To:       NHPCO Members
From:  NHPCO Health Policy Team
Date:   June 06, 2012

Updates to Caps and Limitations on Hospice Payments

On Monday, June 4, 2012, CMS issued CR 7838, “Updates to Caps and Limitations on Hospice Payments.”  This CR outlines the changes in the aggregate cap calculation and the newly revised PS&R report that can track beneficiary days of care and cap liabilities.

Effective date for cap year 2011 and prior years:  April 14, 2011

Effective date for cap year 2012 and subsequent years:  October 1, 2011

Implementation date:  July 2, 2012

The following alert covers:

• Two caps (inpatient and aggregate)
• Cap determination letter
• Deadlines for issuing cap determination letters
• Inpatient cap
• Aggregate cap on overall reimbursement
• Two methods for aggregate cap
• Calculations differ depending on year
• Transition from streamlined to proportional methodology
• Reporting Medicare beneficiaries
• Appeals process
• Steps your hospice can take

Two Caps:  The statute requires that hospice payments be limited by an inpatient cap (no more than 20% of days of care can be at the general inpatient and inpatient respite levels of care) and an aggregate cap (dollar limit for Medicare patients figured in the aggregate). 

Cap Determination Letter:  The Medicare Administrative Contractor (MAC) will issue a cap determination letter, which will provide a notice of program reimbursement.  Any amounts paid to the hospice in excess of either cap must be repaid to Medicare.  The MAC will issue a demand letter requesting that the overpayment be repaid. 

Deadlines for issuing cap determination letters:  CMS announced on the last Open Door Forum that they have instructed the MACs to issue cap determination letters for MACs the cap year ending October 31, 2010 no later than December 31, 2012.  All cap letters for the cap year ending October 31, 2011 should be issued by the MAC no later than March 31, 2013. 

Inpatient Cap

1. 20% Limit:  The Medicare Hospice Benefit allows for up to 20% of days of care to be provided at the inpatient levels of care – both general inpatient and inpatient respite.  
2. Maximum allowable days of inpatient care is calculated as follows: Total days of care x .20 = total days at the general inpatient and inpatient respite levels of care

1. Cap period:  November 1 – October 31 of each year  
2. Inpatient days in excess of 20%:  Any excess days at the inpatient levels of care will be reimbursed at the routine home care level of care.   
3. Repayments:  Any excess reimbursement after that calculation is complete should be repaid to Medicare.

Aggregate Cap on Overall Reimbursement

1. Statute:  The statute requires a limit on the total amount of Medicare payments that can be made to a Medicare-certified hospice.  The limitation is figured in the aggregate, for the cap period of November 1 to October 31 of each year.  
2. Cap amount for 2011:  $24,527.69  (Cap year runs November 1, 2010 to October 31, 2011)  
3. Calculation:  The calculation for the maximum amount of Medicare reimbursement for all patients in the cap year is completed as follows:

Number of beneficiaries  x annual cap amount For the period ending October 31, 2011, the cap amount is $24,527.69.

Example:  100 beneficiaries x $24,527.69 = $2,452,769

Generally, if a hospice’s Medicare reimbursement exceeds the amount in the calculation above, there may be a cap liability.  Providers should monitor their cap liability on a monthly basis.

1. Served by more than one hospice:  If a beneficiary is served by more than one hospice, the cap amount is shared, by percentage of days of care, among all Medicare-certified hospices who provided care to the beneficiary.  
2. Services rendered:  The cap amount is figured based on Medicare payments for “services rendered” beginning November 1 and ending October 31 of each year. 

1. New Hospices:   Contractors will use the proportional method for calculating the aggregate cap for all hospices Medicare certified on or after October 1, 2011.

Two Methods for Aggregate Cap

In April 2011, CMS issued a ruling, CMS 1355-R, which addressed issues of some hospice providers about the calculation of the aggregate cap.  In the FY2012 final wage index rule, published on August 4, 2011, CMS revised the cap calculation methodology to apply a patient-by-patient proportional methodology for cap years 2012 and beyond.  Hospice providers who qualify can elect to continue to use the streamlined methodology with a one-time election.  More detail on the two methods follows.

Proportional Method:  The MAC will include the fraction of the patient’s total days in care in all hospices and in all years spent in that hospice in that cap year. 

