Medicare: More Beneficiaries Use Hospice; Many Factors Contribute to
Shorter Periods of Use (Testimony, 09/18/2000, GAO/T-HEHS-00-201).

Pursuant to a congressional request, GAO discussed issues related to the
use of Medicare's hospice benefit, focusing on: (1) the patterns and
trends in hospice use by Medicare beneficiaries; (2) factors that affect
the use of the hospice benefit; and (3) the availability of hospice
providers.

GAO noted that: (1) the number of Medicare beneficiaries choosing
hospice services has grown substantially during the past decade--nearly
360,000 beneficiaries enrolled in 1998, more than twice the number that
elected hospice in 1992; (2) cancer patients account for more than half
of Medicare hospice users, but the most dramatic growth in use is among
persons with other terminal conditions, such as heart disease, lung
disease, stroke, or Alzheimer's disease; (3) although more beneficiaries
are choosing hospice, many are doing so closer to the time of death; (4)
half of Medicare hospice users are enrolled for 19 or fewer days, and
service periods of 1 week or less are common; (5) many factors influence
decisions about whether and when to begin hospice services, including
physician practices, patient preferences and circumstances, and general
awareness of the benefit among professionals and the public; (6) along
with these factors, federal oversight of compliance with Medicare
eligibility requirements may also have affected hospice use; (7) growth
in the number of Medicare hospice providers in both urban and rural
areas and in almost every state suggests that hospice services are more
widely available to program beneficiaries than in the past; (8) at the
same time, hospice officials report increased cost pressures from
shorter patient enrollment periods and the use of more expensive forms
of palliative care; (9) because data on provider costs are not
available, however, the effect of these factors on the overall financial
condition of hospice providers is uncertain; and (10) the Health Care
Financing Administration is beginning to gather information from hospice
providers about their costs, which should allow the adequacy of Medicare
hospice payment rates to be evaluated in the relatively near future.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  T-HEHS-00-201
     TITLE:  Medicare: More Beneficiaries Use Hospice; Many Factors
	     Contribute to Shorter Periods of Use
      DATE:  09/18/2000
   SUBJECT:  Health care programs
	     Long-term care
	     Patient care services
	     Health resources utilization
	     Health care cost control
	     Health care facilities
	     Home health care services
IDENTIFIER:  Medicare Program

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GAO/T-HEHS-00-201

For Release on Delivery Expected at 1: 30 p. m. Monday, September 18, 2000

GAO/ T- HEHS- 00- 201

MEDICARE More Beneficiaries Use Hospice; Many Factors Contribute to Shorter
Periods of Use

Statement of William J. Scanlon, Director Health Financing and Public Health
Issues Health, Education, and Human Services Division Testimony

Before the Before the Special Committee on Aging, U. S. Senate

United States General Accounting Office

GAO

Page 1 GAO/ T- HEHS- 00- 201

Mr. Chairman and Members of the Committee: I am pleased to be here today as
you discuss issues related to the use of the Medicare hospice benefit. The
twenty- first century will bring new challenges to the provision of
palliative care to older people. Palliative care is changing, as are notions
of a decent or “good” death free from unnecessary suffering for
patients, families, and caregivers. New medical technologies and treatments
are expected to result in better management of symptoms of chronic
conditions and at the same time will blur the lines between curative care
and palliative care.

Hospice care is an option available to Medicare beneficiaries who are
expected to have 6 months or less to live and who choose to receive
palliative care and supportive services, rather than traditional
curativefocused medical care, to manage their terminal illness. Medicare-
certified hospices provide a range of services to control pain and provide
comfort, primarily to individuals in their own homes. Some patient
advocates, hospice providers, and others contend that certain Medicare
beneficiaries for whom hospice care is appropriate may have difficulty in
gaining access to care or receiving services in a timely manner. However,
officials of the Health Care Financing Administration (HCFA) and others
assert that the hospice benefit is basically working as intended and meeting
the needs of those who choose to use it. At your request, we examined the
use of the hospice benefit during the past decade. Accordingly, my remarks
will focus on (1) the patterns and trends in hospice use by Medicare
beneficiaries, (2) factors that affect the use of the hospice benefit, and
(3) the availability of hospice providers. Our report on this work is being
released today, and it provides more detailed information on these issues. 1

