Sequestration’s Return Creating a ‘Tsunami of Pain Points’ for Hospices

The return of sequestration is adding to the financial storms brewing in hospice, as providers contend with rising costs of delivering patient care, inflation and lackluster reimbursement.

Providers are increasingly concerned about their ability to sustain their businesses through choppy waters, calling on regulators to step up support.

After a moratorium during the pandemic, Medicare sequestration resumed July 1. Hospice and other health care providers are once again seeing their Medicare payments slashed by 2% across the board.

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Losing 2% may seem small, but it can have grave consequences on already depressed hospice margins, according to Samira Beckwith, president and CEO of Florida-based Hope Healthcare.

“If [the government] wanted to ensure access to care, this isn’t helping,” Beckwith told Hospice News. “It is really unbelievable with this level of inflation and suffering in the country that they would still institute the sequestration. It is as if our value has been completely ignored.”

Sequestration helped to create a “perfect storm” of financial pressures for providers, she continued.

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In addition to the previously mentioned factors, wage hikes and soaring gas prices have raised staffing costs for providers. Widespread workforce shortages also have hospices struggling to offer competitive compensation in a shrinking resource pool.

Sequestration was established in 2014 by the Budget Control Act. Its suspension during COVID-19 has been a lifeline for hospice leaders pummeled by a mix of several financial and operational challenges.

The 2% Medicare cut is back, despite COVID-19 variants continuing to emerge. The number of cases across the country has climbed in the last month, while the nation’s death toll has tipped above 1 million and continues rising, according to recent data from the U.S. Centers for Disease Control and Prevention (CDC).

Providers also continue to see backlash associated with increased paid sick leave as staff become exposed and need to quarantine. Prices and demand for personal protective equipment likewise remain high.

Hospice providers are not only concerned, but also frustrated at the resumption of sequestration amid the pandemic’s barrage, according to Carole Fisher, president of the National Partnership of Healthcare Innovation (NPHI).

Many providers are “not even close to being out of the woods” when it comes to pandemic headwinds, she told Hospice News.

“We have this tsunami of pain points for our organizations,” said Fisher. “Our providers care for the most vulnerable people with complex and higher levels of care needs. A lot of expense goes with that care, and sequestration is prohibiting the ability for them to deliver it. Providers are disappointed, concerned and frustrated with today’s reimbursement that doesn’t even begin to cover their expenses. Whatever revenue increases they’ve experienced, they’re being offset by sequestration.”

The U.S. Centers for Medicare and Medicaid Services (CMS) in April released the 2023 proposed payment rule for hospice. It included a 2.7% per diem rate increase.

Many providers and stakeholders view the increase as unsubstantial and lagging behind COVID-19 forces at play. CMS used 2019 data that included wages and cost reports to calculate the rate.

Lagging reimbursement and sequestration’s impacts on hospice payment only add to the mix of instability for providers, according to Ben Marcantonio, acting CEO of the National Hospice and Palliative Care Organization (NHPCO).

“It’s not a sustainable model when Medicare reimbursement with a fixed per-diem structure represents nearly 90% of the typical hospice providers’ patient care revenue,” Marcantonio told Hospice News in an email. “If CMS and Congress do not take urgent action, some providers will be forced to close, and patient access to hospice care nationwide will decrease. We must find a way to invest in sustainable, high-quality end-of-life care.”

Financial hits during the pandemic have caused some hospices to stall or completely halt their services, while others have closed down inpatient care facilities.

For example, Ohio-based HMC Hospice of Medina County, an affiliate of Hospice of the Western Reserve, temporarily closed its inpatient center earlier this year, citing cost and safety concerns related to COVID-19. Two years prior, the hospice reduced its staffing ranks to curb expenses, but the move was not enough. The facility has since reopened.

Hospice center closures have sparked community outcry in some cases, with patients and families urging providers to find ways to remain open amid rising demand for serious illness and end-of-life care.

But providers can only stretch as far as financial circumstances allow, according to Beckwith.

Regulators and government officials are at the crux of change that’s needed at a federal level, she continued. Regulators, payers and legislators act in silos, and much is needed to bring them together and understand that their decisions have significant outcomes on patients and families at the end of life, Beckwith said.

Hospices are bracing for impact, anticipating tighter margins and shrinking bottom lines on the horizon, according to Christopher Morrissette, serious illness and palliative care chief operating officer at Teleios Collaborative Network, a group of nonprofit hospices.

“We expect that it is only going to get tougher,” Morrissette told Hospice News in an email. “Sequestration is causing a rate cut, [and] this scenario is directly impacting the bottom line of hospice providers. This means negative margins on top of margins that were slightly above break-even prior. I fear the reduction in revenue will require providers to make difficult decisions that will impact their mission and services.”

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