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How to Establish a Palliative Care Program

Financing Hospice Care

In the US, hospice care has chiefly been delivered at home. This has been driven by the fact that more than 80% of Americans say that, if they have a terminal illness, they would like to be cared for and die at home.

In 1993, 256,900 patients were cared for by hospice programs and an estimated 540,000 were managed in 1998 . In 1999, the National Hospice and Palliative Care Organization estimated that over 600,000 Americans died while receiving hospice care (29% of all Americans who died that year)

Medicare has been the main source of funding for hospice home care in the US. Sixty-five percent of hospice patients are covered by the Medicare Hospice Benefit.

Other funding sources include:

Many hospices also provide care to uninsured individuals. To do so, they rely on donations to cover their costs.

Medicare Hospice Benefit
In response to the enthusiasm of early pioneers, the Health Care Financing Administration funded a national demonstration project beginning in 1979. The purpose was to establish a standard definition of hospice care and assess cost effectiveness.

Based in part on the experience of the National Hospice Study, the 1982 Tax Equity and Fiscal Responsibility Act (TEFRA) established the Medicare Hospice Benefit (MHB). It became effective the following year. It was the first use of a prospective payment system by Medicare. Today, it continues to be the most comprehensive benefit for end-of-life care available.

For eligible patients who elect to enroll in the Benefit, a Medicare-certified hospice program assumes responsibility for the complete plan of interdisciplinary care for the patient and family related to the patient's terminal illness. This includes a wide range of covered services.

In return, the hospice program receives one of 4 fixed reimbursement rates per day (the Perdiem) according to level of care: routine home care, continuous care, general inpatient care and inpatient respite care. These rates cover all of the services that are covered under the Benefit.

For conditions unrelated to the terminal illness, the patient use their regular Medicare coverage.

The Medicare Hospice Benefit provides two benefit periods of 90 days each, followed by an unlimited number of 60 day periods.

Resource:
HCFA: The Hospice Payment System
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Medicaid
Hospice care is included as a benefit under Medicaid in 43 states and the District of Columbia. In those states, the coverage usually mirrors that provided by Medicare.
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Commercial Insurers
Most commercial health plans have some type of hospice coverage. Even if it is not listed in the benefit language of the policy, it can usually be negotiated on a case-by-case basis on humanitarian and financial grounds. Some plans have a cap on the total amount of money for a hospice benefit in the range of $2,000 to $5,000 for a lifetime. At the average per diem that Medicare provides for routine home care of about $107 per day, this benefit cap covers less than 20-50 days. In other words, not nearly as generous as Medicare.

Case managers are an important component of obtaining commercial insurance coverage for hospice. Coverage outside of their policy can often be negotiated by a savvy administrator in the hospice.
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Managed Care
Managed care is a generic term for a variety of insurance plans. Most managed care plans have a provision for hospice care. Some cover hospice care in the same way that Medicare does. If a patient is eligible for the Medicare Hospice Benefit, he or she can elect that coverage whether or not they are enrolled in a managed care company's plan. Authorization from the managed care plan is not required.

Under current regulations, a Medicare managed care plan (such as Medicare+Choice) will continue to receive 25% of its Medicare capitation for a patient who elects the Medicare Hospice Benefit because it remains responsible for the care of problems not related to the terminal illness.

Some managed care plans try to "unbundle" or otherwise negotiate the services provided to its members by an individual hospice. For example, if the managed care plan already covers prescriptions and home care services, they will try to have the hospice provide only the nurse or social work or chaplain visits on a fee-for-service basis rather than under a single per diem rate.
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Government (Veterans Affairs, Active Duty Military)
The CHAMPUS insurance coverage for active duty military covers hospice care.

The Department of Veterans Affairs covers hospice and palliative care by statute. Services can be provided directly and through contracts with medicare-certified hospice programs in their communities. However, implementation is variable thorught the system.

Next, consider the financing of physicians.