In summary, the number of Medicare beneficiaries choosing hospice services
has grown substantially during the past decade- nearly 360,000 beneficiaries
enrolled in 1998, more than twice the number that elected hospice in 1992.
Cancer patients account for more than half of Medicare hospice users, but
the most dramatic growth in use is among persons with other terminal
conditions, such as heart disease, lung disease, stroke, or Alzheimer's
disease. Although more beneficiaries are choosing hospice, many are doing so
closer to the time of death. Half of Medicare hospice users are enrolled for
19 or fewer days, and service periods of 1 week or less are common. Many
factors influence decisions about whether and when to begin hospice
services, including physician practices, patient

1 Medicare: More Beneficiaries Use Hospice, but for Fewer Days of Care( GAO/
HEHS- 00- 182, Sept. 18, 2000). Medicare: More Beneficiaries Use Hospice;

Many Factors Contribute to Shorter Periods of Use

Medicare: More Beneficiaries Use Hospice; Many Factors Contribute to Shorter
Periods of Use

Page 2 GAO/ T- HEHS- 00- 201

preferences and circumstances, and general awareness of the benefit among
professionals and the public. Along with these factors, federal oversight of
compliance with Medicare eligibility requirements may also have affected
hospice use. Growth in the number of Medicare hospice providers in both
urban and rural areas and in almost every state suggests that hospice
services are more widely available to program beneficiaries than in the
past. At the same time, hospice officials report increased cost pressures
from shorter patient enrollment periods and the use of more expensive forms
of palliative care. Because data on provider costs are not available,
however, the effect of these factors on the overall financial condition of
hospice providers is uncertain. HCFA is beginning to gather information from
hospice providers about their costs, which should allow the adequacy of
Medicare hospice payment rates to be evaluated in the relatively near
future.

The Medicare hospice benefit, authorized in 1982 under part A of the
Medicare program, covers medical and palliative care services for terminally
ill beneficiaries. A Medicare- certified hospice provides physician
services, nursing care, physical and occupational therapy, home health aide
services, medical supplies and equipment, and short- term care in the
hospital (for procedures necessary for pain control and symptom management).
In addition, the hospice benefit provides coverage for several services not
generally available under the regular fee- for- service Medicare benefit.
These include drugs for symptom control and pain relief, inpatient respite
care, and bereavement counseling for the patient's family. For each day a
beneficiary is enrolled, the hospice provider is paid an allinclusive,
prospectively determined rate, depending on the level of care that is
provided. 2

Beneficiaries who elect hospice are required to waive Medicare coverage of
care related to their terminal illness that is provided outside the hospice,
although they retain coverage for services unrelated to their terminal
illness. A beneficiary can cancel his or her election of hospice benefits at
any time, return to regular Medicare, and reselect hospice coverage later.
To be eligible for hospice services, a beneficiary's physician and the
hospice medical director (or other physician affiliated with the hospice)
must certify that his or her prognosis is for a life expectancy of 6 months
or less, if the terminal illness runs its normal

2 The four levels of hospice care are routine home care, continuous home
care, inpatient respite, and general inpatient care. Background

Medicare: More Beneficiaries Use Hospice; Many Factors Contribute to Shorter
Periods of Use

Page 3 GAO/ T- HEHS- 00- 201

course. This eligibility requirement has been a concern among patient
advocates and providers, who assert that it deters referrals to hospice.
Research has shown that it can be difficult for physicians to accurately
predict whether or not a patient is likely to die within 6 months. It is
particularly difficult to estimate life expectancy for persons with
noncancer diagnoses because the course of their disease is often uneven.

Our analysis of Medicare claims data indicates significant growth in hospice
use. The number of beneficiaries electing hospice care more than doubled
from 1992 to 1998, from about 143, 000 to nearly 360,000 people annually.
(See fig. 1.) In 1992, hospice users represented 1 in 12 Medicare
beneficiaries who died that year. By 1998, this proportion grew to 1 in 5,
with wide variation across states. However, this measure understates the
proportion of Medicare beneficiaries who choose hospice care among those for
whom the benefit was intended. According to a former president of the
National Hospice Organization, “when the number of deaths nationwide
is adjusted to reflect only those that are likely to be appropriate for
hospice care, the percentage of dying patients cared for in hospice care is
probably about 40 percent.” 3