• More than one year:  If a beneficiary is included in the calculation using the proportional method, the MAC will calculate the proportion of all days in all hospices for each year that the beneficiary received care.
• More than one hospice:  The proportion of each patient’s total days of care in all hospices and in all years will be used in the calculation.

Streamlined (original) Method:  The hospice includes all beneficiaries who have filed an election to receive hospice care during the period beginning on September 28 and ending on September 27 of the following year.  Once a beneficiary is included in the cap calculation, they may not be included in the cap calculation again, even if there are days of care in subsequent year(s). 

• More than one year:  The beneficiary is included in the cap calculation in the year that they filed a notice of election.  The beneficiary may not be counted again, even if their days of care span more than one year.
• More than one hospice:  The hospice includes only the portion of a patient’s total days of care that were provided by that hospice.  The streamlined cap calculation is exactly the same as for the proportional method.

Examples of Beneficiary Counting Using Both Methods

The CR has good examples of how to count beneficiaries for each method.  See CR 7838 for more information.

Calculations Differ Depending on Year

For Cap Years ending October 31, 2011 (the 2011 cap year) or prior years

If your hospice did not file an appeal:

1. Awaiting the cap determination letters for the cap years ending on or before October 31, 2011, you may choose either the streamlined (original) or proportional methodology.
2. Hospice providers may choose to continue to have the streamlined (original) method used for cap years ending on or before October 31, 2011.
3. Hospices who have not filed an appeal under the CMS-1355-R ruling are eligible to use a one-time election to have the cap determination for cap years 2012 and beyond calculated using the streamlined methodology.  This methodology may only be used by hospices who have used the streamlined methodology for all cap years prior to 2012.

If your hospice filed an appeal:

Ruling CMS-1355-R applies to the 2011 cap year and any prior cap years for which a hospice received an overpayment determination and filed a timely appeal.  If your hospice filed a timely appeal, the hospice’s cap determination for any year is calculated using the proportional method, as opposed to the streamlined (original) method.

 For Cap Years ending October 31, 2012 (the 2012 cap year) and subsequent years

Proportional method:

1. Start date for proportional method:  Effective with the cap year ending on or after October 31, 2012, the aggregate cap is to be figured using the proportional method.
2. Exception:  A hospice who has not filed an appeal and has not had a previous year figured with the proportional method may make a one-time election to have the aggregate cap calculated at the streamlined method.  The MAC will provide instructions on how to make that election. 
3. Timeframe for making streamlined election:  60 days after receiving the 2012 cap determination letter.  The MAC contractor will provide additional instructions.

Transition from Streamlined to Proportional Methodology

CR 7838 provides a detailed explanation of the transition options for moving from the streamlined methodology to the proportional methodology, along with a number of patient examples.  Please review this section of the CR for comprehensive guidance on the transition and how it may affect your hospice. 

Reporting Medicare Beneficiaries

1. For cap years through 2011:  For all cap years through 2011, the hospice is responsible for reporting the number of Medicare beneficiaries electing hospice care during the cap period to the MAC contractor.  This must be done within 30 days of the end of the cap period. 
2. For cap years 2012 and beyond:  No separate reporting is needed.  The updated PS&R report will provide the aggregate cap calculation for each hospice and can be checked on a regular basis.

Appeals Process

Cap determination letters follow the existing CMS reopening regulations, which allow reopening for up to 3 years from the date of the cap determination letter.  For instances of fraud, reopening is not limited to 3 years.  The appeals process is outlined in more detail at 42 CFR 418.311, where a provider may request a review from the MAC contractor or the Provider Reimbursement Review Board (PRRB). 

Steps your hospice can take

1. Ensure that the billing staff in your hospice have access to CR7838 and can review the examples for the transition and for beneficiary counting.
2. Watch for more details on the cap calculation process in communication from the MAC contractor for your area.
3. Become familiar with the newly revised PS&R report to check your hospice’s status for cap.
4. Watch for the 2010 and 2011 cap determination letters, which have now been approved for release by CMS.  2010 cap determination letters should be released by December 31, 2012 and 2011 cap determination letters should be released by March 31, 2013.

If you have questions, don’t hesitate to contact us at regulatory@nhpco.org.