CAPC Resources:
Additional resources on "Financing US Healthcare"

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Help develop CAPCManual. Send your comments, questions, suggestions to: fferris@sdhospice.org
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CAPCManual Attribution:  von Gunten CF, Ferris FD, Portenoy RK, Glajchen M, eds. CAPCManual: How to Establish A Palliative Care Program. New York, NY: Center to Advance Palliative Care, 2001.   © Center for Palliative Studies, San Diego Hospice & Palliative Care, San Diego, CA and
The Department of Pain Medicine and Palliative Care, Beth Israel Medical Center, New York, NY, 2001

Permission to reproduce for non-commercial educational purposes with display of attribution and copyright is granted.
Last updated: February 20, 2002

Elements
Select section:
Basis, Context, Components, Case Examples

•  Basis of Palliative Care Practice
      Palliative Care Definitions
         Historical Definitions
            WHO
            Oxford Textbook
            ABHPM
            NHPCO
         Palliative Care
         Applicability
         Application to Patients at Risk
         Differences–Hospice & Palliative Care
      Values, Ethical Principles
         Values
         Ethical Principles
      Conceptual Framework
         Square of Care
         Square of Organization
         Square of Care & Organization
      Norms / Standards of Practice
      Guidelines
      Policies, Procedures
         What are They?
         Developing, Implementing, Evaluating
      Measures
      Definitions of Common Terms
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•  Context
      Tensions
         In Therapeutic Relationships
         Within Host Organizations
         Within Healthcare System, Community
      Who's the Customer
      US Healthcare
         Acute Care Hospitals
         Long-term Care Facilities
         Home
         Hospice Care
      Financing US Healthcare
         Expenditures for EOL Care
         Overview by Settings, Revenue Sources
            Medicare
            Medicaid
            Commercial Insurers
            Managed Care
            Government (VA, Military)
         Financing
            Community Hospitals
            Academic Hospitals
            Subacute, Skilled Care
            Custodial Care
            Ambulatory Care
            Home Care
            Hospice Care
                  Eligibility
                  Covered Services
                  Reimbursement Rates
                  Unintended Consequences
         Financing Physicians
            Coding
               Procedure / Service Codes
                  Coding Based on Time
                     Frequently Used E/M Codes
                        Example
                  Addition of Procedure Codes
            Diagnosis Codes
               ICD-9 Codes for Palliative Care
               Avoiding Concurrent Billing Problems
                  Example
            Documentation
               Example
            Physician Reimbursement
               Medicare
                  Medicare Hospice Benefit
                     Non-hospice Physicians
                     Associated with a Hospice
               Medicaid
               Commercial Insurers
               Managed Care
               Government (VA, Military)
         Financing Non-physician Providers
      Hospital–Hospice Relationships
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•  Program Components
      1º, 2º, 3º Model of Palliative Care Delivery
      Interdisciplinary Care
         Members of Interdisciplinary Team
            Core Competencies
               Physician
               Nurse
               Social Worker
               Chaplain
               Volunteer
      Specialized Environments
      Types of Services
         Consultation Services
            Consultation Etiquette
            Consultation Documentation
               Sample Note
         Inpatient Units
            Developing an Inpatient Unit
               Staffing
               Acuity
               Nursing Model
               Unit Size
                  General Ward vs. Palliative Care Unit
            Roles
            Decisions
            Case Example
               Nursing Staff
               Physician Staff
               Other Staff
               Advice
         Home Care
            Eligibility, Medicare Home Health Benefit
               Covered Services
               Usually Not Covered
         Hospice Care at Home
         Ambulatory Outpatient Care
         Respite Care
      Financing Palliative Care Programs
         Acute Hospital
         Skilled Care Nursing Home
         Hospice
         Home Health
         Ambulatory Outpatient
         Managed Care
      Financing Physicians in Palliative Care
      Financing Non-physicians in Palliative Care
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•  Case Examples
      CAPCManual Case Examples
      Pioneer Program Case Examples
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