The US Centers for Medicare & Medicaid Services (CMS) has implemented a final rule, effective November 13, 2023, designed to enhance the oversight of hospice providers throughout the United States and increase regulatory scrutiny of poor-performing hospices through the Hospice Special Focus Program (SFP).

In recent months, CMS has expanded its focus on addressing the significant increase in the number of hospices enrolling in the Medicare program and related program integrity risks. The CMS final rule[1] (advanced copy published on November 1, 2023) goes well beyond scrutiny on new hospices, however, and will impact the entire hospice sector.

CMS intends to foil activities that it views as improper schemes in the hospice industry, as identified in an HHS OIG July 2018 study, such as (1) the targeting of ineligible beneficiaries for hospice services and (2) false certifications of beneficiaries as terminally ill. CMS believes these schemes can best be nullified through increased reliance on survey findings and quality indicators in the SFP, greater scrutiny of hospice owners and managing employees, and new restrictions on the ownership and transfer of hospice programs.

The final rule expands CMS’s regulatory oversight through several distinct changes, including the following:

• Finalizing the SFP to closely monitor poor-performing hospices (notwithstanding significant industry concerns around the methodology CMS will employ to identify performers in the bottom 10%);
• Formalizing and expanding the hospice period of enhanced oversight;
• Expanding the 36 Month Rule on change of ownership to hospice agencies;
• Requiring hospice administrators and medical directors to be disclosed as managing employees;
• Categorizing hospices as “high risk” providers for Medicare screening purposes, requiring fingerprinting for individuals with 5% or greater ownership; and
• Shortening the Medicare billing deactivation period.

THE FINAL RULE

We describe each of the aforementioned changes in more detail below.

Finalizing the Hospice SFP

The Consolidated Appropriations Act of 2021 mandated HHS to implement an SFP to address poor-performing hospices that may be providing low-quality and potentially unsafe care. The following year, in CY 2022, CMS convened a Technical Expert Panel (TEP) to assist with the development of a methodology and algorithm for identifying poor-performing hospices that should be subject to increased regulatory oversight.

Following the release of the TEP summary recommendation report on April 28, 2023, CMS developed and proposed a methodology and algorithm to identify the bottom 10% of hospices (the threshold for additional oversight) using the following series of factors:

• Hospice surveys, based on survey reports assessing a hospice’s condition-level deficiencies (CLDs)[2] and data obtained in assessing substantiated complaints against a hospice;
• The Hospice Care Index Overall Score, based on Medicare claims data; and
• Four hospice Consumer Assessment of Healthcare Providers and Systems (CAHPS) survey measures.[3]

The algorithm will use these factors to create an aggregate score, and the lowest 10% of hospices will be subject to the SFP’s increased oversight.

If a hospice is selected for increased oversight under the SFP, it will be subject to a survey assessing whether it has any condition-level deficiencies every six months, up to three times. Upon assessment, a hospice must not have any pending complaint investigations or CLDs, or else it must return to substantial compliance within the SFP’s 18-month timeframe if the hospice has any such deficiencies not yet resolved.

Failure to meet these conditions may result in the hospice’s termination from the Medicare program, the imposition of civil monetary penalties, prescribed in-service training, the implementation of a directed plan of correction, or the appointment of temporary management to oversee operations.

Industry stakeholders have roundly criticized this approach, citing flawed methodology that may result in false positives regarding poor performance, which is likely to disproportionately affect larger hospices.

In its final rule, CMS noted, in response to this industry criticism, “[a]s part of our continued monitoring, CMS will evaluate how potential SFP providers will be differentiated from providers that do not need additional attention. As the proposed SFP improves care delivery across providers, CMS may consider changing components of the program such as the number of SFP eligible providers or the number of SFP participants if warranted.”

Formalizing and Expanding the PPEO

CMS decided to formally implement its proposed provisional period of enhanced oversight (PPEO) program across all new hospice providers. The PPEO program, announced in July 2023, was previously enforced solely against newly enrolling hospices located in Arizona, California, Nevada, and Texas.

Through the PPEO, new providers or suppliers are subject to prepayment medical reviews designed to address and catch improper billing practices right out of the gate. To address workarounds to this provisional oversight period, whereby certain providers would refrain from billing until after the period lapsed before engaging in improper billing, the rule updates the commencement of the PPEO to align with “the date on which the new provider or supplier submits its first claim.”

