokes Admit New hosp Death Hospice credit is prorated by days AND Hospices between cap year 2015 and 2016 Hospice A Hospice A Hospice B Cap 2015 Cap 2016 Cap 2016 Total Days Cap Credit Cap Dollars $ 16,954 $ 4,727 $ 5,868 $ 27,549

9 Cap Year 2014 Credit Distribution Example Grand Total Patient Patient Patient Patient Patient Patient Patient Patient Patient Patient Patient Patient

10 Cap Risk Factors Long Average LOS Quick test: is census divided by average monthly admits >4? High Live Discharge rate above 25-30% Low New Medicare admit % - below 80% Smaller sized hospice Admissions declining over time

11 Cap Mitigation - Discharging Not recommended as a solution for cap problems Has varying financial implications depending on patient Example: patient admitted on first day of prior cap year and lives through entire second cap year Decision point days left in cap year Revenue Cost Cap cred. Cap pmt. Total 1) Keep patient $ 14,000 $ (6,000) 0.50 (365/730) $ (14,000) $ (6,000) 2) Another hospice $ - $ (265/730) $ (3,811) $ (3,811) 3) No hospice $ - $ (265/630) $ (2,208) $ (2,208) At best, will save you most of the cost to service that patient At worst, you forfeit $8,000 of margin by discharging

12 Cap Mitigation Discharging (cont.) Scenario change: patient admitted on first day of current cap year and lives through entire current cap year 1) 2) 3) Decision point days left in cap year Revenue Cost Cap cred. Cap pmt. Total Keep patient $ 14,000 $ (6,000) 1.0 (365/365) $ (14,000) $ (6,000) Another hospice $ - $ (265/365) $ (7,622) $ (7,622) No hospice $ - $ (265/265) $ - $ - In this example, worse off financially by discharging if patient goes to another hospice

13 Cap Mitigation Short LOS admits Increasing your patient mix of short LOS is the only true solution for cap problems 3 ways to drive: Referral source analysis either internal or via external database Hospital arrangement Dialysis center partnership NOTE: For streamlined hospices, driving admits is the name of the game (short LOS not necessarily needed), since full credit is granted in first year of admission

14 Cap Tracking Process Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Admits Average Census Deaths Discharges (includes deaths above) Discharge % of ADC 14% 14% 21% 18% 20% 16% 15% 18% 18% 18% 18% 18% Medicare revenue estimate $ 507,064 $ 507,064 $ 342,611 $ 456,814 $ 365,451 $ 351,747 $ 370,020 $ 365,451 $ 352,682 $ 337,815 $ 315,607 $ 316,559 $ 4,588,886 PS&R beneficiary credits Incremental credits for admits 80% Credits at self-reporting (2/1) 4.5% $ 4,173,536 Cushion/(Liability) $ (415,350) Post-erosion credits 15.0% $ 3,714,665 Cushion/(Liability) $ (874,221) Erosion & Cap Position forecasted for two future points in time Self reporting event in Feb/Mar Long term (3 years out) this can vary widely by hospice, for proportional hospices can range from 5%-25% Streamlined hospices will have lower erosion

15 Receiving Cap Letters Pay up front or request payment plan 3 year look-back period resets when cap letter is issued Multiple letters for a single cap year is the norm due to continuing erosion of beneficiary credit over several years As long as some number of patients from a prior cap year are still living, erosion will continue Cap liability can never be truly final until all patients served in a given cap year are deceased If hospice reports via streamlined method, can evaluate cap impact of flipping to proportional Must select this in advance of cap determination Need to weigh the impact on prior year cap calculations regulations allow re-opening back to 2012

16 Self-Reporting Process Run PS&R as soon as February 1st hits Deadline for reporting and submitting any payment owed is March 31st Point in time cap estimate - not a final measurement

17 Q&A