Department of Health and Human Services
 
OFFICE OF 

 
INSPECTOR GENERAL 

 
 
 
 
 
M H C :  A
 
EDICARE  OSPICE  ARE     
 
C   B
OMPARISON OF  ENEFICIARIES 

 
N F
IN  U RSING  ACILITIES AND 

 
B O
ENEFICIARIES IN  THER 

 
 
S  
ETTINGS 

 
 
 
 
 
 
Daniel R. Levinson 
  
Inspector General 

 
December 2007 
 
OEI-02-06-00220 
 
   
   
 
 
Office of Inspector General

http://oig.hhs.gov  
 
The mission of the Office of Inspector General (OIG), as mandated by Public Law 95-452,  
as amended, is to  protect the integrity of  the Department of Health and Human Services 
(HHS)  programs, as well as the health and welfare of beneficiaries  served by those 
programs.  This statutory mission  is  carried  out through  a nationwide network  of  audits, 
investigations, and inspections conducted by the  following operating components:  
Office of Audit Services 
The Office of Audit Services (OAS) provides all auditing services  for HHS, either by  
conducting audits with its  own audit resources or by overseeing audit work done by others.   
Audits examine the performance of HHS programs and/or its grantees and  contractors  
in carrying out  their respective responsibilities and are intended  to provide independent  
assessments of  HHS programs and operations.  These assessments help reduce waste, 
abuse, and mismanagement  and  promote economy and  efficiency throughout HHS. 
Office of Evaluation and Inspections  
The Office  of  Evaluation and Inspections (OEI)  conducts national evaluations to  provide 
HHS, Congress, and the public with timely, useful, and reliable information on 
significant issues.  Specifically, these evaluations focus on preventing fraud,  waste,  or  
abuse and promoting  economy, efficiency, and effectiveness  in departmental programs.  
To promote impact, the reports also present practical recommendations for improving 
program operations.  
Office of Investigations 
The Office of Investigations (OI) conducts criminal, civil, and administrative  
investigations  of  allegations of wrongdoing  in HHS  programs or to HHS  beneficiaries  
and of unjust enrichment by  providers.  The investigative  efforts  of OI lead to  criminal  
convictions, administrative sanctions,  or  civil monetary penalties.  
Office of Counsel to the Inspector General 
The  Office of Counsel to the Inspector General (OCIG)  provides  general legal services  to  
OIG, rendering  advice and opinions on HHS programs and operations and  providing all  
legal support in OIG's internal operations.   OCIG imposes program exclusions and civil 
monetary penalties  on health care providers and litigates  those actions  within HHS.   
OCIG also  represents OIG in the global settlement of  cases  arising under the Civil False 
Claims Act, develops and monitors corporate integrity agreements, develops compliance 
program guidances, renders advisory opinions on OIG sanctions to  the health care  
community,  and issues fraud alerts  and other industry  guidance.  
 
   
   
 
 
  E X E C U T I V E   S U M M A R Y  
OBJECTIVE 
 
1. 	  To determine the percentage of Medicare hospice beneficiaries who 
reside in nursing facilities.  
2. 	  To describe the characteristics of Medicare hospice beneficiaries who 
reside in nursing facilities and compare these characteristics to 
those of hospice beneficiaries who reside in other settings. 
BACKGROUND 
The Medicare hospice benefit allows a beneficiary with a terminal 
illness to forgo curative treatment  for the illness and instead receive 
palliative care. The number of beneficiaries receiving hospice care has 
increased significantly in recent years and some studies suggest that 
the use of hospice care is growing most rapidly in nursing facilities.  
However, little is known about the characteristics of hospice 
beneficiaries who reside in nursing facilities and the way in which this 
population compares to  hospice beneficiaries in other settings.   
This study describes the characteristics of Medicare hospice 
beneficiaries who resided in nursing facilities in 2005 and compares this 
population to Medicare hospice beneficiaries who resided in other 
settings. We used the Medicare Part A hospice claims from the 
National Claims History file to identify beneficiaries who received 
hospice care in 2005 and to obtain demographic information. We used 
the Minimum Data Set to identify the hospice beneficiaries who resided 
in nursing facilities.  We also used the Online Survey and Certification 
Reporting System to identify hospice agencies that were for-profit and  
those that were not-for-profit.   
This study is the first in a two-part series.  The second study will 
determine the nature and extent of hospice services provided to 
beneficiaries residing in nursing facilities and assess the 
appropriateness of payments for their hospice care.   
FINDINGS 
Twenty-eight percent of Medicare hospice beneficiaries  resided in  
nursing facilities in 2005.  A total of 871,437 Medicare beneficiaries 
received hospice care in 2005.  Twenty-eight percent of these 
beneficiaries resided in nursing facilities for at least some time while 
OEI-02-06-00220    MEDICARE HOSPICE CARE:   A  COMPARISON OF  BENEFICIARIES IN  NURSING  FACILITIES AND BENEFICIARIES IN  OTHER  SETTINGS    i    
   