Expanding the 36 Month Rule to Hospices

CMS believes that increased oversight of hospice owners will help identify and deter bad actors from this space. Using the existing 36 Month Rule applicable to home health agencies (HHAs) as a template, CMS finalized the expansion of this rule to hospices.

Now, any provider or owner of a hospice that undergoes a change in majority ownership (CIMO) “by sale within 36 months after the effective date of the hospice’s most recent CIMO” must “enroll in Medicare as a new (initial) hospice” and “obtain a state survey or an accreditation from an approved accreditation organization.”

This rule adopts 42 CFR § 424.502’s definition of a CIMO; that is, occurring when “an individual or organization acquires more than a 50[%] direct ownership interest in an HHA [now including hospice] during the 36 months following the [hospice’s] initial enrollment or most recent CIMO.” Notably, a CIMO includes acquisitions through various transactional structures, including asset sales, stock transfers, consolidations, or mergers.

In other words, “the provider agreement and Medicare billing privileges do not convey to the [hospice’s] new owner” when a transfer occurs within 36 months of the hospice’s initial enrollment in Medicare or the last CIMO. CMS believes this change will prevent the flipping of hospice agencies to unscrupulous owners without going through Medicare’s survey and oversight process. Importantly, the rule does not alter the existing requirement that a CIMO be a direct ownership change as opposed to an indirect change.

Implementing Stricter ‘Managing Employee’ Disclosures

While the definition of a “managing employee” is often vague and can be subject to multiple interpretations, CMS made clear in the final rule that every hospice’s designated administrator and designated medical director will be considered “managing employees” for purposes of Medicare enrollment.

Typically, few hospices report their medical director as a “managing employee,” and few physicians wish to be formally disclosed in such a capacity on Medicare enrollment forms. This change will result in nearly every hospice in the country needing to update their PECOS or 855A enrollment materials and further update these forms when personnel change.

Hospice ‘High Risk Designation’; Heightened Ownership Screening

Hospices enrolling in Medicare will now be deemed “high risk” providers, meaning all individuals with a 5% or greater ownership interest in a newly enrolling hospice will need to submit fingerprints for a criminal background check. Further, any new 5% or greater individual owners in an already enrolled hospice will also need to undergo fingerprinting. CMS believes this will serve to detect individuals more likely to engage in fraud and abuse at an earlier stage, but may be burdensome for the vast majority of upstanding hospice owners.

Shortening the Non-Billing Deactivation Period

The final rule will also shorten the deactivation period for hospice providers from the standard 12 months to six months. “Deactivation” means that “the provider’s or supplier’s [Medicare] billing privileges are stopped,” while still allowing the provider to remain enrolled in Medicare. CMS will now deactivate hospice providers that have not submitted any Medicare claims for six consecutive months.

CMS reasons that a shortened deactivation window should prevent questionable businesses from deliberately hoarding multiple billing numbers, in case one is revoked, and fraudulent businesses from using billing information of deceased or discontinued providers to further their schemes.

WHAT’S NEXT

The final rule will have both immediate and long-lasting effects on the hospice industry. There are a number of actions many hospices will need to take soon after the rule’s effective date, and all hospices should be reviewing their Medicare enrollment information to ensure it is accurate and in compliance with CMS’s updated requirements.

Hospices engaged in transactions or thinking about the future of their hospice should carefully assess their ownership structure to determine whether the 36 Month Rule will throw a wrench into their planning. Finally, all hospices will need to closely evaluate their quality metrics and enhance certain Quality Assurance and Performance Improvement practices to ensure that they do not fall into the bottom 10% of hospices that are now subject to the SFP.

[1] The final rule also updates Medicare payment policies and rates for HHAs.

[2] CMS identified 11 quality of care CLDs that the algorithm will consider in assessing performance: (1) patient rights; (2) initial and comprehensive assessment of the patient; (3) interdisciplinary group, care planning, and coordination of services; (4) quality assessment and performance improvement; (5) infection control; (6) core services; (7) hospice aide and homemaker services; (8) medical director; (9) short-term inpatient care; (10) hospices that provide inpatient care directly; and (11) hospices that provide care to residents of a skilled nursing facility/nursing facility or intermediate care facility for individuals with intellectual disabilities (ICF/IID).

[3] The four CAHPS survey measures selected for consideration are (1) help for pain and symptoms, (2) getting timely help, (3) willingness to recommend this hospice, and (4) overall rating of this hospice.

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