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

BACKGROUND: 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. OBJECTIVE: 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. DESIGN: Analysis of decedents' claims records using propensity score matching, logistic regression, and sensitivity analysis. SETTING/SUBJECTS: All age-eligible Medicare decedents who received care and died in North Carolina in calendar years 2009 and 2010. MEASUREMENTS: Costs to Medicare for hospice and other healthcare services. RESULTS: 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. CONCLUSIONS: Medicare savings could continue with the 2016 payment rate change. Cost savings were found for all primary diagnoses analyzed except dementia.

Duke Scholars

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