   
EE XX EE CC UU TT II VV EE    SS UU MM MM AA RR YY    
they received hospice care. Medicare payments for hospice care for  
these beneficiaries amounted to  $2.55 billion.  Seventy-two percent  of 
hospice beneficiaries resided in other settings.  Medicare payments for 
hospice care for these beneficiaries totaled  $5.37 billion.   
Higher percentages of hospice beneficiaries residing in nursing facilities 
were older and female compared to  their counterparts residing in other  
settings. Those in nursing facilities were also more likely to live in the 
Midwest. The two groups were similar, however, in terms of race, the 
reasons for Medicare eligibility, and their likelihood of living in urban 
areas. Of the four levels of hospice care, beneficiaries in both groups 
most commonly received routine home care, followed by general 
inpatient care, continuous home  care, and respite care.    
Hospice beneficiaries in nursing facilities were more than twice as  
likely as beneficiaries in other settings to have terminal diagnoses  
of ill-defined conditions, mental disorders, or Alzheimers disease. 
The two groups of beneficiaries differed greatly in terms of their 
terminal diagnoses. Forty-eight percent of hospice beneficiaries in 
nursing facilities had terminal diagnoses of ill-defined conditions, 
mental disorders, or Alzheimers disease, compared to 23 percent of 
hospice beneficiaries in other settings. Ill-defined conditions are 
diagnoses that are not easily classified in other diagnosis categories. 
Ill-defined conditions include debility, adult failure to thrive, and 
senility. 
Hospice beneficiaries in nursing facilities were also half as likely to 
have terminal diagnoses of cancer as beneficiaries in other settings. In 
2005, 20 percent of hospice beneficiaries in nursing facilities had cancer 
diagnoses, compared to 41 percent of beneficiaries in other settings. 
On average, beneficiaries in nursing facilities  spent more  time in 
hospice care and  were associated with higher Medicare  
reimbursements than beneficiaries in other settings. Hospice 
beneficiaries in nursing facilities spent an average of 80 days in hospice 
care in 2005. Beneficiaries in other settings spent an average of 62 days  
in hospice care. For 14 of the 15 diagnosis categories, beneficiaries in 
nursing facilities had longer average lengths of stay in hospice care than 
beneficiaries in other settings. 
Additionally, average Medicare reimbursement for hospice care for  
beneficiaries in nursing facilities was 25 percent higher than for 
beneficiaries in other settings. On average, Medicare paid $10,631 per 
beneficiary for hospice care for beneficiaries in nursing facilities in 2005, 
OEI-02-06-00220    MEDICARE HOSPICE CARE:   A  COMPARISON OF  BENEFICIARIES IN  NURSING  FACILITIES AND BENEFICIARIES IN  OTHER  SETTINGS    ii    
   
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compared with the $8,500 per beneficiary paid for beneficiaries in other 
settings. Longer stays in hospice care by beneficiaries who resided in 
nursing facilities contributed to their higher average reimbursement.   
CONCLUSION 
In our comparison of Medicare hospice beneficiaries who reside in 
nursing facilities to hospice beneficiaries who reside in other settings, 
we found that beneficiaries in nursing facilities tended to be older and 
more likely to have ill-defined conditions. Also, their time in care was 
longer and more costly. A second study will assess the appropriateness 
of payments for hospice care for beneficiaries in nursing facilities. As 
the countrys population ages, hospice use in general and hospice care 
by nursing facility residents is expected to grow. The information 
presented in this study and the follow-up study may help the Centers 
for Medicare & Medicaid Services (CMS) and other decisionmakers 
better understand the Medicare hospice care population. 
AGENCY COMMENTS 
CMS states that this report provides  a helpful general description of the 
current utilization patterns. CMS notes the following limitations of the 
study: the cost per beneficiary includes only hospice payments and not 
other costs of care through Parts A, B, and D; the study does not 
reference the number of hospitalizations; the study does not  discuss the 
number of hospice revocations or discharges that have occurred; and the 
study reflects only the length of stay and costs in 2005. 
OEI-02-06-00220    MEDICARE HOSPICE CARE:   A  COMPARISON OF  BENEFICIARIES IN  NURSING  FACILITIES AND BENEFICIARIES IN  OTHER  SETTINGS    iii    
 
 
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EXECUTIVE SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . i
  
 
I N T RO DUC T IO N  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  1 
  
 
 
F I N D IN G S  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  8 
  
  Twenty-eight percent were in nursing facilities.. . . . . . . . . . . . . . .  8 
 
  Those in facilities were more likely to have certain diagnoses . . .  11 

  Beneficiaries in nursing facilities spent more time in hospice  
             
  care.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  13 
  
 
CONC LUSION  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  16 

  Agency Comments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  16 
  
 
APPENDIXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  17 
  
  Appendix A:  Demographic Characteristics of Medicare Hospice  
         
                        Beneficiaries Who Resided in Nursing Facilities   
          
                        and Other Settings, 2005 . . . . . . . . . . . . . . . . . . . . .  17 
  
  Appendix B:  Diagnosis Categories for Hospice Beneficiaries,           .
  
                        2005. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  18 
  
  Appendix C:  Length of Stay in Hospice Care, 2005 . . . . . . . . . . .  19 
  
  Appendix D:  Average Number of Days Spent in Hospice Care
              
                         by Diagnosis Category, 2005.  . . . . . . . . . . . . . . . . .  20 
  
  Appendix E:  Agency Comments. . . . . . . . . . . . . . . . . . . . . . . . . . .  21 
  
 
   
A C K NO WL E D G M E N T S  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  23 
  
 
   
   
   
