Modeling the Impact of Hospice Payment Reform

Pennsylvania Homecare AssociationAnnual MeetingMay 18-20, 2011

by Andrea Devoti, President/CEO

Neighborhood Health Agencies, Inc.

David J. Berman, CPA, CVA, Principal,Simione Consultants, LLC

The Challenges Ahead

MedPAC’s Report

2 Key MedPAC Recommendations for Hospice Reimbursement

1. U-shaped payment

2. Improvement of Data Collection

Hospice Recommendations

1. U-shaped Payment Curve• Congress should direct the Secretary to change

the Medicare payment system to have relatively higher payments per day at the beginning of the episode and relatively lower payments per day as the length increases with a higher payment for the costs associated with patient death at the end of the episode.

• MedPAC recommends implementing the payment system changes in 2013 with a brief transitional period.

• The first year of the payment system should be done is a budget neutral manner.

Hospice Recommendations (cont)

2. Improvement of Data Collection• The Secretary should collect additional

data on hospice care and improve the quality of all data collected to facilitate the management of the hospice benefit.

• Additional data could be collected from claims as a condition of payment and from hospice cost reports.

Medicare Hospice Margin

The aggregate Medicare margin was 5.9 percent in 2007.

MedPAC projects the margin will be 4.6 percent in 2010.This estimate excludes the costs of

bereavement services (about 1.5% of total costs) and marketing which are not reimbursable by Medicare.

Summary of Data Collected Over the Length of Stay

Nursing Visits and TimeHHA Visits and TimeMedical Social Service Visit and TimePhysical Therapy Visits and TimeSpeech Therapy Visits and TimeOccupational Therapy Visits and Time

Summary of Data Collected (con’t)

Medical Social Service Phone Calls – Time on CallAll Time needs to be in 15 minute Intervals

Future DataChaplains/Spiritual CounselorsVolunteers

Why are They Collecting the Data

1. Need to look at utilization of services over the lengths of stay and the intensity of the visits.

2. Cost out services to determine the Routine Home Care Cost in the beginning and end of length of stay.

3. Costs can be determined on an hourly or per visit basis.

4. They need to capture the cost of drugs and HME over the episode.

5. Looking at Site of Care

How Do We Prepare for the Future

1. Track same data within your agency.1. Visit utilization over the length of stay.2. Site of Care and Diagnosis3. Breakdown visits into 15 minute intervals.

a) Determine the length of visits at the front and back end of the length of stay and compare to visits in the middle.

b) Determine direct cost per visit based on time studies.

4. Based on Cost Analysis determine cost in beginning and end of episode divide by number of days to determine cost per day.

Hypothetical Examples of U-Shaped Reimbursement

Assumptions for “Hypothetical” Scenarios:

1. Reimbursement1. Increased Routine Home Care Rate by 10% for

beginning and end of Length of Stay.2. Decreased Routine Home Care Rate by 10% for

middle of Length of Stay.2. Costs

1. Estimated Average Cost Per Visit (based on Hospice Cost Report) does not account for time differential.

2. Direct versus Indirect Cost per Visit3. Cost Per Day for ancillaries based on actual.

3. Utilization of Services based on actual patient data by Diagnosis; Length of Stay and Site of Care.

Assumptions for “Hypothetical” Scenarios:

4. These are Hypothetical Examples

5. The Data used in the following examples is REAL.

6. There are 8 different scenarios analyzed:

1. Site of Care (Nursing Home vs. Home)

2. Diagnosis (Cancer vs. Non Cancer)

3. Length of Stay (Short vs. Longer)

Case 1: Facts

Length of stay – 23 daysCancer DiagnosisVisits – 22Location of Patient – Home

Case 1: Utilization of Services

|-----------------------13 Days-----------------------|5 Days 5 Days

Skilled Service First 5 Days Middle Last 5 Days TOTALRN 2 5 6 13HHA 0 4 1 5MSW 0 2 1 3Chaplain 0 1 0 1TOTAL 2 12 8 22

