Hospice Margin Projections

Memo from a consulting firm (Moran) to the National Hospice and Palliative Care Organization (NHPCO) projecting large reductions in hospice margin over the next decade. I pass it on with only brief comments at this point because I can't go into it in depth right now. The memo says the median Medicare margin now is 2%, and will drop to -14% by 2019 (worse in rural areas), a more gloomy picture than painted by MEDPAC in their March 2010 report (see pp. 156-57). The Medicare margin is even more important for a hospice than other types of health care providers since around 8 in 10 people who die each year are covered by Medicare. A couple of quick points about the general discrepancy, at least in tone between the MEDPAC report and this memo:

• The memo is more recent, so things could have changed, and do change with the ACA (on the revenue side).
• MEDPAC appears to have not considered volunteer costs in calculating margin, whereas I think the Moran memo did; so the two sources don't appear to have used the same costs in calculating margin.
• MEDPAC notes that cost structure of hospices was the key driver in differences in margin, which in one sense is a tautology given hospice has a straight per diem payment (MEDPAC report has gory details).
• Large cost differences give rise to questions about quality.
  
• As with most discussions of hospice and costs, quality is not addressed here (in the memo; is discussed a bit by MEDPAC). We really need to move toward discussing quality and cost together so that we can have some sense of value being provided to patients. This is generally true in health care, but is acutely true in hospice because it seems to be the only part of the Medicare program that is expected to improve quality of life and save money for Medicare overall.

Update: New MEDPAC report out today, here is fact sheet overview of recommendations. In hospice area, biggest item is their renewed call for a U shaped payment to replace the straight per diem (higher payment in first few days of hospice, and higher in last few). I think this is third year in a row they have called for this. Goal of this would be to incentivize short lengths of use to be longer [think 5 day to 15 day] while perhaps discouraging longer stays [over 180 days] depending on how/whether payment levels changed 'in the middle.' I think a U shaped payment approach should improve hospice margins. Here is an older, related post.

h/t @ctsinclair Christian Sinclair who blogs at PalliMed blog. Update: just got a grant from the HCFO Initiative of RWJ Foundation to study these issues (note the email they list for me in the link is wrong; don dot taylor at duke dot edu).