  I N T R O D U C T I O N  
OBJECTIVES 
1. 	 To determine the percentage of Medicare hospice beneficiaries who 
reside in nursing facilities.  
2. 	 To describe the characteristics of Medicare hospice beneficiaries who 
reside in nursing facilities and compare these characteristics to 
those of hospice beneficiaries who reside in other settings. 
BACKGROUND 
The Medicare hospice benefit allows a beneficiary with a terminal 
illness to forgo curative treatment  for the illness and instead receive 
palliative care, which is  the relief of pain and other uncomfortable 
symptoms.  The number of beneficiaries receiving hospice care has 
increased significantly in recent years.  In fiscal year (FY) 2001, 
580,000 Medicare beneficiaries received hospice care.  In FY  2006, this 
number increased by 61 percent to nearly 934,000 beneficiaries.  At the 
same time, Medicare spending on hospice care increased from             
$3.6 billion in 2001 to $9.2 billion in 2006. 1    
Some studies suggest that the use of hospice care is growing most 
rapidly in nursing facilities.2  However, little is known about the 
characteristics of hospice beneficiaries in nursing facilities and the way 
in which this population compares to hospice beneficiaries in other 
settings. Recent studies  also note the need for comprehensive data 
about Medicare hospice beneficiaries and the services they receive.3     
 
1  Centers for Medicare & Medicaid Services, Medicare Hospice Expenditures and  Units 
of Care (November 9, 2006).  Available online at 
http://www.cms.hhs.gov/ProspMedicareFeeSvcPmtGen/downloads/FY05update_hospice_exp 
enditures_and_units_of_care.pdf. Accessed on May 22, 2007;  Office of Inspector General 
analysis of Medicare Health Care Information System data from the Centers for Medicare 
& Medicaid Services.  Accessed on July 17, 2007. 
2 Office of the Assistant Secretary for Planning and Evaluation, Use of Medicares  
Hospice Benefit by Nursing Facility Residents (March 2000) p.  2; Medicare Payment 
Advisory Commission, Medicare Beneficiaries Access to Hospice  (May 2002) p. 5.   
Available online at 
http://www.medpac.gov/publications/congressional_reports/may2002_HospiceAccess.pdf. 
Accessed on May 11, 2006.  
3 Medicare Payment Advisory Commission, Medicare Beneficiaries Access to Hospice 
(May 2002) p. 8; Government Accountability Office, Medicare Hospice Care:  Modifications 
to Payment Methodology May Be Warranted (GAO-05-42) (2004) p. 20; Office of the 
Assistant Secretary for Planning and Evaluation, Synthesis and Analysis of Medicares 
Hospice Benefit (March 2000) p. 4. 
OEI-02-06-00220    MEDICARE HOSPICE CARE:   A  COMPARISON OF  BENEFICIARIES IN  NURSING  FACILITIES AND BENEFICIARIES IN  OTHER  SETTINGS    1    
   
I N T R O D U C T I O N   
This study determines the percentage of Medicare beneficiaries who  
received hospice care and resided in nursing facilities in 2005.  It also 
describes the characteristics of these beneficiaries and compares them 
to those of Medicare beneficiaries who received hospice care and resided  
in other settings, such as private homes.  This study is the first in a  
two-part series.  The second study will determine the nature and extent 
of hospice services provided to beneficiaries residing in nursing facilities 
and assess the appropriateness of payments for their hospice care.   
The Medicare Hospice Benefit 
The Tax Equity and Fiscal Responsibility Act of 1982 created the 
Medicare hospice benefit for eligible beneficiaries under Medicare 
Part A.4  The goal of hospice care is to assist terminally ill beneficiaries 
to continue life with minimal disruption while supporting families 
throughout the process.  The care may be provided to individuals and 
their families in the home or other places of residence, such as a skilled 
or other nursing facility.  The care provided to families includes 
counseling for caregivers, training to provide care for the individual, 
and bereavement counseling. 
To be eligible for Medicare hospice care, a beneficiary must be entitled 
to Part A of Medicare and be certified as having a terminal prognosis 
with a life expectancy of 6 months or less, should the disease run its 
normal course. Certification is based on the attending physicians 
and/or hospice medical directors clinical judgment regarding the normal 
course  of the disease.5  Upon a beneficiarys election of hospice care, the 
hospice provider assumes the responsibility for medical care related to 
the beneficiarys terminal illness and related conditions.  This care is 
palliative, rather than curative.  The beneficiary waives Medicare 
coverage for services related to the treatment of the terminal condition  
or a related condition6  but retains Medicare coverage for services to  
treat conditions unrelated to the terminal illness.   
Beneficiaries are entitled to receive hospice care for two 90-day periods 
and unlimited7 60-day election periods.8  The periods need not be 
 
4  Pub. L. No. 97-248, section 122, 96 Stat. 324, 356 (codified at 42 U.S.C.  1395x(dd)). 

5 42 CFR  418.20 and 418.22. 

6 42 CFR  418.24. 

7 Before 1990, hospice beneficiaries who were in hospice care for more than 210 days and 

still required such care were provided care by the hospice without charge to Medicare or the 
beneficiary.   
8 42 CFR  418.21. 
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consecutive. At the start of each period of care, a physician must certify 
that the beneficiary is terminally ill and has a life expectancy of 
6 months or less. The attending physician and the hospice  medical 
director are required to  make the initial certification. The hospice 
medical director is required to make each subsequent recertification.9   
Beneficiaries may revoke their election of hospice care and return to  
standard Medicare coverage at any time. 10  
Medicare coverage requirements for hospice services. Hospice care is provided 
by Medicare-certified hospice agencies. According to regulations, hospice 
services must meet the following requirements to be covered by Medicare:  
the services must be reasonable and necessary for the palliation or 
management of the terminal illness as well as related conditions; the 
individual must elect hospice care; a plan of care must be established by a 
physician and an interdisciplinary group comprising a physician, a 
registered nurse, social worker, and a pastoral or other counselor; the  
services must be consistent with the plan of care; and a certification that 
the individual is terminally ill must be completed by the medical director 
of the hospice and the individuals attending physician.11  
Hospice services.   As stated in Medicare statutes and regulations, the 
following are covered hospice services:    
 	  nursing care provided by, or under the supervision of, a  
registered nurse;   
 	  physical or occupational therapy or speech-language pathology 
services; 
 	  medical social services under the direction of a physician; 
 	  home health aide and homemaker services; 
 	  medical supplies (including drugs and biologicals) and the use of  
medical appliances; 
 	  physicians services; 
 	  short-term inpatient care (including both respite care and 
procedures necessary for pain control and acute and chronic  
symptom management);  
 
9 42 CFR  418.22. 

