As quietly promised, Medicare Administrative Contractors (NGS, Palmetto) have begun issuing FY 2013 cap demands with sequestration (money never paid) included as a part of revenue, thus overstating the demands.  The demand letters themselves do not call out the sequestration adjustment.  To see the increase in revenue, and thus increase in demand, hospices need to review the cap calculation table.

The cap calculation table is attached to the letter.  This table includes both the inpatient cap (almost no hospices ever hit this cap) and then at the bottom of the page, the hospice cap.   As shown in the examples below, contractors first add to revenue all sequestration, then credit back a portion of sequestration (usually about 15-30%):

NGS FY 2013 Hospice Cap / Sequestration Example (adding money never paid, giving small credit):

Palmetto FY 2013 Hospice Cap / Sequestration Example:

If you recall in CMS’ example, CMS showed the credit amounting to about 80% of sequestration, thus suggesting that the effect would be smaller.  But for a typical hospice, the sequestration credit will be a small fraction.

In these two real FY 2013 examples (specific hospice identifiers removed) the sequestration credit was between 10% and 35%.

In these two examples, hospices face demands that are overstated by $73K and $46K. As can be seen from these examples, the closer a hospice is to break even on the cap, the more sequestration will hit the hospice.

Overstated demands for FY 2014 will be more significant as sequestration was in place for only one-half of the FY 2013 year but was in place for the full FY 2014 year.

Hospices wishing to challenge the addition of sequestration to the cap demands for FY 2013 and later must appeal these demands within 180 days of receipt or the right to appeal will be lost.

Because sequestered revenue as to any single hospice may be relatively modest, no single hospice on its own can justify both the administrative and Federal court litigation fees and costs that will be necessary to reverse this policy.

For these reasons, we are offering to represent hospices on an alternate fee and cost structure with the following basic terms:

• Each provider will be charged a fixed upfront fee of the greater of $2,000.00 or ten percent (10%) of the amount by which revenue is overstated, plus $250.00 toward costs. No further fees or costs will be due unless we succeed in challenging the policy. We will need a group of minimum sufficient size.

• If we save a provider money or recover money through this work, then the provider would pay a further fee equal to twenty-five (25%) of the savings at the time such savings are confirmed or realized, less fees already paid or fees and any costs recovered from CMS, with total fees regardless of benefit not to exceed $25,000 per provider in any case.