Visits

Case 1: Cost of Service

Skill Days Direct Indirect

Cost Per Visit Cost Per Visit Visits Cost Visits Cost Visits Cost RN 120.89$ 73.86$ 2 242$ 5 604$ 6 725$ HHA 41.94 25.62 0 - 4 168 1 42 MSW 113.49 69.33 0 - 2 227 1 113 Chaplain 73.90 45.16 0 - 1 74 0 - TOTAL 2 242$ 12 1,073$ 8 881$ Direct Cost Per DayVisits Per Day

Beginning Middle End

82.55$ 176.15$

5 13 5

48.36$ 0.40 0.92 1.60

Case 1: Cost of ServiceSkill DaysDirect Cost Per DaySupplies Cost Per DayDrug Cost Per DayDME Cost Per DayTOTAL Direct Cost Per DayReimbursementDirect Gain (Loss) Per DayDIRECT GAIN (LOSS) PER PERIODINDIRECT COSTGAIN (LOSS)TOTAL (408.78)$ -11.36%

68.79 102.98 196.58 174.36 142.66 174.36

527.88 515.89 (111.12) 105.58

147.72 655.60 538.11

8.27 8.27 8.27

0.58 0.58 0.58

380.16 (139.71) (649.23)

82.55$ 176.15$ 5 13 5

48.36$ 11.58 11.58 11.58

(22.22)

TOTAL GAIN (LOSS) ON THIS CASE $ (408.78)

Case 2: Facts

Length of stay – 23 daysNon-Cancer DiagnosisVisits – 15Location of Patient – Home

|-----------------------13 Days-----------------------|5 Days 5 Days

Visits

Cost Per Visit Cost Per Visit Visits Cost Visits Cost Visits Cost RN 120.89$ 73.86$ 1 121$ 4 484$ 8 967$ HHA 41.94 25.62 0 - 0 - 0 - MSW 113.49 69.33 0 - 1 113 0 - Chaplain 73.90 45.16 0 - 0 - 1 74 TOTAL 1 121$ 5 597$ 9 1,041$ Direct Cost Per DayVisits Per Day

45.93$ 208.20$

5 13 5

24.18$ 0.20 0.38 1.80

Skill DaysDirect Cost Per DaySupplies Cost Per DayDrug Cost Per DayDME Cost Per DayTOTAL Direct Cost Per DayReimbursementDirect Gain (Loss) Per DayDIRECT GAIN (LOSS) PER PERIODINDIRECT COSTGAIN (LOSS)TOTAL

574.91 627.16 (907.41)

45.93$ 208.20$ 5 13 5

24.18$ 11.58 11.58 11.58

(54.27)

8.27 8.27 8.27

0.58 0.58 0.58

294.66$ 8.19%

44.61 66.36 228.63 174.36 142.66 174.36

648.77 991.93 (271.37) 129.75

73.86 364.77 636.04

TOTAL GAIN (LOSS) ON THIS CASE $ 294.66

Case 1 & 2 Analysis HomeHome Cancer Non Cancer Analysis Cost per Visit

Case 1 Case 2Gain / (Loss) (409) 295 (704) LOS 23 23 Visits 22 15 SN 13 13 - 194.75 HHA 5 - 338 67.56 MSW 3 1 366 182.82 Chaplain 1 1 - 119.06 Visits per Day 0.96 0.65 Total Visit Variance 704 Reimbursement 3,598$ 3,598$ - Variance 704 Drugs/DME/Supplies - 20.43 TOTAL 704

Case 3: Facts

Length of stay – 10 daysCancer DiagnosisVisits – 17Location of Patient – Nursing Home

|-----------------------00 Days-----------------------|5 Days 5 Days

Visits

Cost Per Visit Cost Per Visit Visits Cost Visits Cost Visits Cost RN 120.89$ 73.86$ 2 242$ 0 -$ 6 725$ HHA 41.94 25.62 1 42 0 - 5 210 MSW 113.49 69.33 1 113 0 - 0 - Chaplain 73.90 45.16 1 74 0 - 1 74 TOTAL 5 471$ 0 -$ 12 1,009$ Direct Cost Per DayVisits Per Day