10 42 CFR  418.28. 

11 42 CFR  418.200; 42 CFR  418.24; 42 CFR  418.58; 42 CFR  418.68; and 

 
42 CFR  418.22. 
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I N T R O D
  U C T I O N   
 	  counseling (including dietary counseling) with respect to care of 
the terminally ill individual and adjustment to the individuals 
death;12 and 
 	  any other service that is  specified in the plan of care as 
reasonable and necessary for the palliation and management of 
the terminal illness and related conditions and for which 
payment may otherwise  be made under Medicare.13  
Payment rates. The Medicare hospice benefit has four levels of care and 
each level has an all-inclusive, prospectively determined daily rate.  The 
rate is paid to the hospice for each day that a beneficiary is in hospice care, 
regardless of the amount of services  furnished.  The Centers for Medicare 
& Medicaid Services (CMS) publishes general hospice payment rates  
annually to be used for each level of care.  The rates are adjusted based on 
the beneficiarys geographic location.  The levels of care and the FY 2005 
Medicare unadjusted daily rate for each are as follows:   
 	  Routine Home Care ($121.98): The routine home care rate is 
paid to the hospice for each day the beneficiary is under the 
care of the hospice and not receiving  one of the other 
categories of care.  Routine home care includes, but is not  
limited to, nursing and home health aide services.  Routine 
home care can be provided in the home or other places of 
residence, such as a nursing facility. 
 	  Continuous Home Care ($711.92): Continuous home care is 
allowed only during periods of crisis in which a beneficiary 
requires continuous care to achieve palliation or management 
of acute medical symptoms.  It is covered only as necessary to 
maintain the terminally ill beneficiary at home.  The care 
must be predominantly nursing care. Continuous home care 
can be provided in the home or  other places of residence, such  
as a nursing facility. The continuous home care rate is divided 
by 24 hours to determine an hourly rate.  A minimum of eight 
hours must be provided.    
 	  Respite Care ($126.18): Respite care is short-term inpatient 
care provided to the beneficiary when necessary to relieve the 
beneficiarys caregiver(s).  Respite care may be provided only 
 
12  42 U.S.C.  1395x(dd)(1)(H); 42 CFR  418.202.  
13 42 CFR  418.202.  
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I N T R O D U C T I O N   
on an occasional basis and is not reimbursed for more than 
5 consecutive days.  Inpatient care  may be provided in a 
Medicare-certified or Medicaid-certified hospice inpatient 
facility, hospital, or skilled nursing facility. 
 	  General Inpatient Care ($542.61):  General inpatient care is 
inpatient care for pain control and symptom management that 
cannot feasibly be provided in other settings. Inpatient care 
may be provided in a Medicare-certified or Medicaid-certified 
hospice inpatient facility, hospital, or skilled nursing facility. 
Hospice care in nursing facilities.   When a beneficiary resides in a nursing 
facility, the hospice agency is responsible for providing all of the core 
hospice services (nursing, physician, medical social, and counseling) to the 
beneficiary.14  The nursing facility provides room and board care and care 
unrelated to the terminal illness.  Medicare reimburses the hospice 
provider according to the level of care provided and the beneficiary or a 
third party payer pays the nursing facility for room and board costs.15    
METHODOLOGY 
Scope 
This study describes the characteristics of Medicare hospice 
beneficiaries who resided in nursing facilities in 2005 and compares this 
population to Medicare hospice beneficiaries who resided in other 
settings. Our analysis includes the universe of Medicare hospice 
beneficiaries who resided in nursing facilities and the universe of 
Medicare hospice beneficiaries who resided in other settings.  We define 
Medicare hospice beneficiaries in nursing facilities as all beneficiaries 
who resided in nursing facilities for at least 1 day while in hospice care 
during 2005.  We used a number of  different data sources to identify 
this population and the comparison  group because no single  data source 
identifies the place of service for hospice care.  We used 2005 claims 
data because 2005 was the most recent full year of complete claims data 
available at the time of our study. 
 
 
 
14 The hospice agency can contract with the nursing facility to provide noncore services 
as well as caregiver services such as meals and laundry.  
15 Medicare Benefit Policy Manual, chapter 9, section 20.3 (December 3, 2004). 
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Beneficiaries Who Received Hospice Care in 2005 
We identified all beneficiaries who received hospice care in 2005 using 
the Medicare Part A hospice claims from the National Claims History  
file for 2005. We also included claims from the 2006 file that covered 
days of service that occurred in 2005. Hospice agencies typically submit 
claims that cover a 1-month period.  Therefore, some claims from the  
2006 file included days from 2005. Similarly, some claims from the 
2005 file included days from 2004. We determined Medicare 
reimbursement for the 2005 portion of these claims by multiplying the 
percentage of days that the beneficiary received hospice care in 2005 by 
the claim reimbursement amount. 
We obtained demographic information about the beneficiaries from the 

claims data. We also matched the claims data to the Medicare 

Enrollment  Database by Health Insurance Claim Number to identify 

the Social Security number for each  beneficiary. We used the Social 

Security numbers to link this file to  other databases. 

