July 26, Dear Ms. Stein-Ordonez:

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1 Department of Health & Human Services Centers for Medicare & Medicaid Services 233 North Michigan Avenue, Suite 600 Chicago, Illinois Refer to: July 26, 2002 Michelle Stein-Ordonez, Policy Analyst Office of Medicaid Policy and Planning Long Term Reimbursement 402 West Washington Street, Room W382 Indianapolis, Indiana Dear Ms. Stein-Ordonez: This is in response to Indiana's request for guidance on hospice issues, as expressed in the State's letters dated November 13, 2001 and February 27, These letters present the State's hospice policy in response to issues raised by hospice and nursing facility providers. The following clarifications are a result of CMS review involving discussions between Central Office staff, Regional Office (RO) staff and the Indiana Office of Medicaid Policy and Planning (OMPP). Most of the questions and discussion in your letters of November 13, 2001 and February 27, 2002 relate to payment arrangements between hospices and nursing facilities for services provided to Medicaid eligible residents of nursing facilities who elect hospice care. As far as CMS is concerned, hospices and nursing facilities have wide discretion in structuring these arrangements, so long as the hospice pays the facility at least 95% of the Medicaid facility rate, and provides substantially all of the core services itself; the hospice can pay the nursing facility to provide other non-core services if the hospice provides the requisite professional management. However, payment arrangements between hospices and nursing facilities do raise additional concerns under the fraud and abuse statutes and authorities. Those authorities are within the purview of the Department s Office of the Inspector General ( OIG ). Its concern is not whether a specific payment arrangement is lawful or proper under Medicare reimbursement rules, but whether payments under the arrangement are made, in part, in return for referrals of, or access to, hospice patients. In the OIG Special Fraud Alert you referenced, the OIG identified certain payment practices that were suspect and would be subject to scrutiny. Identification of a particular practice as suspect does not mean the practice is necessarily illegal in every circumstance. In an attempt to respond to Indiana s concerns, CMS has conferred with the OIG and believes that the following comments are consistent with OIG policy and practice. In particular, we have clarified with the OIG that, absent aggravating circumstances, payments to a nursing facility by a hospice provider should not trigger scrutiny so long as any amounts in excess of the Medicaid daily nursing facility rate are limited to reimbursement of the nursing facility s costs for non-core medical services, supplies, and therapies provided to the hospice patient that are non-routine for nursing facility residents and that are related to the hospice patient s terminal medical condition. (A payment to a supplier affiliated with the nursing facility would count as a payment to the nursing facility.) Using that standard as a benchmark, we have attempted to respond to the specific questions you posed.

2 Page 2 Regional Office Memo Dated December 28, 2001 The RO and the State raised the issue of how a State can provide hospice and home and communitybased services (HCBS) to the same consumer. A HCBS waiver recipient residing at home may elect hospice care and continue to receive waiver services if the waiver services are non-medical and noncurative. (Generally, home and community-based waiver services are non-medical, non-curative support services.) However, the State plan services that are generally available to waiver recipients would not be available, if they are for curative purposes. Only those services rendering palliative care are available to hospice patients. We recommend that the case manager of waiver services ensure that the services provided under the waiver program are non-medical, non-curative and do not duplicate the services provided under the hospice benefit. It is important to note that a HCBS waiver recipient who moves into a nursing facility for the purposes of receiving hospice care, may not continue to receive waiver services. The RO and the State (on page 6 of Nov. 13, 2001 letter) asked whether a hospice provider can pay a nursing facility prior to the receipt of payment from Medicaid without it being perceived as fraud or a kickback under the Office of the Inspector General (OIG) standards. As a general rule, a hospice provider may pay a Medicaid-certified nursing facility for the cost of room and board of a hospice patient prior to receiving reimbursement from Medicaid. However, this advance payment should be for a purpose such as relieving a nursing facility's cash flow problem, and should not be for the purpose of an inducement for patient referral. Notwithstanding the general allowance of advance payment, it should be noted that the responsibility for meeting pre-admission screening and resident review requirements and for meeting Medicaid nursing facility level of care eligibility requirements continues to rest with the nursing facility. Hospice providers who pay for room and board in advance, run the risk of Medicaid nonpayment should any of the above noted requirements fail to be met. Indiana's November 13, 2001 Letter Issue One-- Maximum Payment Amount for Room and Board, page 2 OIG has clarified that payments by a hospice provider for room and board services may not exceed the Medicaid daily rate that the nursing facility would have received had the nursing home facility resident not elected hospice. In the interest of deterring fraud and abuse, CMS agrees with OIG's position. Issue Two-- Contractual Documentation, page 2 OIG has stated that the contract between the nursing home and the hospice provider must separately identify the room and board services from any additional non-core services, and the rates for each. CMS has always encouraged both parties to enter into a contract delineating who is responsible for what service(s), including what services are covered under room and board.