-$ 201.79$

94.22$ 1.00 0.00 2.40

10.71 - (855.71)

-$ 201.79$ 5 0 5

94.22$ 11.58 - 11.58

(47.86)

- 8.27 8.27

0.58 - 0.58

(844.99)$ -48.46%

114.65 - 222.22 174.36 - 174.36

298.55 - (239.29) 59.71

287.83 - 616.42

TOTAL GAIN (LOSS) ON THIS CASE ($ 844.99)

Case 4: Facts

Length of stay – 14 daysNon-Cancer DiagnosisVisits – 26Location of Patient – Nursing Home

|------------------------4 Days-----------------------|5 Days 5 Days

Visits

Cost Per Visit Cost Per Visit Visits Cost Visits Cost Visits Cost RN 120.89$ 73.86$ 3 363$ 2 242$ 5 604$ HHA 41.94 25.62 4 168 4 168 4 168 MSW 113.49 69.33 1 113 0 - 1 113 Chaplain 73.90 45.16 1 74 0 - 1 74 TOTAL 9 718$ 6 410$ 11 960$ Direct Cost Per DayVisits Per Day

102.39$ 191.92$

143.56$ 1.80 1.50 2.20

(386.72) (170.82) (776.22)

102.39$ 191.92$ 5 4 5143.56$

11.58 11.58 11.58

(37.99)

8.27 8.27 8.27

0.58 0.58 0.58

(1,333.75)$ -57.63%

163.99 122.82 212.35 174.36 142.66 174.36

51.83 79.38 (189.95) 10.37

438.55 250.20 586.27

TOTAL GAIN (LOSS) ON THIS CASE ($ 1,333.75)

Case 3 & 4 Analysis Nursing Home

Nursing Home Cancer Non Cancer Analysis Cost per VisitCase 3 Case 4

Gain / (Loss) (845) (1,334) 489 LOS 10 14 Visits 17 26 SN 8 10 (390) 194.75 HHA 6 12 (405) 67.56 MSW 1 2 (183) 182.82 Chaplain 2 2 - 119.06 Visits per Day 1.70 1.86 Total Visit Variance (978) Reimbursement 1,744$ 2,314$ (571) Variance (407) Drugs/DME/Supplies (82) 20.43 TOTAL (489)

Case 5: Facts

Length of stay – 87 daysNon-Cancer DiagnosisVisits – 69Location of Patient – Home

|-----------------------77 Days-----------------------|5 Days 5 Days

Visits

Cost Per Visit Cost Per Visit Visits Cost Visits Cost Visits Cost RN 120.89$ 73.86$ 1 121$ 21 2,539$ 2 242$ HHA 41.94 25.62 1 42 32 1,342 3 126 MSW 113.49 69.33 1 113 3 340 0 - Chaplain 73.90 45.16 1 74 4 296 0 - TOTAL 4 350$ 60 4,517$ 5 368$ Direct Cost Per DayVisits Per Day

58.66$ 73.52$

5 77 5

70.04$ 0.80 0.78 1.00

205.47 2,135.26 177.48

58.66$ 73.52$ 5 77 5

70.04$ 11.58 11.58 11.58

8.27 8.27 8.27

0.58 0.58 0.58

2,518.20$ 19.78%

90.47 79.09 93.95 174.36 142.66 174.36

419.44 4,894.79 402.06 83.89

213.97 2,759.53 224.58

TOTAL GAIN (LOSS) ON THIS CASE $ 2,518.20

Case 6: Facts

Length of stay – 75 daysCancer DiagnosisVisits – 78Location of Patient – Home

|-----------------------65 Days-----------------------|5 Days 5 Days

Visits

Cost Per Visit Cost Per Visit Visits Cost Visits Cost Visits Cost RN 120.89$ 73.86$ 4 484$ 30 3,627$ 6 725$ HHA 41.94 25.62 2 84 25 1,049 4 168 MSW 113.49 69.33 1 113 5 567 1 113 Chaplain 73.90 45.16 0 - 0 - 0 - TOTAL 7 681$ 60 5,243$ 11 1,007$ Direct Cost Per DayVisits Per Day

