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Medicare Hospices Have Financial Incentives To Provide Care in Assisted Living Facilities

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Jenell Clarke-Whyte

Medicare Hospices Have Financial Incentives To Provide Care in Assisted Living Facilities

Jenell Clarke-Whyte, a team leader for the Office of Evaluation and Inspections, is interviewed by Nancy Harrison, Deputy Regional Inspector General for Office of Evaluation and Inspections in New York.

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Medicare hospice care is intended to help terminally ill beneficiaries continue life with minimal disruption and to support beneficiaries' families and other caregivers in the process. Care may be provided in various settings, including a private home or other places of residence, such as an assisted living facility (ALF). Pursuant to the Patient Protection and Affordable Care Act, CMS must reform the hospice payment system, collect data relevant to revising hospice payments, and develop quality measures for hospices. This report provides information to inform those decisions and is part of OIG's larger body of work on hospice care. While the report focuses on ALFs, many of the issues identified pertain to the hospice benefit more broadly.


We based this study on an analysis of all Medicare hospice claims from 2007 through 2012. We used Certification and Survey Provider Enhanced Reports data and Healthcare Cost Report Information System reports for supplementary information on hospice characteristics.


Medicare payments for hospice care in ALFs more than doubled in 5 years, totaling $2.1 billion in 2012. Hospices provided care much longer and received much higher Medicare payments for beneficiaries in ALFs than for beneficiaries in other settings. Hospice beneficiaries in ALFs often had diagnoses that usually require less complex care. Hospices typically provided fewer than 5 hours of visits and were paid about $1,100 per week for each beneficiary receiving routine home care in ALFs. Also, for-profit hospices received much higher Medicare payments per beneficiary than nonprofit hospices. This report raises concerns about the financial incentives created by the current payment system and the potential for hospices to target beneficiaries in ALFs because they may offer the hospices the greatest financial gain. Together, the findings in this and previous OIG reports show that payment reform and more accountability are needed to reduce incentives for hospices to focus solely on certain types of diagnoses or settings.


We recommend that CMS, as part of its ongoing hospice reform efforts: (1) reform payments to reduce the incentive for hospices to target beneficiaries with certain diagnoses and those likely to have long stays, (2) target certain hospices for review, (3) develop and adopt claims-based measures of quality, (4) make hospice data publicly available for beneficiaries, and (5) provide additional information to hospices to educate them about how they compare to their peers. CMS concurred with all five recommendations.