3 John J. Mahoney, “The Medicare Hospice Benefit- 15 Years of
Success,” Journal of Palliative Medicine, Vol. 1, No. 2 (1998), pp.
139- 46. The Number of

Beneficiaries Using Hospice Has Grown as Average Days of Use Have Declined

Medicare: More Beneficiaries Use Hospice; Many Factors Contribute to Shorter
Periods of Use

Page 4 GAO/ T- HEHS- 00- 201

Figure 1: The Number of Medicare Hospice Benefit Users Has Grown Steadily,
1992- 98

Source: GAO analysis of claims data from the Medicare Hospice Standard
Analytic File.

Given concerns about the difficulty of establishing a 6- month prognosis for
beneficiaries with noncancer diagnoses, we took a closer look at their use
of hospice services. Although the majority of beneficiaries electing hospice
have a diagnosis of cancer, the use of hospice services by beneficiaries
with noncancer diagnoses has increased dramatically. From 1992 to 1998,
hospice enrollment by beneficiaries with cancer increased 91 percent, while
enrollment among beneficiaries with all other conditions increased 338
percent. By 1998, about 43 percent of Medicare beneficiaries electing
hospice had noncancer diagnoses, compared with about 24 percent in 1992.
Table 1 shows the distribution of new hospice users by primary diagnosis in
1992 and 1998.

0 50

100 150

200 250

300 350

400 1998 1997 1996 1995 1994 1993 1992

Number in Thousands 143.1

180.1 223.0

258.5 294.9

325.3 358.9

Medicare: More Beneficiaries Use Hospice; Many Factors Contribute to Shorter
Periods of Use

Page 5 GAO/ T- HEHS- 00- 201

Table 1: Noncancer Patients Are a Growing Share of Hospice Enrollees, 1992
and 1998

Primary diagnosis a 1992 1998

Number Percent Number Percent

All cancer 108,232 75.6 206,190 57.4

Lung 29,966 20.9 57,841 16.1 Prostate 10,052 7. 0 15,494 4. 3 Breast 7, 602
5.3 13,093 3. 6 Colon 6, 697 4.7 13,278 3. 7 Pancreatic 6,359 4.4 12,116 3.
4 Other 47,556 33.2 94,368 26.3

All noncancer 34,878 24.4 152,759 42.6

Congestive heart failure 6,141 4.3 24,248 6. 8 Chronic obstructive pulmonary
disease 4,112 2.9 15,765 4. 4 Stroke 2,140 1.5 13,282 3. 7 Alzheimer's
disease 1,591 1.1 11,836 3. 3 “Ill- defined conditions” 888 0.6
7, 599 2.1 Other 20,006 14.0 80,029 22.3

Total 143,110 100.0 358,949 100.0

a Patients entering hospice may have more than one terminal condition or
diagnosis. The data presented include only the first, or principal,
diagnosis listed for each patient. Source: GAO analysis of claims data from
the Medicare Hospice Standard Analytic File.

Beneficiaries who die of cancer are likely to receive hospice services
during the course of their illness, more so than those with other
conditions. In 1997, hospice users accounted for nearly half of all cancer
deaths among Medicare beneficiaries aged 65 or older. For the most prevalent
types of cancer in the hospice population, rates of use ranged from about 75
percent of deaths from brain or liver cancer to 31 percent for those with
colon cancer. In comparison, hospice users represented 9 percent of people
aged 65 and older who died from all noncancer causes in 1997. 4

Although more Medicare beneficiaries are receiving hospice services, on
average, they are receiving fewer days of care than did beneficiaries in the
past. From 1992 to 1998, average length of stay declined 20 percent (from 74
to 59 days), while median length of stay declined 27 percent (from 26 to 19
days). (See fig. 2.) This overall decline appears to have been driven by
both (1) a reduction in the proportion of beneficiaries with very long

4 The denominator used for calculating noncancer use rates includes people
who died unexpectedly (for example, from a first heart attack or injuries
sustained during an automobile accident) and thus are not candidates for
hospice care.

