Department  of  Health  and  Human  Services 
OFFICE  OF 
INSPECTOR  GENERAL 
HOSPICE  AND  NURSING  HOME 

CONTRACTUAL  RELATIONSHIPS 

JUNE GIBBS BROWN 
Inspector  General 
NOVEMBER  1997 
OEI-05-95-00251  OFFICE OF INSPECTOR GENERAL 
The  mission  of  the  Office  of  Inspector  General  (OIG),  as mandated  by  Public  Law  95-
452,  is to  protect  the  integrity  of  the  Department  of Health  and  Human  Services 
programs  as well  as the  health  and  welfare  of  beneficiaries  served  by  them.  This 
statutory  mission  is carried  out  through  a nationwide  program  of  audits,  investigations, 
inspections,  sanctions,  and  fraud  alerts.  The  Inspector  General  informs  the  Secretary 
of  program  and  management  problems  and  recommends  legislative,  regulatory,  and 
operational  approaches  to  correct  them. 
Office of Evaluationand Inspections 
The  Office  of  Evaluation  and  Inspections  (OEI)  is one  of  several  components  of  the 

Office  of  Inspector  General.  It  conducts  short-term  management  and  program 

evaluations  (called  inspections)  that  focus  on  issues  of  concern  to  the  Department,  the 

Congress,  and  the  public.  The  inspection  reports  provide  findings  and 

recommendations  on  the  efficiency,  vulnerability,  and  effectiveness  of  departmental 

programs. 

OEIs  Chicago  Regional  Office  prepared  this  report  under  the  direction  of  William  C. 

Moran,  Regional  Inspector  General,  and  Natalie  Coen,  Deputy  Regional  Inspector 

General.  Principal  OEI  staff  included: 

REGION  HEADQUARTERS 
Thomas  Komaniecki  Stuart  Wright 
John  Traczyk  Lisa  Foley 
Magarita  Rodriguez 
To  obtain  a copy  of  this  report,  call  the  Chicago  Regional  Office  at  (312)  353-4124.  Department  of  Health  and  Human  Services 
---TPE  nl-7
Ul?l!  1-u  VI 
INSPECTOR  GENERAL 

HOSPICE  AND  NURSING  HOME 
CONTRACTUAL  RELATIONSHIPS 
JUNE GIBBS BROWN 
Inspector  General 
NOVEMBER  1997 
OEI-05-95-0025  1  EXECUTIVE  SUMMARY 
PURPOSE 
To  examine  the  contractual  relationships  between  hospices  and  nursing  homes. 
BACKGROUND 
Hospice  care  is an  approach  to  treatment  that  recognizes  that  the  impending  death  of 
an  individual  may  warrant  a change  in  focus  from  curative  to  palliative  care.  Hospice 
helps  patients  face  death  while  minimizing  pain  and  disruption  of  normal  activities. 
The  Medicare  hospice  benefit  was  established  in  1983.  In  1986,  Congress  allowed 
States  to  add  a hospice  benefit  to  their  State  Medicaid  plans. 
For  nursing  home  patients  who  are  dually  entitled  to  Medicare  and  Medicaid  and  who 
choose  the  hospice  benefit,  Medicaid  pays  the  hospice  for  the  patients  room  and 
board,  (no  less  than  95 percent  of the  Medicaid  daily  rate),  and  Medicare  pays  the 
hospice  for  the  hospice  benefit.  The  hospice  then  pays  the  nursing  home  for  daily 
care,  and,  depending  on  the  arrangement  made  between  the  hospice  and  the  nursing 
home,  for  other  services  as well. 
Based  on  evaluations,  audits,  anecdotal  evidence  and  a review  of  statutory  provisions, 
we  decided  to  examine  whether  contractual  arrangements  between  hospices  and 
nursing  homes  present  vulnerabilities  for  inappropriate  or  excessive  Medicare  and 
Medicaid  payments  being  made  to  hospice  or  nursing  homes. 
From  a stratified  random  sample  of  36 hospices,  we  reviewed  the  contracts  and 
financial  records  of  22 hospices  who  had  patients  residing  in  nursing  homes.  We  did 
not  attempt  to  project  these  findings  to  the  universe  of  hospices. 
FINDINGS 
Almost  all hospices reviewed pay nursing homes  the same  or more  than what 
Medicaid would have paid for nursing home  care  if the patient  had not elected 
hospice. 
Of  the  22 hospice  contracts  reviewed,  17 had  sufficient  information  to  determine  the 
hospice  payment  to  the  nursing  home  for  room  and  board.  Of  the  17 hospices,  10 pay 
100 percent  of  Medicaids  daily  rate  for  nursing  home  care;  5 pay  105 percent,  and  1 
pays  120 percent  of  Medicaids  daily  rate.  Only  one  hospice  pays  less  than  100 
percent  of  Medicaids  daily  nursing  home  rate. 
i  The six hospices payingmore than 100 percent of the Medicaid dailyrate for musing 
home care have a higher penxntage  of patients in nursinghomes. 
The  hospices  that  paid  over  100 percent  of the  Medicaid  daily  rate  had,  on  average, 
49 percent  of their  Medicare  patients  living in nursing  homes.  Two  of these  six 
hospices  had  close  to  100 percent  of their  patients  living in nursing  homes.  The  11 
remaining  hospices  had,  on  average,  24 percent  of their  Medicare  patients  living  in 
nursing  homes. 
Both the hospice and the nursinghome can benefit financiallyby enrollingpatients in 
hospice. 
In one  instance  we found.additional  hospice  income  generated  because  Medicaid 
payments  to hospice  for  room  and  board  exceeded  what  the  hospice  paid  the  nursing 
home  for  room  and  board.  By enrolling  nursing  home  patients  hospices  also  benefit 
financially  from  increases  in the  average  length  of stay and  increasing  the  efficient 
utilization  of staff.  The  advantages  for  the  nursing  homes  are:  increasing 
reimbursement  for  Medicaid  patients,  receiving  additional  staff  hours  at no  additional 
cost,  increased  patient  census  and  reducing  supply  and  medication  costs when  the 
hospice  provides  them. 
Some hospice contracts with nursinghomes contain provisionsthat raise questions 
about inappropriate patient referrals between hospices and nursinghomes. 
Language  from  contracts  in 3 of 22 hospices  we reviewed  raises  the  possibility  that 
.!some nursing  homes  and  hospices  are  inappropriately  referring  patients  to  each  other. 
 Another  potential  abuse  was in the  provision  of free  care  in return  for  patient 
referrals.  These  arrangements  potentially  implicate  the  Medicare-Medicaid  ant& 
kickback  statute. 
RECOIMMEDIDA~ONS 
Given  the  above  information,  and  information  in our  companion  report  entitled 
Hospice  Patients  in Nursing  Homes,  we are  concerned  that  some  decisions  about 
patient  care  can  be  potentially  infhrenced  by financial  rather  than  clinical  factors. 
Financial  incentives  between  hospices  and  nursing  homes  that  induce  referrals  may 
implicate  the  Medicare  anti-kickback  statute.  Any  contracts  with  potentially 
troublesome  language  will be  reviewed  further  by appropriate  components  of the 
Office  Inspector  General.  These  offices  may take  additional  action  as necessary. 
of 
We recommend that the Health Care Financing Administration(HCFA)  work with 
the hospice associations to educate the hospice and nursinghome communitiesto help 
them avoid potentiallyfraudulent and abusive activitiesthat might influence decisions 
on patient benefit choices and care. 
In addition, we fecommend that HCFA work with @e States to develop regulations 
ii  defining what is included in their nursing home  room  and board  payment. 
AGENCY  COMMENTS 
We  received  comments  from  HCFA  and  they  concur  with  both  of  our 

