Hospice in the Federal Budget - revisited

I wrote a quick post earlier this month about the budget proposal that President Bush sent to congress. On first look, it was a little worse for the hospice industry than last year's proposal, but not a big deal. Well, your lowly hospice blogger missed something big in that post. Before telling you what I missed, I'd like to say that this is the precise reason that I encourage you to become a member of the National Hospice and Palliative Care Association. That little portion of the submitted budget that I overlooked is much more than a little issue, and I would have never known about my oversight if it weren't for the alert that NHPCO sent out to all of its members. More than that, when they sent out the alert they had excel spreadsheets already worked out so I would know just how much pain this budget could cause me. I'm sure I could have figured it out on my own, but there is little doubt that it would have taken me a few hours of research. Judging by the number of posts I have written for this blog lately, I'm pretty sure that I don't have a few hours to do that homework. The knowledge and time saved on this one issue has paid for my dues this year. (Not to mention all of the other things they do for me throughout the year!)

No, I don't work for NHPCO, and I do not benefit in any way if you are a member.

Moving on.

The detail I missed in the president's budget proposal is that he is proposing the end of the Hospice Wage Index. Instead of having a wage index just for hospices, we would start using the hospital wage index. Now, I'm no rocket scientist, but I'm figuring that a wage index is a wage index. In the long run, that is probably true, but in the short run, it is nowhere near true. The problem here is that there are differences between the two indexes. In my world, we get paid about 5% more using the hospice wage index than we would with the hospital wage index. That means, that if they make this change effective next year, we will not only not get a pay raise (see prior budget post) we will take around a 5% pay cut. That could really hurt.

It is a bit unclear to me but I believe that the president has proposed to phase this in over three years, which would make it easier to swallow. As I have said before, I'm all for appropriate payment rates, and if the hospital index works as well as or better than the hospice index, then I'm game. The problem is that I'm rather sure that there are a lot of hospices that are not prepared for a 5% pay cut. There are a lot of hospices that are working hard to break even, so taking 5% away may be a critical problem. Clearly, some of that is their problem and goes back to past discussions on this blog about the need for better business practices throughout the hospice industry.

The bottom line: I don't care who you are, if you lose 5% of your revenue, you are, at a minimum, going to have to tighten your belt. It would be nice to have three years to phase this in, but either way, every hospice in the nation needs to know that this is coming. You have now been warned.

Hospice Recommendations in President Bush's Budget

Excuse me if I'm not up in arms about the new budget proposed by President Bush. I thought about cutting and pasting my post from almost exactly 365 days ago here, because the proposal is largely the same.

When President Bush sent his proposed budget to congress, it called for a zero percent rate increase for hospice in 2009-2001. In 2012 & 2013 we would get our normal rate increase minus .65%. Now, going three years with rates not changing at all would be a big deal. I can promise my employees will be expecting pay raises in 2009, 2010, and 2011. Employee salary is often around 80% of a hospice's costs, so giving everyone a 3% "cost of living" raise three years in a row while our rates are not increasing would make a company that is currently making an 8% profit lose money. (Yes, that math is a bit fuzzy, but it is close enough.)


To understand the .65% portion, read the post from last year, because that was last year's proposal. Congress gets to make their changes before everything is all said and done, and I'm betting that the 0% increase goes away. Will they reduce our expected rate increase in some way? Only time will tell.


Just like last year, please don't give in to the hype that this is a rate cut. It is a cut in the amount of our expected pay raise. Seriously, read last year's post, click on some of the links. It ties the president's budget, Medicare payment issues, and our recent discussion of gaming together rather well. I guess Solomon was right when he said, "there is nothing new under the sun."

Tom Hoyer & the Hospice Cap

Briefly, I wanted to mention a section of the gaming portion of the article I've been writing about that I skipped. It is the section on the Medicare Hospice Cap. (My earlier posts on this article are here and here.)

Mr. Hoyer does not devote a lot of time to the cap, but what he says is priceless. First, let's review his credintials. He, as a CMS employee, was the person in charge of drafting the original hospice medicare regulations. If anyone on the face of the earth knows what the original purpose of the cap was, it is Tom Hoyer. With that in mind, we'll look at a couple of quotes.

"The cap was introduced by hospice's initial advocates as a guarantee that the hospice principle would not exceed the cost of conventional care. At present, it is the only effective check on abuse of the benefit..."

This chops the legs out of the argument that the cap is an antiquated law that was never meant to do what it is doing today. Apparently, the law was inserted by some wise hospice folk who knew that at some point people would try to "game the system".

Speaking of those arguing for a hospice cap change or moratorium, Mr. Hoyer says:

"There is a current movement to persuade the Congress to raise or eliminate the cap and it is being pursued by clever advocates with high-sounding arguments."

and

"The cynical effort to get legislative relief will likely fail. This is a case where the congress can do the right thing by doing nothing, a situation that plays to its classic strength."

I'll take him at his word that the push for Medicare Hospice Cap reform will fail, and that's fine with me.

As I said, he didn't devote a lot of time on the cap, but I sure think what he said is interesting in the light of everything we are being told by those fighing to change the cap.