Medicare: More Beneficiaries Use Hospice; Many Factors Contribute to Shorter
Periods of Use

Page 6 GAO/ T- HEHS- 00- 201

hospice stays and (2) an increase in the share of users with very short
stays. 5 Beneficiaries using hospice care for one week or less accounted for
28 percent of all users in 1998, compared with 21 percent in 1992. While 9
percent of beneficiaries received hospice services for more than 6 months in
1992, this share decreased to 7 percent in 1998.

Figure 2: Average and Median Hospice Lengths of Service Have Declined, 1992-
98

Source: GAO analysis of claims data from the Medicare Hospice Standard
Analytic File.

5 The small proportion of beneficiaries with very long periods of enrollment
skews the average length of hospice service. Although 97 to 98 percent of
all those electing hospice complete their hospice use by the end of the year
following their initial enrollment, our data for 1992 and 1993 show that
some of the remaining 2 to 3 percent of beneficiaries may receive services
for as many as 6 or 7 years.

0 10

20 30

40 50

60 70

80 1998 1997 1996 1995 1994 1993 1992

Days 74 76 75

68 65

61 59 26 26 26 24 23 21 19

Average Median

Medicare: More Beneficiaries Use Hospice; Many Factors Contribute to Shorter
Periods of Use

Page 7 GAO/ T- HEHS- 00- 201

The decline in the average number of hospice days used has been especially
dramatic among patients with a primary diagnosis other than cancer. While
these beneficiaries historically had used many more days of care, the
average number of days used declined 38 percent between 1992 and 1998. In
comparison, average days used by hospice beneficiaries diagnosed with cancer
declined by 14 percent. As a result, differences in length of stay across
diagnosis categories have narrowed considerably. By 1998, cancer patients
used 54 days, on average, while noncancer patients used 68 days.

Several factors influence a beneficiary's choice about whether and when to
use hospice care. These include physician preferences and referral
practices, individual patient choice and circumstances, and general
awareness of the benefit among the public and professional communities. In
addition, recent federal oversight of compliance with patient eligibility
requirements may have affected certain beneficiaries' use of the hospice
benefit.

Physicians initiate most referrals to hospice, and they may continue to care
for their patients after enrollment as part of the hospice team. Because
patients and their families rely heavily on physician recommendations for
treatment, including recommendations for end- oflife care, physicians are an
influential factor in a patient's entry into hospice. However, the research
literature indicates that not all physicians are comfortable discussing end-
of- life care, and some may hesitate to suggest hospice care for other
reasons. Specifically, research has shown that many physicians are poorly
trained in care of the dying and are often uncomfortable discussing options
for end- of- life care or the cessation of curative treatment. In addition,
some physicians may not be aware that they can continue to provide services
after the beneficiary has entered hospice and may delay referral out of
concern about losing control of the patient's care.

Even when the issue has been broached, some beneficiaries choose instead to
continue curative or life- extending treatments. Medicare beneficiaries' use
of hospice services requires acceptance that death is near. Once a patient
is enrolled, no other services related to the patient's terminal condition
are covered under Medicare. Beneficiaries who do not consider hospice care
may be unwilling to confront the terminal nature of their illness. The
Institute of Medicine (IOM) noted that patients in the Multiple Factors

Influence the Use of Hospice Benefits

Physician Practices, Patient Preferences, and Public Awareness Affect
Hospice Use

Medicare: More Beneficiaries Use Hospice; Many Factors Contribute to Shorter
Periods of Use

Page 8 GAO/ T- HEHS- 00- 201

United States are influenced by the general American unwillingness to accept
limits of all types, including those of aging and death. 6 A Gallup poll in
1996 found that although a majority of people expressed interest in hospice
care, most also said they would still seek curative care.

Beneficiary circumstances may complicate the initiation of hospice services.
For example, because hospice is designed to allow the beneficiary to remain
at home, some hospice programs limit participation to beneficiaries who have
a caregiver at home. Improvements in cancer care and the addition of new
treatment options for other common chronic conditions may be prompting some
beneficiaries to pursue new curative options until very shortly before
death, thus contributing to the trend of shorter hospice stays.

Public and professional awareness of hospice also influences the use of the
Medicare benefit. The need for greater public and professional knowledge and
awareness of options for end- of- life care- including hospice- has been
highlighted recently by IOM, in recent congressional hearings, and in
several other public forums. Patient advocacy groups, medical societies, and
others have initiated a range of educational efforts designed to increase
awareness of hospice care and its benefits. For example, the American
Medical Association is developing a core curriculum for educating physicians
in end- of- life care. The Medicare Rights Center, a consumer advocacy and
education organization, is conducting a national campaign to increase
awareness of the Medicare hospice benefit among health professionals. Also,
the National Hospice and Palliative Care Organization has published a
variety of materials on public education and outreach strategies for its
members.

