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Hospice providers rejoice

March 30, 2010
by Robert T. Strang
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Courts deem method of calculating hospice cap invalid

Several recent decisions1 by federal courts across the country have confirmed what hospice providers have for years complained about: The Department of Health and Human Services (HHS) methodology for calculating the hospice cap is improper and in some instances artificially reduces the cap amount. These decisions provide much needed ammunition to providers seeking to appeal a hospice cap demand.

As hospice providers appreciate, the amount that Medicare will reimburse a hospice provider is limited by an annual statutory cap. Any payments made to the hospice provider in excess of the statutory cap must be returned to Medicare. The fiscal year for hospice providers runs from Nov. 1 to Oct. 31. Congress’ intent in enacting a benefit cap was to ensure that Medicare would not expend more money in a year for hospice care than what would be expended in treating a patient in a traditional setting.

To calculate a hospice provider’s annual reimbursement cap, HHS multiplies the per patient cap by the number of beneficiaries that have elected to receive hospice care from the given hospice during that fiscal year. The per patient cap of $6,500 is adjusted annually using the Consumer Price Index to account for inflation.

The recent spate of cases does not call into question the per patient cap of $6,500, but instead relates to the method for calculating the number of beneficiaries. The U.S. District Court for the Northern District of Texas recently concluded that a federal regulation setting forth the methodology for determining the number of beneficiaries is contrary to statute and should be set aside. Under the refuted regulation, HHS was allocating benefits based solely upon the date that a beneficiary elected hospice care and was not providing benefits for additional years of care. This was problematic for providers that cared for patients with longer than average lengths of stays that extended into another fiscal year.

For example, if a terminally ill patient elected to receive hospice care on Aug. 31, 2006, HHS would under the regulation allocate his or her entire individual benefits cap to 2006 because the patient elected to receive care before the Sept. 27 cutoff. Assuming the beneficiary continued to elect hospice care through fiscal year 2007, HHS would not under the regulation count the beneficiary as having received any hospice care during 2007 and the provider would not receive any payment.

Under the same hypothetical, utilizing the fractional method proposed by most hospice providers, only a proportional fraction of the hospice cap would be allocated to the care rendered in 2006, while the remaining portion would be allocated to the care rendered in 2007. In support of this methodology, hospice providers cite the statute that requires each hospice patient's benefit cap allowance be allocated across years of service, not lumped into a single year in which care was provided, irrespective of the length of a patient's overall stay.

The ramifications of these recent decisions could be momentous for hospice providers. One of the recent cases stopped short of granting a request for monetary relief from HHS, but noted that HHS must recalculate the hospice provider’s reimbursement caps for fiscal years 2006 and 2007 using a fractional method of calculation as required by the statute and return any monies the provider overpaid to HHS. The Texas case determined that HHS’ regulation was invalid and granted an injunction against the use of the regulation. Based upon these recent cases, there may never be a better time to appeal a hospice cap repayment demand that is based upon this invalidated regulation.

Robert T. Strang is an associate at Arnall Golden Gregory in the Healthcare/Life Sciences Group. His practice focuses on a variety of litigation, regulatory, and compliance issues. Mr. Strang represents physicians, hospitals, and nursing homes in medical negligence cases and in certificate of need litigation. He also advises healthcare clients on federal and state regulatory issues.

1 Tri-County Hospice, Inc. v. Sebelius, 2010 WL 784836 (March 8, 2010); Hospice of New Mexico v. Sebelius, 2010 WL 773229 (March 5, 2010); Lion Health Services v. Sebelius, 2010 WL 637954 (Feb. 22, 2010).

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