Hospices will receive a 3.8% Medicare pay bump in fiscal year 2023 — an increase of $825 million compared with fiscal year 2022 — under a final hospice rule released Wednesday by the Centers for Medicare & Medicaid Services.

The update is a result of the 4.1% market basket percentage increase reduced by a 0.3 percentage point productivity adjustment. It marks a significant uptick from the 2.7% proposed increase that CMS offered in March. Hospices that fail to meet quality reporting requirements receive a 2% point reduction to the annual hospice payment update percentage increase for the year, CMS said. 

The National Hospice and Palliative Care Organization said late Wednesday the payment increase is a “step in the right direction” but doesn’t go far enough.

The rates “still do not accurately reflect the reality of higher gas prices, unrelenting labor shortages, and additional pandemic-related expenses that hospice providers and programs are facing across the country,” NHPCO Interim President and CEO Ben Marcantonio said in a statement. “We call on the Biden administration and Congress to step in to provide additional reimbursements in 2023, which accurately reflect the unprecedented demands and costs providers are facing in order to ensure long-term viability for the hospice and palliative care that Americans want and deserve.”

National Association for Home Care and Hospice President and CEO William Dombi echoed that sentiment.

“We have continuing concerns that it will not fully address current cost inflation and will seek support for further increases that would cover the increasing labor and other costs affecting hospice providers,” Dombi told McKnight’s Home Care Daily Pulse. “We also fully support CMS’ actions to finalize the 5 percent cap on wage index decreases from one year to the next but are disappointed that CMS did not address the significant reductions that affected many hospices in 2022 that are not remedied by a prospective application of the cap at this point.”

The hospice payment update includes a statutory aggregate cap that limits the overall payments per patient that is made to a hospice annually. Departing from the proposed rule, the cap amount for FY 2023 is $32,486.92, an increase of 3.8% from the FY 2022 cap amount of $31,297.61.

Consistent with the proposed rule, the final rule establishes for FY 2023 and subsequent years a permanent, budget-neutral 5% cap on any decrease to a geographic area’s wage index, so that a geographic area’s wage index would not be less than 95% of its wage index calculated in the prior FY regardless of the circumstances causing the decline. 

One of the highlights of the proposed rule for providers was the focus on equity. CMS extended a Health Equity Request for Information (RFI) to support providers in quality improvement activities to reduce health inequities, enable beneficiaries to make more informed decisions, and promote provider accountability for healthcare disparities. In the final rule, CMS noted its appreciation of public comments received and offered its strategic vision for 2022.

This is a developing story. Please check back for updates.

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