Medicare Hospices To See Increase In 2009 Salary Index

Armen Hareyan's picture

Hospices serving Medicare beneficiaries will see a 2.5 percent increase in their payments for 2009 according to a final regulation published today by CMS.

The increase in the hospice wage index is the net result of a 3.6 percent increase in the so-called “market basket” indicator of cost, offset by a 1.1 percent decrease in payments to hospices as CMS phases out a transitional payment to these providers.

As published in the Federal Register on July 31, CMS is phasing-out an adjustment to the hospice wage index that was put into place over 10 years ago to help hospices through a transition to the new wage index. Phasing-out this special adjustment will save Medicare $2.18 billion over five years. It is estimated that payments to hospices would decrease by approximately 1.1 percent for FY 2009, the first year of the three-year phase-out of the adjustment.

This final rule reflects the ongoing efforts of CMS to support beneficiary access to hospice services while maintaining responsible financial stewardship of the Medicare Trust Fund.



In 1997, the agency, then the Health Care Financing Administration (HCFA), wanted to change from an outdated wage index to a more current and accurate method for determining the hospice wage index. In order to minimize disruption to beneficiary access to hospice services, a special adjustment was applied when computing the hospice wage index. This special adjustment, known as the “budget neutrality adjustment factor” (BNAF), is based on 24 year-old wage data.

The number of Medicare-certified hospices has increased significantly since 1997, up by 69.6percent. Hospice expenditures are estimated to be about $10.2 billion for 2007. The Medicare Payment Advisory Commission (MedPAC) reports that through 2015, hospice expenditures are projected to grow at a rate that outpaces those projected for hospitals, skilled nursing facilities, physician services and home health care.

Final Rule Details

The BNAF is to be phased-out over three years, beginning with a 25 percent reduction in FY 2009, an additional 50 percent reduction (for a total of a 75 percent reduction) in FY 2010, and a complete elimination in FY 2011.

This reduction to the wage index portion of hospice payments is partially offset by the annual market basket increase, which is 3.6 percent for fiscal 2009, The hospice wage index, which is based on the unadjusted hospital wage index, is updated annually and is a more accurate index of area wage costs. Phasing out the budget neutrality adjustment also makes the hospice wage index more consistent with the home health wage index. Both hospices and home health agencies are home-based benefits which compete in the same labor markets.

This rule also makes final a change in the way multi-campus hospitals report their wage data, which affects the hospital wage index used to derive the hospice wage index.

Taken together, these changes will pay hospices accurately, maintain the fiscal integrity of the Medicare program, and allow continued access to hospice services for Medicare beneficiaries.