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Longer Lives Could End Up Costing Hospices Millions

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By KEVIN SACK, The New York Times

Published: November 30, 2007

CAMDEN, Ala. - Hundreds of hospice providers across the country are facing the catastrophic financial consequence of what would otherwise seem a positive development: Their patients are living longer than expected.

During the past eight years, the refusal of patients to die according to actuarial schedules has led the federal government to demand that hospices exceeding reimbursement limits repay hundreds of millions of dollars to Medicare.

The charges are assessed retrospectively, so in most cases the money has long since been spent on salaries, medicine and supplies. After absorbing huge assessments for several years, often by borrowing at high rates, a number of hospice providers are bracing for a new round that they fear may shut their doors.

One is Hometown Hospice Inc., which has been providing care since 2003 to some of the most destitute residents of Wilcox County, the poorest place in Alabama.

The locally owned, for-profit agency, which serves about 60 patients, mostly in their homes, had to repay the government $900,000, or 27 percent of its revenue, from its first two years of operation, said Tanya O. Walker-Butts, a co-owner. Its profits were wiped out in the time it took to open the demand letters, Walker-Butts said.

Hometown paid its first assessment with a bank loan. When the bank declined credit for the second year, the hospice structured a five-year payment plan with the Centers for Medicare and Medicaid Services, the federal agency that administers the program, at 12.5 percent interest.

The next bill is expected any day. "If they hit us with a number in the several hundred-thousand range, I just don't see how we can survive," said Gaines C. McCorquodale, Hometown's other owner.

Less-Predictable Illnesses
In the early days of the Medicare hospice benefit, which was designed for those with less than six months to live, nearly all patients were cancer victims, who tended to die relatively quickly and predictably once curative efforts were abandoned.

But in the past five years, hospice use has skyrocketed among patients with less predictable trajectories, like those with Alzheimer's disease and dementia. Those patients now form a majority of hospice consumers, and their average stays are far longer - 86 days for Alzheimer's patients, for instance, compared with 44 for those with lung cancer, according to the Medicare Payment Advisory Commission.

The commission, which analyzes Medicare issues for Congress, recently projected that 220 hospices - about one of every 13 providers - received 2005 repayment demands totaling $166 million. The National Alliance for Hospice Access, a providers' group that is lobbying for a three-year moratorium on the collections, places the numbers at 250 hospices and $200 million.

Because fewer than a tenth of all hospice providers have faced repayment, Medicare officials suggest that management might have been an issue. But Lois C. Armstrong, president of the hospice access alliance, warns that if the cap on Medicare reimbursements is not lifted, the availability of care will tighten at a time when demand for hospice care is exploding and when new research suggests it saves money for the runaway Medicare program.

Financial Cap Still In Place

In 1998, Congress removed limits on the number of days that an individual could receive Medicare hospice coverage, a move that encouraged physicians to refer terminal patients.

Lawmakers, however, did not remove a cap on the aggregate amount that hospice providers could be reimbursed each year, a measure designed to contain the program's cost. A hospice's total annual reimbursement cannot exceed the product of the number of patients it serves and a per-patient allowance set by the government each year ($21,410 in 2007).

For reasons that are not fully understood, problems with the cap have been most prevalent at small, for-profit hospices in Southern and Western states such as Mississippi, Alabama and Oklahoma.

Those programs typically have had higher proportions of noncancer patients and, thus, longer lengths of stay. But the Medicare advisory commission's analysis also determined that the average length of stay in the cap-busting programs was significantly higher for all types of patients, including those with cancer.

Herb B. Kuhn, the deputy director of the Center for Medicare and Medicaid Services, said that finding was attracting attention at the center, which is eager to keep the hospice care benefit from morphing into a long-term care entitlement.

"Well over nine out of 10 hospices seem to be managing well, including the ones in higher-wage areas, so it does raise an issue of management," Kuhn said.

Among the matters meriting review, he said, is whether doctors have been premature in certifying patients as terminal.

The medical director at Hometown Hospice, Sumpter D. Blackmon, said he relied heavily on the judgment of the hospice's nurses to determine whether prospective patients were rather likely to live longer than six months.

Of the 56 patients on the books on Oct. 31, however, 17 had been there for at least that period, including two for more than 500 days.

"Doing this for 40-something years," said Blackmon, a longtime physician here, "every time I think somebody is going to die tomorrow, damned if they don't live for a year and a half."

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