At last week’s National Association for Home Care meeting in Chicago, it became apparent that Medicap and CMS are finally on the same page (or at least close) to reform of the hospice payment system.

The reformed payment system comes close the U shaped payment system under consideration the past several years. This payment system focused on paying more at the early and late portion of a patient stay and less for the “bottom” part of the U. Most higher Length of Stay patients have long an elongated shape.

The proposed payment rate will be a multiple of the current per diem payment amount, for example $160. The exact multiple is still being discussed as CMS and Medcap have different model. As a side note, there was dialogue that the per diem rate may be reduced. For days 1 to 5 the multiple will be close to 2.0 or double the per diem. And goes down to a low of .87. (the bottom of the U) The last seven days of life will increase to a 1.90 range. This is a simple example yet gives a feel for where payment is headed. Here are the observations and implications to consider for this re-basing payment reform. CMS and MedCap project that at an average Length of stay (LOS) of 87, the payment shift will be budget neutral. If your program has a LOS of 87 days or less, this payment system will be have a neutral impact on your bottom line and as your LOS declines, profitability will increase.

NOW, for those programs with a LOS higher than 87, you have an issue. By-the-way, this reform is intended to go after those hospice programs that have higher than normal LOS. We know who those programs are!! If you have a LOS higher than 87, more than ever, you will need to examine your growth strategy and the type of business you are going after, a.k.a, lower length of stay type patients. Most typically hospital based business. The LOS for hospital referred patient is sometime measured in hours. This has implications of your marketing, sales and growth strategies as well as your clinical capabilities. If you are not strong in caring for more acute care patients you maybe disadvantaged. Hospitals are looking for hospices to accept those high acute patients. Start now by examining your distribution of the type of referrals you are receiving, i.e. hospitals, physicians, assisted living centers, etc. and what is the LOS per these segments. I would recommend you involve your Medical Director and other key physicians so they understand the challenge and also be a part of the solution.

As you look at solution strategies, I would recommend that you look at the Growth Pillars for Hospitals and Physicians and complete a Growth Workshop that is focused on these two pillars. Lastly, if you do not do a great deal of work at the General Inpatient Hospice level of care, you may wish to consider improving your ability to deliver this level of care.

Best of wishes to you as you prepare for this change which is still a few years off.