Open Letter to MedPAC

Dear MedPAC: 

You’re missing opportunities to improve hospice access, reform the cap and save $billions; instead, you’re giving Vitas a $100 million profit windfall

The National Alliance for Hospice Access (NAHA) is a non-profit grassroots coalition of over 500 hospices founded to provide America’s independent hospices with a voice in hospice reform.  We are writing to share with you important and new data on hospice access compiled by Avalere.  This data confirms concerns we have raised with you in the past – MedPAC staff’s review of hospice is demonstrably flawed, will reduce patient access to cost-effective end-of-life care and unnecessarily increase Medicare’s costs.  But, there are practical, alternative hospice reforms that would improve patient access to hospice care, reform the cap, avoid unnecessary hospice rate reductions and still reduce Medicare’s end-of-life care costs by $1 billion annually.  Our goal is to ensure that all end-of-life care stakeholders are fully and accurately informed so that public policy is not led down a demonstrably wrong and needlessly expensive path.

NAHA’s concerns and our alternative reform ideas are based on solid data and analysis.  We commissioned Avalere, an independent and highly respected healthcare advisory firm, to compile and model access and length of stay data for 100% of the 3.5 million Medicare beneficiaries who elected hospice from 2003 through 2007.  We also studied Duke University’s 2007 landmark research on hospice cost savings, reviewed 100% of Medicare hospice cost reports from 2005 and 2006 and SEC filings of large chain hospices, especially Vitas.  Finally, although MedPAC staff offers little transparency to their analyses, we have thoroughly reviewed what they have made public.

Today, 27 years after the hospice benefit was created and 11 years after it was expanded to improve access for non-cancer patients, timely access to hospice is far lower than it could be, and Medicare’s costs are billions of dollars higher than they should be.  Medicare has an extraordinary opportunity to improve end-of-life care while reducing costs by billions of dollars.

• Only 41% of Medicare decedents receive hospice care; more than 1 million die without hospice.
• 66% of cancer patients but only 34% of non-cancer patients receive hospice care.
• 43% of whites but only 33% of minorities receive hospice care, yet Mississippi and other states provide near-equal access to whites and minorities.
• 60% of Arizona terminally ill Medicare beneficiaries receive hospice care, but only 24% of New York’s; 83% of white cancer patients in Arizona receive care, but only 8% of New York’s minority non-cancer patients receive any hospice care, and about half of those 8% receive less than 10 days.
• The hospice cap is harming patient access, especially for minorities and non-cancer patients.

And, the 800,000 Medicare beneficiaries who do get a hospice choice do not get a timely choice.  25% die within 5 days, 38% die within 10 days, 48% within 15 days and 72% within 60 days.  Only 7% of Medicare decedents receive between 60 and 180 days of hospice care, the range in which healthcare quality and maximum cost savings for Medicare coincide.

Why such persistently poor and variable access?  Medicare’s hospice Local Coverage Determinations are not evidence-based and are now known to be seriously flawed and non-predictive of patient length of stay.  Consequently, hospices are individually inventing their own criteria, resulting in a morass of eligibility standards that in practice vary by state, by community, by diagnosis and possibly by race.  Arbitrary eligibility criteria that are not evidence-based restrict timely hospice access.

Yet, in 18 months of reviewing hospice, MedPAC staff never disclosed this hard data or the issues presented, nor did they identify the obvious opportunity for Medicare to improve access and reduce costs. Instead, in November 2007 staff prematurely and incorrectly decided the “problem” was that hospice was growing too fast, driven by for-profit hospices scamming the system.  Staff then spent 16 months force-fitting analyses to build a case to support bad theory, while ignoring data that pointed to far more important issues and opportunities.  The opportunity costs of this misguided and silo-based advocacy are substantial.  Instead of pursuing the opportunity to better distribute cost-effective hospice care and save billions of dollars, staff is recommending Medicare pay more for fewer and shorter hospice stays.  This flies in the face of Duke’s landmark 2007 hospice research, and will reduce access and increase Medicare’s costs.  Using staff’s own estimates, for example, MedPAC’s recommendation will reward Vitas, already the most profitable hospice in the country, with a $100 to $200 million annual profit windfall.  This is an outrageous waste of taxpayer funds, but may explain why the NHPCO has not spoken out.

We want to persuade you, and all end-of-life care stakeholders, not to allow healthcare policy to proceed down this wrong and needlessly expensive path.  Below are eight MedPAC staff claims that form the basis for staff’s recommendations, and that unfortunately to-date have misinformed Commissioners.  Each claim is demonstrably false and/or unsupported by any credible data or analysis.