In 1995 and 1996, the Department of Health and Human Services' (HHS) Office
of the Inspector General (OIG) investigated the eligibility status of
Medicare beneficiaries receiving hospice services, as part of a larger
investigation of fraud and abuse in Medicare. Patient advocacy groups and
the hospice industry assert that this federal scrutiny of compliance with
the 6- month eligibility rule has had a chilling effect on entry into
hospice for noncancer beneficiaries, for whom it may be more difficult to
establish a 6- month prognosis with confidence. They contend that hospice
providers are more cautious about admitting beneficiaries with noncancer
diagnoses

6 Institute of Medicine, Approaching Death: Improving Care at the End of
Life( Washington, D. C.: National Academy Press, 1997). Federal Oversight of

Eligibility May Have Had an Effect on Beneficiaries' Use of Services

Medicare: More Beneficiaries Use Hospice; Many Factors Contribute to Shorter
Periods of Use

Page 9 GAO/ T- HEHS- 00- 201

as a result, leading to delays in hospice entry for those wishing to use the
benefit.

Although the percentage increases in beneficiaries electing hospice slowed
somewhat from 1995 through 1998 compared with earlier years, it is difficult
to know how much of this slower growth is attributable to the effect of
federal scrutiny and how much is attributable to other factors, such as the
larger base of beneficiaries already using hospice. Importantly, the trend
toward fewer average days of hospice use began before the period of federal
scrutiny, as shown in figure 3.

Medicare: More Beneficiaries Use Hospice; Many Factors Contribute to Shorter
Periods of Use

Page 10 GAO/ T- HEHS- 00- 201

Figure 3: Decline in Days of Hospice Care Began Before Federal Scrutiny
Increased

Note: Operation Restore Trust (ORT) was a joint initiative between HCFA, the
Office of Inspector General, and the Administration on Aging designed to
identify vulnerabilities in the Medicare program.

Source: GAO analysis of claims data from the Medicare Hospice Standard
Analytic File.

While the OIG reviews were under way, the National Hospice Organization
developed guidelines to assist physicians and hospices in determining a 6-
month prognosis for patients with selected noncancer diagnoses. These
included amyotrophic lateral sclerosis (ALS), dementia, human
immunodeficiency virus (HIV)/ acquired immunodeficiency syndrome (AIDS),
heart disease, pulmonary disease, liver disease, stroke and coma, and kidney
disease. In order to enhance accuracy and uniformity in the claims review
process, HCFA distributed these guidelines to the

0 20

40 60

80 100

120 1998 1997 1996 1995 1994 1993 1992

Days

ORT Investigations

Begun First OIG Report

on Hospice Issued

Average Days Used, Noncancer Average Days Used, Cancer

Median Days Used, Cancer Median Days Used, Noncancer

Medicare: More Beneficiaries Use Hospice; Many Factors Contribute to Shorter
Periods of Use

Page 11 GAO/ T- HEHS- 00- 201

intermediaries that process hospice claims for Medicare. 7 The
intermediaries have since adapted them for use as formal local medical
review policies, which specify clinical criteria for establishing a
patient's 6month prognosis. 8 Intermediaries report that they allow for
variation in individual cases. For example, one medical review policy for
heart disease states that “some patients may not meet the criteria,
yet still be appropriate for hospice care, because of other comorbidities or
rapid decline.”

HCFA instructed the intermediaries to begin medical review of hospice claims
in 1995. Prior to that year, a very small proportion of claims were
reviewed. Four of the five intermediaries reported that, by 1999, review
rates ranged from 0.8 to 4.2 percent of all hospice claims processed. 9 They
noted that claims are selected for medical review based on a variety of
factors, including beneficiary length of stay, beneficiary diagnosis, and
provider use of hospice continuous home care or inpatient care.

