The OIG’s recently released study examining Medicare hospice claims from 2007 to 2012 calls for targeted reviews of hospices that receive a high proportion of their payments for care in assisted living facilities.

The evaluation and policy division of the U.S. Department of Health and Human Services Office of Inspector General (OIG) issued a study dated January 13, 2015 after evaluating all Medicare hospice claims from 2007 through 2012.^[1] OIG’s general study observations were that (1) hospices provided care much longer for beneficiaries in assisted living facilities (ALFs) compared to other settings, like nursing facilities, private homes, and skilled nursing facilities (SNFs); (2) ALF residents often had diagnoses that usually required less complex care; (3) hospices typically furnished fewer than five hours of visits for routine home care patients in ALFs; and (4) for-profit hospices received “much higher” Medicare reimbursement per beneficiary than nonprofit hospices. Ultimately, OIG, like the Medicare Payment Advisory Commission before it, recommends to the Centers for Medicare & Medicaid Services (CMS) that its hospice payment reform should address the financial incentives under the current system to target ALF residents for hospice services.

If history is a guide, critical OIG studies such as this one trigger additional targeted scrutiny, and so hospices, particularly for-profit hospices, should expect increased audits related to their services for ALF residents. Indeed, OIG’s study recommends that CMS “target certain hospices for review.”

One important point that the OIG study does not address is the simple observation that ALF residents are generally more likely to be healthier than nursing home and SNF residents, and so one would expect a lower median number of hospice days for patients in those non-ALF settings. Nonetheless, with the OIG findings that “hospices provided care to beneficiaries in ALFs much longer than to beneficiaries in any other setting” and “Medicare paid twice as much for care for beneficiaries in ALFs than for beneficiaries in other settings,” the OIG’s call for scrutiny of hospice care furnished in ALFs is, as a practical and policy matter, unavoidable. Hospices should take note.

So, what are the takeaways of this latest OIG hospice study?

• For-profit hospices will likely face a higher level of scrutiny than their nonprofit peers. This for-profit hospice “call out” is consistent with prior OIG hospice reports that have done the same.

• If a hospice serves a disproportionate or high number of ALF residents (identified by OIG in its study as hospices that had “more than half of their Medicare payments from care provided in ALFs”), it is more likely to be subject to Medicare review.

• OIG’s recommendations to CMS for hospice payment reform, greater transparency on hospice payments, and better data for hospices to compare themselves against their peers (all of which CMS agreed with) will likely be adopted in the future. However, hospice reform has been on CMS’s Affordable Care Act “to-do” list since 2010, and those reform wheels can turn slowly.

• In the meantime, hospices should check if their ALF resident data look different in 2015 than in 2012, the last year covered by OIG’s study. If not, it makes sense for hospices to consider potential compliance assessments of their services furnished in the ALF setting.

• Any individual hospice with a disproportionate number of ALF residents (i.e., greater than 50%) should consider an appropriately focused compliance review to assess potential risk, particularly if the hospice has cap liability and a higher than average length of stay.

While in the current program integrity focused environment, CMS and OIG audits may be an inevitable part of participating in the Medicare program. It is important that hospices pay heed to the government’s clear signals of the increased scrutiny that lies ahead and get out in front of auditors by engaging in appropriate internal assessments and, as appropriate, process improvement.