What Does the Hospice Carve-In Demo Mean for Hospices and Their Business Model?

A Medicare demonstration project called the Value-Based Insurance Design (VBID) Model includes, among other innovations, a hospice component now being tested in nine Medicare Advantage (MA) regions. The hospice innovation points to a world where hospice care is a “carve-in” to MA plans, rather than carved out as a separate benefit provided by Medicare-certified hospices, as it is currently. If “carved in” to MA plans, the scope of services offered as “hospice care” would be defined by the particular MA plan and paid for at rates negotiated between the hospice and the plan. Eventually, might it lead to some form of concurrent care, which would permit covered hospice services to be provided along with other conventional care and even curative treatments?

The path for making these changes is not clear, nor is the timetable, and the journey is unlikely to be without controversy. But hospice’s current business model, especially the requirement enshrined in the 1982 law creating the benefit that hospice-enrolled patients must forgo curative treatment, appears to be on borrowed time. How America’s hospices will adjust and adapt, without this familiar business model, is an open question.

The VBID health plan innovation, also known as inclusion of the Medicare hospice benefit into Medicare Advantage, is now being piloted with the expectation that it will spread to more plans and more patients in 2022, according to an August 12 webinar on expanded hospice payers offered by The Corridor Group.

“This is a brand new world,” said Gwen Guillotte, chief revenue officer at LHC Group, a home care and hospice company in Lafayette, Louisiana. “Growth is going to explode.” She said providers can expect that the rules will change as the carve-in evolves. Providers need to be ready for lots of change, and to learn about the larger post-acute care arena in which these changes will unfold.

What’s in the Details?

Hospices, by and large, are ready to grow beyond the current limited structure of the Medicare hospice benefit, NHPCO President Edo Banach, JD, said in a recent interview. He and other industry leaders agree that the field is moving toward a carve-in approach that would redefine hospice’s business model and strategic partnerships.

“We know this is a fantastic benefit, but changes need to be made to the rules that went into effect for hospices 40 years ago.” However, Banach added, the devil is in the details. “I can tell you we’re not in favor of how CMS has rolled out the VBID, even though we agree with the concept.” For instance, he said hospices would like to see an approach that is more prescriptive for what services need to be included in order to call it “hospice care.” If CMS doesn’t clarify what hospice care should include, providers and consumers both could be hurt, he said.

Karen Rubel, president and chief executive officer of Nathan Adelson Hospice in Las Vegas, Nevada, said that her organization is busy trying to develop relationships with health plans of varying models, although Las Vegas was not in one of the regions included for the initial round of hospice VBID pilots. “Right now, hospice care is the only benefit not carved into Medicare Advantage. Under a carve-in, MA plans will be able to define what kind of care we provide and what they pay for it,” she said.

“We’re in good relationships with some of our payers, until the carve-in actually happens, which may not be for a few years,” Rubel said. “But I think we’re going to have to figure out how to do care in these new models. When I look at my patient population, 50 percent is aligned with Medicare Advantage plans. If I’m not part of the networks when the carve-in happens, that will be a problem.”

Hospices, particularly smaller ones, should be collaborating with other service providers to build networks, Rubel said. They need to be able to approach MA plans collectively with a broader geographic footprint or a fuller complement of services, such as home health, private duty, primary care, even hospital at home. Other observers suggest exploring niche services, such as a specific disease, target population, or linguistic group.

A Short Honeymoon

Denis Viscek, who just retired as CFO for By The Bay Health, a hospice and palliative care provider based in Larkspur, California, also spoke at the Corridor webinar, where he suggested that there may be a honeymoon period for providers when the hospice carve-in is first rolled out on a broader scale.

He said hospices potentially could act more nimbly than larger or national companies in responding to changes in local market, and he urged them to make themselves appealing to MA plans, following their rules and providing the data they need. “Take ‘no’ out of your vocabulary and replace it with ‘maybe’,” Viscek said. “It’s going to be a rapidly changing landscape and some hospices will want to keep things the way they are (under the Medicare benefit). They are probably not going to survive.” Payment rates will be subject to negotiation, payment is expected to come much more slowly, requiring greater cash reserves by the hospice, and more administrative staff will be required to manage the contracts.

CMS, he added, has been advocating for “a very robust home-based palliative care program,” but has not explained what that means. If the goal is a seamless transition from palliative care to hospice care, when that becomes timely, it will be shaped by who is in the network.

“We’ve seen it with our palliative care program, although we’re not part of the current VBID demo. Even when we offer a patient a choice of hospices, inevitably they choose to stay with [palliative care] because of their comfort level with our staff.” In other words, he says, as MA plans form networks for serious illness care, you will need to be part of those networks. If a palliative care service presents itself to the payer as comprehensive, there may not be many referrals to the hospices.

Or patients could choose an á la carte approach, picking the services chosen off a hospice menu. There is also concern that MA could just park patients in their palliative care program as a kind of “hospice lite,” and never introduce them to the full hospice program, Viscek said. Even in a concurrent model, providers and health plans may shy away from the hard conversation that lets patients know their real prognosis and their prospects, in order to make informed treatment decisions. But how will patients know there is an alternative?

VBID, like many payer-driven service delivery innovations, has both advantages and disadvantages. How the hospice “carve-in” will play out will depend on myriad factors – but for sure, change is coming and hospices must adapt.

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