recommendations.  They  state  that  HCFA  staff  and  the  regional  home  health 

intermediaries  are  in  constant  touch  with  the  national  and  local  hospice  associations 

and  are  working  to  educate  them  regarding  potentially  fraudulent  and  abusive 

practices.  Also,  HCFA  is currently  developing  technical  regulations  for  Medicaid 

hospice  care  that  will  discuss  the  issue  of what  constitutes  room  and  board  for  nursing 

home  patients  electing  hospice  care. 

The  HCFA  suggested  that  the  OIG  issue  guidance  to  the  hospice  and  nursing  home 

industries  and  the  Medicare  intermediaries  about  the  problems  we  identified  in  our 

report.  We  agree  and  plan  to  do  so.  In  addition  we  hope  to  make  our  report  widely 

available  for  this  purpose,  both  by  sending  it to  the  affected  industry  organizations  and 

intermediaries  and  making  it available  on  the  internet.  We  will  discuss  our  plans  with 

HCFA  to  ensure  adequate  dissemination  of  these  results. 

We  appreciate  the  work  that  HCFA  is dong  in  this  area.  The  full  text  of  their 

comments  can  be  found  in Appendix  A. 

... 
111  TABLE  OF  CONTENTS 
PAGE 

EXECUTIVE  SUMMARY 

INTRODUCTION  . . . . . . . . . . . .  . . . .  . .  . . . .  . .  .......  . .  . . . ......  1 

FINDINGS  . . . . . . . . . . . . . . . . . . . . . .  . .  . . . .  . .  .......  . . .  . .  ......  4 

Hospices  payments  to  nursing  homes  . . . . . . . . . . . . . 
 . . . . . . . . . . . . . . . . . . . .  4 
5 
Potential  inappropriate  referrals  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  _ 

Mutual  benefits  to  hospices  and  nursing  homes  . . . . . . . . . . . . . . . . . . . . . . . . . . .  5 

Troublesome  contractual  language  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  7 

RECOMMENDATIONS  ............................................  9 

APPENDIX  ...................................................... 