Sustained growth in the number of hospice providers participating in
Medicare and in their distribution throughout the country suggests that
hospice services are now more widely available to program beneficiaries.
While all sectors of the hospice industry have grown over the past decade,
recent growth has been particularly strong in the for- profit sector and
among large hospice programs. At the same time, hospice industry officials
report growing cost pressures from shorter patient stays and changes in the
practice of palliative care. However, because data on provider costs are not
available, it is not clear how these cost factors affect providers and
beneficiaries.

Until recently, the number of hospices participating in Medicare had grown
each year. As shown in figure 4, the number of Medicare- certified hospice
providers nationwide grew by 82 percent, from 1,208 in 1992 to

7 Intermediaries contract with HCFA for paying providers for services
provided to Medicare beneficiaries. They review all hospice claims for
accuracy and completeness before payment and review a sample of claims to
confirm that beneficiaries were eligible for the hospice services provided.

8 Local medical review policies are medical criteria, specific to a service
or diagnosis, that may assist in determining compliance with program
eligibility requirements. 9 One fiscal intermediary did not provide data on
rates of medical review. Hospice Care Is More

Widely Available, but Providers Report Cost Concerns

Medicare: More Beneficiaries Use Hospice; Many Factors Contribute to Shorter
Periods of Use

Page 12 GAO/ T- HEHS- 00- 201

2,196 in 1999. 10 Each year during this period, additional hospice programs
became certified for Medicare, although the number of new entrants declined
from 274 in 1994 to 46 in 1999, and the number of hospices leaving Medicare
exceeded the new entrants in 1999. (Many of those leaving were based in home
health agencies (HHA) that may have closed because of changes in HHA
payments enacted in the Balanced Budget Act of 1997.) The higher number of
providers reflects not only new hospices but also growing participation in
Medicare. In 1989, we estimated that about 35 percent of the approximately
1, 700 hospice providers nationwide participated in Medicare. By 1998, the
National Hospice and Palliative Care Organization estimated that 80 percent
of hospices were certified to serve Medicare patients.

10 The total number of Medicare hospice providers peaked at 2, 281 in 1998.
In 1998 and 1999, hospice program closures (195) exceeded new program
entrants (149) for the first time. A disproportionate number of hospice
closures were among those based in home health agencies (HHA). Although
HHAbased hospices represent approximately one- third of all hospices, they
accounted for 43 percent of those that closed over the 2- year period. As we
reported in Medicare Home Health Agencies: Closures Continue, With Little
Evidence Beneficiary Access Is Impaired( GAO/ HEHS- 99- 120, May 5, 1999),
14

percent of HHAs closed between October 1997 and January 1999.

Medicare: More Beneficiaries Use Hospice; Many Factors Contribute to Shorter
Periods of Use

Page 13 GAO/ T- HEHS- 00- 201

Figure 4: Growth in the Number of Medicare Hospices and New Entrants, 1992-
99

Source: GAO analysis of annual Medicare Provider of Service Files.

Over this period, all types of hospice providers grew, in rural and urban
areas, and in almost every state. From 1992 to 1999, the rate of growth was
greatest among for- profit providers and those in rural areas. Also, large
providers accounted for an increasing share of the services delivered. (See
table 2.) The number of for- profit providers increased nearly fourfold and
the number of large hospice programs (those serving 500 or more patients per
year) more than tripled over the period. In addition, the number of rural
providers increased 116 percent while the number of urban- based providers
increased 64 percent. Even with high growth in these sectors of the
industry, the majority of hospices are small programs (with fewer than 100
patients per year), organized as not- for- profit, and located in urban
areas.

0 500

1,000 1,500

2,000 2,500

1999 1998 1997 1996 1995 1994 1993 1992

Number 1,208

1,433 1,667

1,910 2,129

2,238 2,281 2,196

193 240 274 266 243 174 103 46

Active Providers New Entrants

Medicare: More Beneficiaries Use Hospice; Many Factors Contribute to Shorter
Periods of Use

Page 14 GAO/ T- HEHS- 00- 201

Table 2: Growth in Medicare Hospice Programs by Provider Characteristics,
1992 and 1999

Number of hospices Characteristic

1992 1999

Percent change 1992- 99

All hospices 1,208 2,196 82 Type

Freestanding 466 877 88 Hospital- based 327 553 69 HHA- based 403 730 81

Control

For- profit 151 593 293 Not- for- profit 957 1,365 43 Government 63 146 132
Other 36 75 108

Location

Urban 823 1,350 64 Rural 384 829 116

Size a

Small 795 1,244 56 Medium 370 816 121 Large 43 136 216 Note: The
subcategories do not always add to the total because data were not available
for all providers.

a We categorized hospices as small if they served fewer than 100 Medicare
beneficiaries a year, medium if they served 100 to 499 patients a year, and
large if they served 500 or more beneficiaries a year.