3 Page 3 Definitions Section and Per Diem Charts, pages 2, 3 CMS concurs with the State's definitions of hospice core and non-core services, including the comparison chart, with the exception that hospice physician services are no longer considered core services as specified in the Balance Budget Act of Issues the OMPP Has Already Addressed to Hospice Providers, pages 3-6 Question 1. If the hospice provider pays the nursing facility 100% of the Medicaid nursing facility per diem for room and board, can the hospice provider also pay the nursing facility an additional amount for oxygen and other supplies used in the care of the patient's terminal illness? Indiana has correctly applied the principles stated in the OIG Special Fraud Alert. If the provision of oxygen in these circumstances is considered by Indiana to be a routine service for Medicaid residents of the nursing facility, than an additional payment that results in the facility receiving more than 100% of the Medicaid daily nursing facility rate would be suspect. However, if the provision of oxygen is non-routine and related to the patient s terminal illness, payment by the hospice either to the nursing facility or an affiliated supplier for its actual costs or directly to a supplier not affiliated with the nursing facility would be unlikely to trigger OIG scrutiny, even if the payment resulted in an aggregate payment exceeding 100% of the Medicaid daily nursing facility rate. From CMS viewpoint, the payment is appropriate since these services are non-core services and may be contracted out. Question 2. What is included in the nursing facility room and board per diem under the hospice benefit? What do you mean by DME and prescribed therapies? Are they part of the services billed and reimbursed through the hospice specific revenue codes? In light of the fact that primarily the response to this question involves day-to-day operational policy which is the responsibility of the State to establish, CMS defers to OMPP. CMS notes that OMPP's policy regarding this question is reasonable and does not appear to violate federal law and regulations. Question 3. If a hospice member resides in a nursing facility, who must administer an IV at 3 a.m. for treatment of the terminal illness, the hospice nurse or the nursing facility nurse? Similarly, if a hospice member requires dressing changes, when would hospice administer the dressing changes? Same position as in response to question 2 above. Question 4. It is so confusing when hospice non-core services are similar to nursing facility room and board per diem under the Medicaid hospice benefit. How can it be determined what services the hospice pays the supplier for, and what services the nursing facility pays the supplier for, under the nursing facility room and board per diem under the Medicaid hospice benefit? Refer to response to question 1. Question 5. Who pays for dietary drinks such as Ensure--the nursing facility or the hospice provider?

4 Page 4 Question 6. Who pays for adult diapers such as Depends for the hospice member residing in the nursing facility--the hospice or the nursing facility? Question 7. (mislabeled 6 on page 6) The hospice patient has a wound as a result of the terminal condition. The hospice nurse is required to change a special dressing for the wound care. Can the hospice bill the nursing facility for the special dressing? Question 8. (mislabeled 7 on page 6) The hospice patient in the nursing facility has a hospice primary diagnosis of heart disease. The patient falls and breaks his hip in the nursing facility. The hip dislocation has no relation to the terminal illness or related conditions--who takes care of the physical therapy? CMS concurs with OMPP's response regarding who is responsible for the delivery of the physical therapy. Question 9. (mislabeled 8 on page 6.) If there is an overlap of conditions (terminal diagnosis with non-terminal diagnosis), who is responsible for providing services such as medical appliances and supplies, medications or therapies? Same position specified in the response to questions 2 and 3 regarding day-to-day operational issues and in compliance with our response to question 1. Areas That OMPP Requests CMS Policy Clarification on Proposed Policy, pages 6, 7 Issue 1. CMS' position regarding pre-payment of room and board to the nursing home is stated in paragraph 3 on page 1 of this memorandum provided there is no double payment to the nursing home for the patient for that month. Issue 2. CMS concurs that hospices and nursing facilities, when developing their contracts, should consider addressing the issues raised by the State on page 7. Indiana's February 27, 2002 Letter Case Specific Example Number 1, pages 1-2 We concur with OMPP that the hospice s payment of 95% of the nursing facility case mix rate for room and board services is permissible. Consistent with the guidance in the response to question 1 above, the pertinent question with respect to additional payments for oxygen and medical supplies is whether they are considered by Indiana to be a routine for Medicaid residents of nursing facilities. If so, aggregate payments from the hospice to the nursing facility that exceed 100% of the Medicaid nursing facility daily rate would be suspect under the fraud and abuse laws. If, on the other hand, the oxygen and medical supplies are non-routine and related to the patient s terminal illness, the hospice may pay the nursing facility (or an affiliated supplier) its actual costs, or the hospice may obtain the

5 Page 5 oxygen and medical supplies from an independent supplier. For example, as noted above in question 6, it would be proper for a hospice to pay for a special dressing for wound care related to a patient s terminal illness. Case Specific Example Number 2, pages 3-5 Example No. 2 seeks verification that a hospice may pay a nursing facility at 95% of the nursing home daily rate and then also pay separately for specific supplies, DME, or other services that are provided as part of the patient s hospice plan of care. We refer you again to the guidance in question 1 above. So long as the total aggregate payments to the nursing facility (including affiliated suppliers) do not exceed 100% of the Medicaid nursing facility daily rate, the arrangement described in the example should not raise concerns. Amounts paid to the nursing home above 100% of the Medicaid nursing facility daily rate should be limited to non-routine equipment, supplies, and therapies that are related to the patient s terminal illness and that are paid to the nursing home or an affiliated supplier at cost or obtained from an independent supplier. Case Specific Example 3, page 5 In light of the fact that the response to this case involves a review and analysis of the contract, CMS defers to OMPP. OMPP s explanation of the cessation of direct Medicaid payment to the nursing facility once a patient elects hospice is accurate. Case Specific Example 4, page 5 Same position as for case specific example 3 above. Case Specific Example 5, page 5 Same position as for case specific example 3 above, and with the same explanation and cautionary note given on page 2, paragraph 2 of the section entitled Regional Office Memo Dated December 28, Thank you for giving us an opportunity to review Indiana OMPP's hospice policy. If you have any further questions or concerns, please contact Jean Hall at , jhall@cms.hhs.gov, or Thomas Shenk at 410/ , tshenk@cms.hhs.gov. Sincerely, /s/ Alan Freund Manager IL/IN/OH Operations Branch Division of Medicaid and Children's Health