Will Changes to Medicare Payment Rates Alter Hospice's Cost-Saving Ability?

Abstract

On January 1, 2016, Medicare implemented a new "two-tiered" model for hospice services, with per diem rates increased for days 1 through 60, decreased for days 61 and greater, and service intensity add-on payments made retrospectively for the last seven days of life. To estimate whether the Medicare hospice benefit's potential for cost savings will change as a result of the January 2016 change in payment structure. Analysis of decedents' claims records using propensity score matching, logistic regression, and sensitivity analysis. All age-eligible Medicare decedents who received care and died in North Carolina in calendar years 2009 and 2010. Costs to Medicare for hospice and other healthcare services. Medicare costs were reduced from hospice election until death using both 2009-2010 and new 2016 payment structures and rates. Mean cost savings were $1,527 with actual payment rates, and would have been $2,105 with the new payment rates (p < 0.001). Cost savings were confirmed by reducing the number of days used for cost comparison by three days for those with hospice stays of at least four days ($4,318 using 2009-2010 rates, $3,138 for 2016 rates: p < 0.001). Cost savings were greater for males ($3,393) versus females ($1,051) and greatest in cancer ($6,706) followed by debility and failure to thrive ($5,636) and congestive heart failure ($1,309); dementia patients had higher costs (+$1,880) (p < 0.001). When adding 3 days to the comparison period, hospice increased costs to Medicare. Medicare savings could continue with the 2016 payment rate change. Cost savings were found for all primary diagnoses analyzed except dementia.