Source: GAO analysis of annual Medicare Provider of Service Files.

Even as the hospice industry has grown, changes in the use of the hospice
benefit and the delivery of hospice care have raised cost concerns among
providers. Industry representatives point out several areas of change that
they contend are adversely affecting the financial condition of providers.
Specifically,

Under Medicare's per diem payment system for hospice care, hospices have
traditionally offset the higher- cost days that occur at admission and
during the period immediately preceding death with lower- cost days of less
intensive care. 11 For example, costs for admitting and assessing a new

11 Hospice representatives we interviewed reported that the hours of
nursing, social work, and administrative time the typical patient requires
are nearly twice as great during the first and last weeks of a patient's
care as they are during the intervening weeks.

Medicare: More Beneficiaries Use Hospice; Many Factors Contribute to Shorter
Periods of Use

Page 15 GAO/ T- HEHS- 00- 201

patient, establishing a care plan, and delivering medical equipment are
incurred during the first few days of enrollment and do not vary with the
patient's period of service. As enrollment periods have declined, hospices
have fewer days over which they can spread the higher costs associated with
the start and end of a patient's stay.

As more patients enter hospice later in the course of their terminal
illness, they enter with higher levels of impairment and in need of more
intensive services. In addition, the shift in the mix of patients by
diagnosis may have increased the average service needs for the overall
hospice population. According to the most recent National Home and Hospice
Care Survey, hospice patients with noncancer diagnoses are somewhat more
likely than those with cancer to be functionally impaired and thus may
require more services on a regular basis from hospice agencies. 12

Physicians and patients are calling on hospice programs to provide a broader
array of palliative services than in the past. Costly treatments such as
chemotherapy and radiation- traditionally used for curative purposes- are
increasingly used in the hospice setting to manage pain and other symptoms.
Furthermore, some new palliative care treatment options, such as the
transdermal administration of narcotic pain medication, may offer better
symptom control for some patients but often at greater expense.

Data to assess how declining patient stays and changes in palliative care
have affected overall provider costs are not available. While specific, more
expensive services may be provided more frequently, the share that these
services currently represent of total costs is unknown. Furthermore, we do
not know the extent to which providing more expensive medications or
treatments to hospice patients may reduce the need for other services such
as nursing visits. HCFA, in response to the Balanced Budget Act
requirements, has begun collecting hospice cost data to use for evaluating
the adequacy of current levels of Medicare reimbursement. Officials
anticipate that audited hospice cost data will be available beginning in
late 2001.

Trends in the use of the Medicare hospice benefit during the 1990s indicate
that beneficiaries with all types of terminal diseases are making use of
hospice services in greater numbers every year. In particular, the

12 National Center for Health Statistics, The National Home and Hospice Care
Survey: 1996. Conclusions

Medicare: More Beneficiaries Use Hospice; Many Factors Contribute to Shorter
Periods of Use

Page 16 GAO/ T- HEHS- 00- 201

types of patients selecting hospice have expanded broadly- from mostly
beneficiaries with cancer to a nearly even split among those with cancer and
those with other chronic conditions. In spite of these trends in use and the
widespread availability of hospice providers, patient advocates and the
industry are concerned that the Medicare hospice benefit is underused.
Because many factors influence the use of hospice care, however, potential
demand is difficult to determine. The goal remains that the program ensure
that beneficiaries understand their rights and options and receive
appropriate care that is tailored to their needs and preferences at the end
of life.

Mr. Chairman, this concludes my statement. I would be happy to answer any
questions from you and other members of the Committee.

For future contacts regarding this testimony, please call Janet Heinrich,
Associate Director, Health Financing and Public Health, at (202) 512- 7119.
Others who made key contributions include Rosamond Katz, Assistant Director;
Eric Anderson; Jenny Grover; and Wayne Turowski.

(201100) GAO Contact and

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