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Medicare Hospice CAP Demands and Appeals

Beginning in 1982, Medicare began offering a hospice benefit to covered individuals needing end of life palliative care. Provisions for Medicare hospice reimbursement were set out in Hospice Statute of 1982. Under the system, benefits would be paid to the hospice provider in the form of a flat fee per day the patient receives care, regardless of actual costs incurred by the provider. The patient agreed to forego all other Medicare coverage related to their terminal diagnosis. All costs of the patient’s terminal illness would be shifted to the hospice, and the hospice would take on all costs related to this diagnosis. An individual’s hospice benefit originally had a 210-day lifetime limit.

Provider Reimbursement Limit

The statute also limited total Medicare reimbursements to a hospice provider during the accounting year. The amount paid to a provider could not exceed an aggregate cap, which is calculated by multiplying a flat per patient amount by the number of patients served by the facility in a given accounting year. The number of patients, or “beneficiaries” served in a year was to be prorated so Cap Allowances for patients in hospice across multiple years would be distributed across those years.

Lifetime Benefit Limit Removed

While the lifetime Medicare 210-day hospice lifetime benefit limit was removed in 1998, the individual patient reimbursement cap to the hospice did not change. Further, regulations written in 1983 by the Department of Health & Human Services (HHS) disregarded the existing provision for Cap proration, instead allowing providers to count the patient only for the year in which they were first admitted to hospice, regardless of their length of stay. Because of this inconsistency, Center for Medicare & Medicaid Services (CMS) began issuing “Cap Demands,” requiring a hospice to repay funds received for caring for Medicare beneficiaries, even though the services were rendered to an eligible patient.

Even though the Department of Health and Human Services changed to a Proportional Cap calculation in 2011, Cap Demands still continued. In 2013, CMS announced a Medicare “sequester” which reduced every Medicare provider’s reimbursements by 2% as part of a larger government program to reduce budget deficit. These monies, never paid to providers, were later included in revenue totals for purposes of Cap Allowance and Demand calculations. In other words, hospice providers have been asked to pay back reimbursements they never received.

Appeals Process

Hospice providers who have received Cap Demand letters from CAP can and should appeal. Be aware, there is a deadline for filing an appeal. If you have received a Cap Demand that might include sequestered revenue or an invalid cap allowance calculation, don’t delay!