1)  Access - Staff claims that patient access to hospice is adequate and that the aggregate hospice cap is not harming access.  Both claims are demonstrably wrong.  NAHA’s analysis of Avalere data confirms timely hospice access is poor, there are unnecessary and costly gaps in access among states, diagnoses and races, and the cap is destroying patient access to cost-effective end-of-life care, especially among non-cancer and minority patients.

2)  Eligibility – Staff did not disclose that current hospice LCDs are not evidence-based and are widely viewed as non-predictive of patient length of stay in hospice.  Nor did staff discuss the impact of arbitrary eligibility standards that vary by state, by diagnosis and possibly by race.

3)  Hospice cost-effectiveness – Staff mischaracterized Duke University’s hospice research, understated Medicare’s cost savings from hospice and understated the length of stay at which Medicare’s per user and total savings from hospice are maximized.

4)  Hospice growth – Staff incorrectly asserted that most growth since 2000 has been due to “an influx of for-profit hospices.”  In fact most growth since 2000 has been provided by hospices well-established before 2000, mainly non-profits.

5)  Hospice length of stay – Staff incorrectly asserted there is widespread “managing up of length of stay.”  But, staff’s own testimony admits they were unable to correctly measure length of stay.  Staff either doesn’t know or chose not to disclose what Avalere’s data clearly show:  there has been no increase in length of stay for the overwhelming majority of hospice patients from 2003 through 2007.  This discredits any theory of widespread “managing up.”

6)  Hospice margins – Staff asserts that they were able to accurately measure and segment hospices’ profit margins including, for example, “cap vs. non-cap” hospice margins, based mainly on hospice cost reports.  These assertions are simply not credible.  Hospice cost reports (a) are not financial statements, (b) often do not report revenues, (c) include cost numbers that are unreliable, often incomplete and/or frequently include non-hospice costs, (d) include 600 hospital-based and 400 chain-owned hospices that include unpredictable and inconsistent cost allocations from parent companies, and (e) may or may not report cap expenses and, if they do, do not disclose for which year they accrued the expense.

7)  Length of stay and hospice profits / Vitas – Staff asserts, without credible data or analysis, that length of stay is the key to hospice profitability.  First, staff could not accurately measure hospices’ length of stay or their profit margins, let alone the relationship between the two.  Second, staff asserted hospices reduce services as length of stay increases, but the only data supporting this conclusion came from Vitas. Vitas is the most profitable hospice in the country but not because of length of stay.  Vitas’ profit margin is about 15% and increasing, which is well above average, but their median length of stay is 13 days, which is below average.

Three other business practices may better explain Vitas’ high margins:  (i) according to MedPAC, Vitas consistently reduces caregiver visits to all patients over time; (ii) much of Vitas’ business is in Florida, where Certificate of Need regulations severely restrict competition; and (iii) Vitas delivers about 8% of all Medicare hospice days in the U.S., but about 40% of all high-cost, high-profit Medicare continuous care days; i.e., Vitas charges Medicare more per patient day of care delivered.

Vitas is not representative of independent hospices in America.  We know of no evidence that independent hospices consistently reduce caregiver visits to patients over time.  And, when it comes to caregiver jobs, Vitas says one thing but does another.  For example, within a week of signing a letter promising Congress that delaying the hospice BNAF cut in the stimulus package would save thousands of hospice jobs, Vitas told Wall Street analysts that their $8 million share of the BNAF stimulus would “drop to Vitas’ bottom line” and they would be seeking additional “labor efficiencies.”

8)  Hospice Cap – MedPAC staff has systematically underestimated the size and growth of aggregate cap demands, and the harm the cap is causing to rural, minority and non-cancer patient access.  Staff did not get actual cap numbers from CMS but instead “modeled” the impact.  Their model is flawed and their numbers are wrong.  Staff issued at least three different estimates of 2005 Cap demands, with the third ($166 million) being 36% higher than the first and, we estimate, still about 20% below the actual.

MedPAC staff also claimed there is a “huge gap” in length of stay between “cap hospices” and “non-cap” hospices and that this must be evidence of questionable business practices.  In fact, the “huge length of stay gap” is the product of bad analysis and misleading advocacy, and staff’s accusation that hospices exceed the cap as a result of questionable business practices is simply false.

In summary, MedPAC staff has spent the last 18 months advocating a fundamentally flawed view of hospice, have misinformed the Commission with analysis that has not been made transparent and would not pass peer review, and in doing so are missing significant opportunities to improve hospice value and reduce Medicare’s costs.

We appreciate MedPAC Commissioner’s service and your commitment to improving the value of the hospice benefit.  Independent hospices seek to do the same, but we think all end-of-life care stakeholders should be fully and accurately informed.  We would welcome the opportunity to discuss our data-driven ideas for alternative, practical and fiscally-responsible reforms that would both improve timely patient access to end-of-life care and reduce Medicare’s end-of-life care costs.