Beneficiaries Who Received Hospice Care and Resided in Nursing Facilities 
We identified the beneficiaries who received hospice care and resided in 
nursing facilities using the Minimum Data Set (MDS) from 2004, 2005, 
and 2006. The MDS includes assessments on all residents in Medicare-
certified or Medicaid-certified long term care facilities, including skilled 
nursing facilities. For the purpose of  this report, we refer to all such 
facilities as nursing facilities. We considered a beneficiary a resident of 
a nursing facility if the beneficiary had an MDS.   Nursing facilities 
complete these assessments at scheduled intervals during a residents 
time in a facility and when a residents health status changes. 
We used information from the MDS to create a record for each  
beneficiary that included the dates he or she resided in a nursing 
facility. We then matched these records, by Social Security number, to 
the claims data to identify the beneficiaries who received hospice care 
and resided in nursing facilities in 2005. These beneficiaries could have 
been in a nursing facility before electing hospice care or entered a 
facility after electing hospice care. 
Hospice Agencies 
We identified the hospice agencies that provided care to beneficiaries in  
2005 by using the Online Survey and Certification Reporting System 
(OSCAR). We matched the provider numbers in the claims file with the 
OSCAR data. We identified hospice agencies that were for-profit and 
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those that were not-for-profit using a variable that indicates the type of 
provider ownership.  
Analysis of Beneficiary  Characteristics 
We analyzed the files described above to determine the characteristics 
of hospice beneficiaries who resided in nursing facilities in 2005 and 
those who resided in other settings. We determined the total number of  
beneficiaries in each of these groups, their demographic characteristics,  
their diagnosis categories,16 and reimbursements for hospice care. 
Standards 
Our review was conducted in accordance with the Quality Standards 
for Inspections issued by the Presidents Council on Integrity and 
Efficiency and the Executive Council on Integrity and Efficiency. 
 
16 The diagnosis categories are from the International Classification of Diseases, Ninth  
Revision, Clinical Modification (ICD-9-CM), which is the official system of assigning codes 
to diagnoses and procedures. 
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  F I N D I N G S  
Twenty -eight percent of Medicare  A total of 871,437 Medicare 
hospice beneficiaries resided in  beneficiaries received hospice care  
nursing facilities in 2005  in 2005. Twenty-eight percent of 
these beneficiaries resided in 
nursing facilities for at least some time while they received hospice care.  
As Figure 1 shows, 22 percent of beneficiaries resided in nursing 
facilities for all of their time in hospice care in 2005, and 6 percent  
resided in nursing facilities for part of their time in hospice care. These 
beneficiaries started hospice care before entering facilities and/or left 
the facilities for some time during their hospice care in 2005.  The 
remaining 72 percent of hospice beneficiaries resided in other settings.  
According to our analysis of hospice claims, Medicare paid a total of 
$7.92 billion for hospice care for all Medicare beneficiaries in 2005. 
Thirty-two percent of these Medicare  payments were for beneficiaries 
who resided in nursing facilities, amounting to $2.55 billion.  The 
remaining $5.37 billion was for beneficiaries who resided in other 
settings. 
Hospice beneficiaries 

 
FIGURE 1:   residing in  nursing 
 
Medicare Hospice    facilities for part of 
  
Beneficiaries, 2005    their  time in hospice 

care 
 
    6%
 
 
  Hospice beneficiaries 
residing in nursing  
 
facilities for all of  their  
  time in hospice care 
22% 
 
 
 
 
Hospice beneficiaries 

residing in other settings
 
72%
 
  Source:   Office of Inspector General analysis of Medicare claims and MDS data, 2007.  
 
 
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F I N D I N G
  S  
Age and Gender. Higher percentages of hospice beneficiaries residing in 
nursing facilities were older and female, compared to their counterparts 
residing in other settings. In 2005, the average age of hospice 
beneficiaries residing in nursing facilities was 84 years, while the 
average age for hospice beneficiaries  residing in other settings was 
81 years. Fifty-two percent of hospice beneficiaries in nursing facilities 
were 85 years or older, compared to 36 percent of beneficiaries in other 
settings. Females represented 68 percent of hospice beneficiaries in 
nursing facilities, as opposed to 56 percent of hospice beneficiaries in 
other settings.  See Appendix A for a table of the demographic 
characteristics of the two groups.   
Other Demographics.   Hospice beneficiaries in nursing facilities were 
more likely than beneficiaries in other settings to live in the Midwest 
region of the United States and less likely to live in the South.  Thirty 
percent of hospice beneficiaries in nursing facilities lived in the 
Midwest, compared to 21 percent of hospice beneficiaries in other  
settings. Thirty-four percent of the beneficiaries in nursing facilities 
lived in the South, as opposed to 40 percent of beneficiaries  in other 
settings. The two groups were similar, however, in terms of race, the 
reasons for Medicare eligibility, and their likelihood of living in urban 
areas. 
Levels of Hospice Care.   Routine home care was the most common level 
of hospice care received by beneficiaries in both groups.  As Table 1 
shows, 94 percent of hospice beneficiaries in nursing facilities received 
routine home care at some time during the year, compared to 85 percent 
of beneficiaries in other settings.  General inpatient care was the next 
most common level of care.  Fifteen percent of hospice beneficiaries in 
nursing facilities received 
Table 1: Levels of Hospice Care, 2005 
general inpatient care at 
Level of Hospice Care  Beneficiaries in  Nursing  Beneficiaries in  Other  some time during the year, in 
Facilities  Settings 
contrast to 24 percent of 
Routine Home Care  94%  85%  beneficiaries in other 
General Inpatient Care  15%  24%  settings. Seven percent  of 
beneficiaries in nursing  
Continuous Home Care  7%  6% 
facilities and 6 percent  of 
Respite Care  3%  2% 
beneficiaries in other settings 
Source:  Office of  Inspector General analysis of Medicare claims and MDS data, 2007.   
Note: Levels of care are not mutually exclusive.   had continuous home care.  
 
