August 18, 2021

Medicare Hospice Payment Rate Update for Fiscal Year 2022

By Scott Manson, Managing Director, Advisory Services

Medicare Hospice Payment Rate Update for Fiscal Year 2022 Healthcare

In the Federal Register from August 4, 2021, the Centers for Medicare and Medicaid Services (CMS) released its hospice payment update for October 1, 2021, through September 30, 2022. There are plenty of changes to take note of, including changes to payment rates, labor portion percentages, wage indices, and other items.

The fiscal year (FY) 2022 payment rates increased by 2.0% from the FY 2021 amounts. The increase consists of a market basket percentage increase of 2.7%, which is then reduced by a productivity forecast amount of 0.7%. Rates are further increased or decreased by other factors. Providers that do not submit the required data will again receive a 2% rate reduction, so providers should take care to submit the necessary information. Beginning in FY 2024, providers that don’t submit the required data will see a 4% rate reduction.

As in past years, Medicare cost reports are used to set hospice reimbursement rates. CMS used the 2018 Medicare cost reports to reset the labor percentage of the hospice rates. Wages, benefits, contract labor, and other wage-related costs were taken from the cost reports and used to update the labor share components of the rate calculations. The labor share percentage is adjusted by the wage index based on the patient’s site of service. Some service areas will benefit from the labor share changes and some will not — it depends on whether the area’s wage index is greater than or less than 1.0. The table below summarizes the changes:

FY 2022
Labor Share
FY 2021
Labor Share
Continuous Home Care 75.20% 68.71% 6.49%
Routine Home Care 66.00% 68.71% -2.71%
Inpatient Respite Care 61.00% 54.13% 6.87%
General Inpatient Care 63.50% 64.01% -0.51%

The prior year (FY 2021) hospice rates included major core-based statistical area (CBSA) classification changes. These changes were capped at 5% for decreases. However, the FY 2022 wage indices are not capped, and some areas will have decreases that exceed 5%. For example, New Brunswick-Lakewood, New Jersey (CBSA #35154) will see a wage index decrease from 1.2108 in FY 2021 to 1.0578 in FY 2022. As a result, the routine home care daily reimbursement for days 1-60 will decrease from $228.11 per day to $211.16 per day.

In FY 2022 the hospice cap will increase by 2.0%, the same as the other hospice rates. That makes the FY 2022 cap $31,297.61 per beneficiary. The cap is not wage index adjusted, so providers in high wage index areas may approach the cap sooner than providers in lower wage index areas.

The rate update also includes changes to the hospice election statement addendum, the conditions of participation for hospice aide competency evaluation standards and training, and the hospice quality reporting program. CMS estimates that hospices will see an additional $480 million in payments in FY 2022 as a result of the update.

A hospice rate calculator is available on Marcum’s website. If you have any questions about the hospice rate updates, please contact a member of Marcum’s healthcare advisory team.