80.66$ 201.32$

5 65 5

136.19$ 1.40 0.92 2.20

(327.29) (500.72) (851.91)

80.66$ 201.32$ 5 65 5136.19$

11.58 11.58 11.58

(47.39)

8.27 8.27 8.27

0.58 0.58 0.58

(1,679.91)$ -15.25%

156.62 101.09 221.75 174.36 142.66 174.36

88.72 2,702.24 (236.94) 17.74

416.01 3,202.95 614.97

Case 5 & 6 Analysis HomeHome Non Cancer Cancer Analysis Cost per Visit

Case 5 Case 6Gain / (Loss) 2,518 (1,680) 4,198 LOS 87 75 Visits 69 78 SN 24 40 (3,116) 194.75 HHA 36 31 338 67.56 MSW 4 7 (548) 182.82 Chaplain 5 - 595 119.06 Visits per Day 0.79 1.04 Total Visit Variance (2,731) Reimbursement 12,728$ 11,017$ 1,712 Variance (4,443) Drugs/DME/Supplies 245 20.43 TOTAL (4,198)

Case 7: Facts

Length of stay – 91 daysCancer DiagnosisVisits – 51Location of Patient – Nursing Home

|-----------------------81 Days-----------------------|5 Days 5 Days

Visits

Cost Per Visit Cost Per Visit Visits Cost Visits Cost Visits Cost RN 120.89$ 73.86$ 3 363$ 19 2,297$ 2 242$ HHA 41.94 25.62 0 - 10 419 0 - MSW 113.49 69.33 1 113 10 1,135 1 113 Chaplain 73.90 45.16 0 - 5 370 0 - TOTAL 4 476$ 44 4,221$ 3 355$ Direct Cost Per DayVisits Per Day

52.11$ 71.05$

5 81 5

95.23$ 0.80 0.54 0.60

2.59 3,101.20 197.34

52.11$ 71.05$ 5 81 5

95.23$ 11.58 11.58 11.58

8.27 8.27 8.27

0.58 0.58 0.58

3,301.12$ 24.82%

115.66 72.54 91.48 174.36 142.66 174.36

293.50 5,679.84 414.39 58.70

290.91 2,578.64 217.05

TOTAL GAIN (LOSS) ON THIS CASE $ 3,301.12

Case 8: Facts

Length of stay – 83 daysNon-Cancer DiagnosisVisits – 85Location of Patient – Nursing Home

|-----------------------73 Days-----------------------|5 Days 5 Days

Skilled Service First 5 Days Middle Last 5 Days TOTALRN 3 26 6 35HHA 1 29 2 32MSW 1 4 2 7Chaplain 1 5 0 6Therapy 1 4 0 5TOTAL 7 68 10 85

Visits

Cost Per Visit Cost Per Visit Visits Cost Visits Cost Visits Cost RN 120.89$ 73.86$ 3 363$ 26 3,143$ 6 725$ HHA 41.94 25.62 1 42 29 1,216 2 84 MSW 113.49 69.33 1 113 4 454 2 227 Chaplain 73.90 45.16 1 74 5 370 0 - Therapy 70.60 43.15 1 71 4 282 0 - TOTAL 7 663$ 68 5,465$ 10 1,036$ Direct Cost Per DayVisits Per Day 1.40 0.93 2.00

74.87$ 207.24$

5 73 5

132.52$

74.87$ 207.24$ 5 73 5132.52$

(1,079.01)$ -8.88%

107.06 3,457.46 (266.55) 404.84 3,339.07 633.06

(297.79) 118.38 (899.61)

11.58 11.58 11.58 8.27 8.27 8.27 0.58 0.58 0.58

152.95 95.30 227.67 174.36 142.66 174.36

21.41 47.36 (53.31)