Respite care was the least 
common, received by 3 percent of those in nursing facilities and  

2 percent of those in other settings. 

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F I N D I N G S  

Hospice Agencies.   Both for-profit and not-for-profit hospice agencies  
provide care for beneficiaries who reside in nursing facilities.  In 2005, 
for-profit hospice agencies had a higher percentage of their Medicare 
beneficiaries residing in nursing facilities than not-for-profit hospice 
agencies.  For-profit hospice agencies had 30 percent of their Medicare 
beneficiaries residing in nursing facilities.  In contrast, not-for-profit 
hospice agencies had 23 percent of their Medicare beneficiaries residing 
in nursing facilities.  See Table 2. 
 
Table 2: Medicare Hospice Beneficiaries by Type of Hospice Agency, 
 
2005 
 
   For-Profit  Not-for-Profit  
 
Beneficiaries in Nursing Facilities    30%  23% 
 
Beneficiaries in Other Settings   70%  77% 
 
Total  100%   100%  
  Source: Office of Inspector General analysis of Medicare  claims and MDS data, 2007.  
Overall, the  percentage of hospice agencies that are for-profit continues 
to grow.  In 1992, 13 percent of hospice agencies were for-profit and this 
percentage grew to 28 percent by 2001.17  In 2005, 45 percent of the 
2,884 hospice agencies that provided care to the Medicare population 
were for-profit. 
 
 
 
 
 
 
 
 
 
 
17 Government Accountability Office, Medicare Hospice Care:  Modifications to Payment 
Methodology May Be Warranted (GAO-05-42) (2004) p. 9. 
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 F I N D I N G S   
 
A beneficiary must be diagnosed 
Hospice beneficiaries in nursing facilities were 
with a terminal illness with a 
more than twice as likely as beneficiaries in 
life expectancy of 6 months or  
other settings to have terminal diagnoses of ill-
less to be eligible for Medicare 
defined conditions, mental disorders, or 
hospice care.  In 2005, 
Alzheimers disease 
beneficiaries in nursing facilities 
were more than twice as likely 
as beneficiaries in other settings to have diagnoses in certain categories.  
These categories are:  (1) symptoms, signs, and ill-defined conditions18  
(referred to as ill-defined conditions); (2) mental disorders; and 
(3) Alzheimers disease.19   
Forty-eight  percent of hospice beneficiaries in nursing facilities had 
terminal diagnoses in one of these categories, compared to 23 percent of 
hospice beneficiaries in other settings.  Specifically: 
 	  Twenty percent of hospice beneficiaries in nursing facilities had 
terminal diagnoses of ill-defined conditions, as opposed to 
10 percent of beneficiaries in other settings.  See Figure 2.   
Within this category, almost all of the beneficiaries, regardless of 
where they resided, had diagnoses of debility, adult failure to 
thrive, or senility without mention of psychosis.   
 	  Fifteen percent of hospice beneficiaries in nursing facilities had 
terminal diagnoses of mental disorders, compared to 6 percent of 
hospice beneficiaries in other settings.  The most common 
mental disorders for these beneficiaries were dementia in 
conditions classified elsewhere without behavior disturbances, 
other specified organic  brain syndromes, and atherosclerotic 
dementia, uncomplicated.   
 	  Thirteen percent of hospice beneficiaries in nursing facilities had 
diagnoses of Alzheimers disease, as opposed to 7 percent of  
beneficiaries in other settings. 
 
 
18 This category includes diagnoses that are not easily classified in other ICD-9-CM 
categories such as debility, adult failure to thrive, and senility. 
19 Alzheimers disease is listed under diseases of the nervous system and sense organ in  
the ICD-9-CM. 
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F I N D I N G S  

FIGURE 2:     45% 
41% 
 
Common  
40% 
Diagnoses for    
Medicare    35% 
Hospice  es  
Beneficiaries,  ciari  30% 
2005  efi
n  25% 
e
  B
of   20%  20%  20%  20% 
e  20% 
g
a 
nt 15% 
erce  15%  13% 
P 10% 
 
10% 
7% 
  6% 
5% 
 
  0% 
  Ill-defined  Neoplasms (Cancer) Circulatory Diseases  Mental Disorders  Alzheimer's Disease 
Conditions 
 
Diagnosis Category 
Beneficiaries in Nursing  Facilities  Beneficiaries in Other Settings 
  Source:  Office of  Inspector General analysis of Medicare claims and MDS data, 2007.  
 
Another major difference between the two groups of beneficiaries was 
the frequency of cancer.  When the hospice benefit was introduced, 
cancer was by far the most prevalent terminal diagnosis among hospice 
beneficiaries.  Although cancer is still prevalent, cancer diagnoses for 
hospice beneficiaries are now less common, particularly among 
beneficiaries in nursing facilities. In 2005, hospice beneficiaries in 
nursing facilities were half as likely to have terminal diagnoses of 
cancer as beneficiaries in other settings.  Twenty percent of  hospice 
beneficiaries in nursing facilities had cancer diagnoses, compared to  
41 percent of beneficiaries in other settings.   
In total, Medicare hospice beneficiaries had terminal diagnoses in 
15 different diagnosis categories in 2005. 20  In addition to those 
discussed above, other common diagnosis categories were diseases of the 
circulatory system (referred to as circulatory diseases) and diseases of  
the respiratory system.  See Appendix B for a complete list of diagnosis 
categories and the percentage of beneficiaries with diagnoses within 
each category. 
 
