Reduced Costs

Hospice Series Part 1 | BNAF Reductions Continue

Rural Hospices May Be Affected Most.

You know the old saying, “What goes up, must come down?” It seems we are seeing this more and more in the healthcare market space. Alas, our costs of operating agencies haven’t decreased significantly, but the chisel is out and reimbursements are being chipped away.

In 1983, when the Hospice benefit was initiated, the Budget Neutrality Adjustment Factor (BNAF) was put into place for agencies. It remained as defined for about 26 years.  In fact, since Hospice was initiated 28 years ago as a benefit for Medicare recipients we’ve seen little change to the overall program. Considering the amount of change in the healthcare market, this alone is pretty incredible.

In the FY 2010 Hospice Wage Index Final Rule (74 FR 39384) CMS finalized the ruling to eliminate the BNAF.  There was an adjustment from the proposed rule, however. It would be eliminated over a seven year period, instead of a two year period. At the time, while still a significant impact to hospices, this was considered at least a partial win as the original proposal would have been fast and likely painful. I liken it to ripping a band-aid off. It would hurt and it’s likely the wound would take longer to heal. (Or industry to recover in this case.)

The impact of the BNAF was approximately 4% annually for agencies. With a 7 year phase-out the impact would be seen in smaller increments.  The hope being that agencies could gain efficiencies over the years to accommodate the adjustment phase out.  There’s a bit of contention out there regarding the average margin of a hospice agency. Regardless of who is pontificating on hospice margins it’s consistent that the margins are not in double digits, nor does anything I see put them above 5%. Fast forward a bit and we’ve now seen the impact of two full years of the seven years of reduction.  With the FY2012 reduction 60% of the BNAF remains in place.

Agencies are still struggling with how this is going to impact them, in particular agencies operating in rural CBSAs.  Rural-based agencies have highlighted the additional costs associated with caring for patients in their geographic areas. This resulting in large part because patients are located further apart from one another.  As a result, agencies see an increased cost in getting visiting staff from one patient to the next.

CMS contends that they have seen an overall growth in the number of hospice agencies since the start of the phase-out. They also maintain that they haven’t seen any data that is indicative of agencies in rural areas closing. CMS indicated that they will continue to monitor to ensure there are no unintended consequences associated with the BNAF phase-out.

There is good news however! As I looked at the impact of Medicare Hospice Payments (Table 1 in CMS-1355-F) the net percent change in hospice payments due to wage index change, the additional 15% reduction in BNAF and the increase for the market basket update left every geographic region in a positive position. Each of the geographic areas defined had an increase of 1.6% or greater. The highest increases seen in the Pacific Urban area (3% increase) and Mountain Rural region (2.9% increase). CMS estimates that payments to hospice agencies will increase by $340 million in FY2012.

Here’s hoping you have a glimmer in your eye caused by some extra coins or dollars coming in!

It’s been two full months of billing since the rate adjustments.  What are you seeing in your agency?  Do you have a little more cash coming in? Are you saving that for a rainy day, planning ahead for what could be a rate reduction based on the Affordable Care Act?

Helpful Links:
CMS-1355-F Hospice Wage Index for FY 2012 Click here.

December 21, 2011
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