Case 7 & 8 Analysis Nursing Home

Nursing Home Cancer Non Cancer Analysis Cost per VisitCase 7 Case 8

Gain / (Loss) 3,301 (1,079) 4,380 LOS 91 83 Visits 51 85 SN 24 35 (2,142) 194.75 HHA 10 32 (1,486) 67.56 MSW 12 7 914 182.82 Chaplain 5 6 (119) 119.06 Therapy - 5 (569) 113.75 Visits per Day 0.56 1.02 Total Visit Variance (3,402) Reimbursement 13,299$ 12,158$ 1,141 Variance (4,543) Drugs/DME/Supplies 163 20.43 TOTAL (4,380)

Average Visits per Day for Each Case’s Time Period

Average Visits per Day

Average Nursing Hours per Visit

Summary of Hypothetical Cases

Over 60 Day Length of Stay: Non Cancer Gain (Loss) on Case MarginsHome 2,518.20$ 19.78%Nursing Home (1,079.01)$ -8.88%Over 60 Day Length of Stay: Cancer Gain (Loss) on Case MarginsHome (1,679.91)$ -15.25%Nursing Home 3,301.12$ 24.82%Under 30 Day Length of Stay: Non Cancer Gain (Loss) on Case MarginsHome 294.66$ 8.19%Nursing Home (1,333.75)$ -57.63%Under 30 Day Length of Stay: Cancer Gain (Loss) on Case MarginsHome (408.78)$ -11.36%Nursing Home (844.99)$ -48.46%

Reimbursement Comparison

Case Base Rate Days Current Hypothetical Variance Profit (Loss)Case 1 158.51 23 3,645.73$ 3,598.18$ (47.55)$ (408.78)$ Case 2 158.51 23 3,645.73 3,598.18 (47.55) 294.66 Case 3 158.51 10 1,585.10 1,743.61 158.51 (844.99) Case 4 158.51 14 2,219.14 2,314.25 95.11 (1,333.75) Case 5 158.51 87 13,790.37 12,728.35 (1,062.02) 2,518.20 Case 6 158.51 75 11,888.25 11,016.45 (871.80) (1,679.91) Case 7 158.51 91 14,424.41 13,298.99 (1,125.42) 3,301.12 Case 8 158.51 83 13,156.33 12,157.72 (998.61) (1,079.01)

Routine Home Care Base Rate: $158.51

Questions that need to be addressed

1. Why am I losing money on certain patients?

Cost per visit High Caseload per discipline of service Productivity Transportation Costs Indirect Costs

2. Need to compare analysis by diagnosis.

Questions that need to be addressed

3. Need to look at mix of services over the length of stay.

4. Need to look at frequency of visits.

5. Need to look at additional funding for support services, i.e.

Music Therapy Art Therapy

A Tradition of Caring Since 1912

So, What Can One Hospice Do?

Neighborhood Hospice’s Response to These

Numbers

Meetings with all staff

-Reviewed 8 cases -Reviewed proposed payment structure vs. current-Reviewed staffing patterns

Reviewed Financial Goal

-To break-even + 3-4%

-Cover next year’s raises, insurance cost

increases, payment decreases and mileage

Reviewed 2009 Cost Report

-Aggregate CPD for hospice

-$150.51 vs. $155.83 per day

Increase Expected Productivity of Staff

-4-5 in private homes

-5-6 or 6-7 in SNFs

Eliminated Direct care positions

• 2 full time RN positions– Third position covering for triage

manager overnight

• One 24 hour MSW• 2 C.N.A. positions

Discussed Contributions

-Staff expect to be used for charity care-Being used to cover paid care overages

Reviewing All Processes and Procedures

• IDT• Bereavement• Pastoral Care• Social Work• Liaisons

Reviewed all contracts

-Renegotiated pharmacy, DME, linen, food services -Added 2nd DME and pharmacy

Face to Face Encounters

-Already doing to ensure no ADRs or denied payment, so we do not feel this is a threat

Reviewing Care Provision Methodology

-Currently Teams with Team Leader vs. all Case Manager-Has not had the desired effect and may be eliminated.

Reviewing Staffing and Staffing Patterns

- Case loads- Territories- Mileage

Looking at:

-Mix of services and scheduling of those services

-Use of volunteers

Thank you!

- Any questions?

Modeling the Impact of Hospice Payment Reform

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