20 There are two additional diagnosis categories that we did not include in our analysis 
because together they accounted for 0.001 percent of the hospice population. 
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F I N D I N G S  

Hospice beneficiaries in nursing 
On average, beneficiaries in nursing facilities spent 
facilities spent an average of  
more time in hospice care and were associated 
80 days in hospice care in 2005, 
with higher Medicare reimbursements than 
compared to an average of 62 days 
beneficiaries in other settings   for beneficiaries in other settings.  
Beneficiaries in nursing  facilities 
were less likely than other beneficiaries to spend between 1 and 30 days 
in hospice care.  Forty-nine percent of the beneficiaries in nursing 
facilities spent 30 days or fewer in hospice care in 2005, while 
58 percent of beneficiaries in other settings spent that time in hospice 
care.    
Beneficiaries in nursing facilities were more likely than other 
beneficiaries to spend more than 180 days in hospice care. Sixteen 
percent of beneficiaries in nursing facilities spent more than 180 days in  
hospice care in 2005, compared with 11 percent of beneficiaries in other 
settings. See Appendix C for more details on the lengths of stay for the 
two groups  of beneficiaries.  
For 14 of the 15 diagnosis categories, beneficiaries in nursing facilities 
had longer average lengths of stay in hospice care than beneficiaries in 
other settings. For example, beneficiaries in nursing facilities with 
terminal diagnoses of ill-defined conditions spent an average of 84 days 
in hospice care in 2005, whereas those in other settings spent 75 days in 
hospice care.  Beneficiaries in nursing facilities who had terminal 
diagnoses of cancer spent an average of 64 days in hospice care in 2005, 
while beneficiaries in other settings spent 46 days.  See Figure 3 for the 
average days in hospice care for the most common diagnosis categories.  
See Appendix D for the average days for all diagnosis categories.    
In both groups, beneficiaries with terminal diagnoses of Alzheimers 
disease, mental disorders, or ill-defined conditions had the longest 
average lengths of stay in hospice care in 2005.21  As noted  earlier, these 
diagnosis categories were more common for beneficiaries who resided in  
nursing facilities than for beneficiaries who resided in other settings.  
At the same time, cancer diagnoses were associated with shorter 
lengths of stay on average.  These diagnoses were more common for 
beneficiaries who resided in other settings.   
 
21 Diseases of the musculoskeletal system and  connective tissue are also associated with  
long lengths of stay but represented 0.1 percent of the hospice population in 2005. 
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F I N D I N G S  

 
FIGURE 3:  
Average   120 
Number of 
102  100 
Days in  
100 
92 
Hospice Care  87 
 e  84 
by Diagnosis  ar
Category, 2005  ce C 80  75  75  71 
pi
  os 64 
H
n  60 
ys i
Da 46 
e 
ag 40 
er
v
A
20 
0 
Alzheimer's Disease  Mental Disorders  Ill-defined  Circulatory Diseases Neoplasms (Cancer) 
Conditions 
Diagnosis Category 
Beneficiaires in Nursing Facilities  Beneficiaries in Other Setttings 
  Source:   Office of Inspector General analysis of Medicare claims and MDS data, 2007.  
 
Average Medicare reimbursement for hospice care for beneficiaries in 
nursing facilities was 25 percent higher than for beneficiaries in other 
settings 
On average, Medicare paid $10,631 per beneficiary for hospice care for 
beneficiaries in nursing facilities in 2005. 22  This amount is 25 percent  
higher than the $8,500 per beneficiary paid for beneficiaries in other 
settings. Longer stays in hospice care by beneficiaries who resided in 
nursing facilities contributed to their higher average reimbursement. 
Additionally, average Medicare reimbursement was higher for every 
level of hospice care for beneficiaries in nursing facilities, compared to 
reimbursement for beneficiaries in other settings.  See Table 3.  The 
biggest percentage difference was in  general inpatient care.  Although 
proportionately fewer beneficiaries in nursing facilities received general 
inpatient care, the average Medicare reimbursement in 2005 for these 
beneficiaries was 33 percent higher than the average reimbursement for 
beneficiaries in other settings. 
 
22 This amount includes hospice services only.  It does not include reimbursement for 
other Medicare Part A services or Medicare Part B services that the beneficiary may have 
received in 2005.  
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F I N D I N G S  

Table 3: Average Medicare Reimbursement by Level of  Specifically, Medicare paid on 
Hospice Care, 2005  average $4,836 for beneficiaries 
residing in nursing facilities, 
Level of Hospice Care   Beneficiaries in  Nursing  Beneficiaries in  Other 
compared to $3,634 for 
Facilities   Settings 
beneficiaries residing in other 
Routine Home Care  $10,174  $8,664 
settings. 
Continuous Home Care  $2,956  $2,814 
 
Respite Care  $806  $663 
 
General Inpatient Care  $4,836  $3,634 
 
Source:  Office of  Inspector General analysis of Medicare claims and MDS data, 2007. 
 
 
 
 
 
 
 
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E X E C U T I V E   S U M M A R Y  
  C O N C L U S I O N
In our comparison of Medicare hospice beneficiaries who reside in 
nursing facilities to hospice beneficiaries who reside in other settings, 
we found that beneficiaries in nursing facilities tended to be older and 
more likely to have ill-defined conditions.  Also, their time in care was 
longer and more costly.  A second study will assess the appropriateness 
of payments for hospice care for beneficiaries in nursing facilities.  As 
the countrys population ages, hospice use in general and hospice care 
by nursing facility residents is expected to grow.  The information 
presented in this study and the  follow-up study may help CMS and 
other decisionmakers better understand the Medicare hospice care 
population. 
AGENCY COMMENTS 
CMS states that this report provides  a helpful general description of the 
current utilization patterns.  CMS notes the following limitations of the 
study: the cost per beneficiary includes only hospice payments and not 
other costs of care through Parts A, B, and D; the study does not 
reference the number of hospitalizations; the study does not  discuss the 
number of hospice revocations or discharges that have occurred; and the 
study reflects only the length of stay and costs in 2005.  See Appendix E 
for the full text of CMSs comments. 
 
 
 
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  A P P E N D I X ~ A
 
Demographic Characteristics of Medicare Hospice Beneficiaries Who Resided in Nursing 
Facilities and Other Settings, 2005 
Beneficiaries in Nursing Facilities  Beneficiaries in Other Settings 
Variable 
(n=240,217)  (n=631,220) 
Age       
Less than 65 years  4%  6% 
65-84 years  44%  58% 
85 years and older  52%  36% 
       
Gender      
Female  68%  56% 
Male  32%  44% 
       
Region       
Northeast  19%  16% 
Midwest   30%  21% 
South  34%  40% 
West  16%  21% 
Unknown  0%  1% 
       
Race       
White  89%  88% 
Black  8%  8% 
Hispanic  1%  2% 
Unknown  2%  0% 
       
Medicare Eligibility       
Aged  96%  94% 
Disabled  3%  6% 
Other  0%  0% 
       
Location      
Urban  81%  79% 
Rural  16%  18% 
Unknown  3%  3% 
 
Source: Office of Inspector General analysis of Medicare claims and MDS data, 2007. 
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    A P P E N D I X   ~ B
 
Diagnosis Categories for Hospice Beneficiaries, 2005  
Beneficiaries in   Beneficiaries 
Nursing  in Other 
Diagnosis  Category  
Facilities  Settings 
(n=240,217)  (n=631,220) 
Ill-defined Conditions  20%  10% 
Neoplasms (Cancer)  20%  41% 
Circulatory Diseases  20%  20% 
Mental Disorders  15%  6% 
Alzheimer's Disease  13%  7% 
Diseases of the Respiratory System  7%  9% 
Diseases of the Genitourinary System  3%  3% 
Diseases of the Digestive System  1%  2% 
Endocrine, Nutritional, and Metabolic Diseases and Immunity Disorders  1%  0.4% 
Injury and Poisoning  0.2%  0.2% 
Infectious and Parasitic Diseases  0.2%  0.2% 
Diseases of the Blood and Blood-Forming Organs  0.1%  0.2% 
Congenital Anomalies  0.1%  0.2% 
Diseases of the Musculoskeletal System and Connective Tissue  0.1%  0.1% 
Diseases of the Skin and Subcutaneous Tissue  0.0%  0.0% 
 
 
Source: Office of Inspector General analysis of Medicare claims and MDS data, 2007. 
  
 
 
 
 
 
 
 
 
 
 
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  A P P E N D I X ~ C
Length of Stay in Hospice Care, 2005  
Beneficiaries in Nursing   Beneficiaries in Other 
   Facilities (n=240,217)  Settings (n=631,220) 
0-30 days  49%  58% 
31-60 days  13%  13% 
61-90 days  8%  8% 
91-180 days  14%  11% 
181-270 days  7%  5% 
271-364 days  5%  3% 
365 days and more  4%  3% 
Source: Office of Inspector General analysis of Medicare claims and MDS data, 2007. 
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  A P P E N D I X   ~ D
Average Number of Days Spent in Hospice Care by Diagnosis Category,  2005  
Beneficiaries in   Beneficiaries in  
Diagnosis Category   Nursing Facilities  Other Settings  
(n=240,217)  (n=631,220) 
Alzheimers Disease  102  100 
Mental Disorders  92  87 
Ill-defined Conditions   84  75 
Diseases of the Respiratory System  80   73 
Congenital Anomalies  78  75 
Infectious and Parasitic Diseases  76  52 
Circulatory Diseases   75  71 
Endocrine, Nutritional, and Metabolic Diseases and Immunity Disorders  73  60 
Diseases of the Musculoskeletal System and Connective Tissue  71  81 
Diseases of the Blood and Blood-Forming Organs  67  46 
Neoplasms (Cancer)  64  46 
Diseases of the Skin and Subcutaneous Tissue  54  53 
Diseases of the Digestive System  51  40 
Injuries and Poisoning  42  23 
Diseases of the Genitourinary System  34  24 
Source: Office of Inspector General analysis of Medicare claims and MDS data, 2007. 
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  A P P E N D I X ~ E
Agency Comments 
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A P P E N D I X   ~   E  

 
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  A C K N O W L E D G M E N T S
This report was prepared under the direction of Jodi Nudelman, 
Regional Inspector General for Evaluation and Inspections in the New  
York regional office, and Meridith Seife, Deputy Regional Inspector  
General. 
Nancy Harrison served as team leader for this study.  Other principal 
Office of Evaluation and Inspections staff from the New York regional 
office who contributed to this report include Michelle McInnis; other 
regional and central office staff who contributed include Robert 
Gibbons, Scott Horning, Elizabeth Jones, Sandy Khoury, and Barbara 
Tedesco. 
 
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