A:  Agency  Comments  .............................................  A-l 
 INTRODUCTION 
PURPOSE 
To  examine  the  contractual  relationships  between  hospices  and  nursing  homes. 
BACKGROUND 
Hospice  Care 
Hospice  care  is an  approach  to  treatment  that  recognizes  that  the  impending  death  of 

an  individual  may  warrant  a change  in focus  from  curative  to  palliative  care.  Hospice 

helps  patients  face  death  while  minimizing  pain  and  disruption  of  normal  activities. 

The  goal  of  hospice  care  is to  help  terminally  ill individuals  continue  life  with  minimal 

disruption  to  normal  activities  while  remaining  primarily  in  a home  environment. 

The  Medicare  hospice  benefit  was  established  in  1983.  To  be  eligible  for  Medicares 

hospice  benefit,  a patient  has  to  be  diagnosed  with  a terminal  condition  with  a life 

expectancy  of  6 months  or  less  if the  illness  runs  its  normal  course.  The  benefit  was 

initially  comprised  of  four  levels  of  care,  with  three  benefit  periods  and  a limit  of  210 

days  of  coverage. 

In  1990,  Medicares  hospice  benefit  was  expanded  by  adding  a fourth  benefit  period 

that  was  unlimited  in  duration.  Before  the  addition  of  this  period,  patients  who  lived 

beyond  210  days  and  still  required  hospice  care  were  provided  care  by  the  hospice 

without  charge  to  Medicare  or  the  patient. 

Medicare  patients  enrolled  in  the  hospice  program  waive  coverage  of  all  medical 

services  related  to  the  treatment  of  their  terminal  illness.  The  hospice  assumes 

responsibility  for  all  of  the  patients  medical  needs  related  to  their  terminal  illness. 

However,  Medicare  will  continue  to  pay  for  services  furnished  by  the  patients  non-

hospice  attending  physician  and  for  the  treatment  of  conditions  unrelated  to  the 

terminal  illness. 

Medicaids  Hospice  Benefit 

In  1986,  Congress  allowed  States  to  add  a hospice  benefit  to  their  State  Medicaid 

plans.  The  original  legislation  adding  the  optional  hospice  benefit  specifically 

mentioned  that  hospice  care  may  be  provided  to  an  individual  while  such  individual  is 

a resident  of  a skilled  nursing  facility  or  intermediate  care  facility  (P.L.  99-272, 

Sec.9505(a)(2)).  To  be  eligible  for  hospice  care  under  Medicaid,  patients  have  to 

meet  the  same  requirements  defined  by  Medicare.  For  nursing  home  hospice  patients 

3 
 who  are  dually  entitled  to  Medicare  and  Medicaid,  Medicaid  pays  an  additional 
amount  to  cover  the  patients  room  and  boardi. 
Room  and  board  can  include  the  following: 
 assistance  in  activities  of  daily  living, 

0  socializing  activities, 

 administration  of  medication, 

 maintaining  the  cleanliness  of  a residents  room, 

 supervising  and  assisting  in  the  use  of  durable  medical  equipment  and  prescribed 

therapies,  and 
0  personal  care  services. 
When  a dually  entitled  patient  elects  hospice,  Medicaid  pays  the  hospice  for  the 
patients  room  and  board  instead  of  paying  the  nursing  home.  The  hospice  then  pays 
the  nursing  home.  Initially,  Congress  only  required  that  States  take  into  account  the 
room  and  board  furnished  by  such  facility  in  determining  the  room  and  board 
payment.  In  1990,  Congress  required  States  to  pay  at least  95 percent  of  the  rate 
that  would  have  been  paid  by  the  State....  There  is nothing  in  this  section  of  the  law 
that  explicitly  prohibits  a hospice  from  paying  all  or  more  than  the  95 percent  they 
receive  from  the  State  to  a nursing  home  for  room  and  board. 
OIG  Studies 
Recently,  the  Office  of  Inspector  General  (OIG)  conducted  a number  of  different 
audits,  inspections  and  investigations  examining  Medicares  hospice  benefit. 
Previously,  OIG  conducted  a number  of  Hospice  audits  in  Puerto  Rico.  Other  OIG 
reports  include  individual  hospice  audits  as well  as  Enhanced  Controls  are  Needed  to 
Insure  Validity  of  Medicare  Hospice  Enrollments  (A-05-96-00023). 
This  report  is a companion  to  an  earlier  report  entitled  Hospice  Patients  and  Nursing
Homes  (OEI-05-95-00250).  In  that  report,  we  found  that  a lower  frequency  of  service 
for  nursing  home  patients,  overlap  of  services,  and  questionable  enrollment  in  hospice 
by  nursing  home  patients  suggests  that  current  payment  levels  for  care  in  nursing 
homes  may  be  excessive. 
METJAODOLOGY 
For  our  inspection  entitled  Hospice  Patients  and  Nursing  Homes  (OEI-05-95-00250), 
we  selected  a stratified  random  sample  of  36 hospices,  6 hospices  each  from 
I  In this report  room and board  is used  to describe  the  payments  made  by hospices  to 
nursing  homes  once  a patient  elects  hospice.  Nursing home  care is used  to describe  those 
payments  that  the  State  Medicaid  agency would  have  made  if the  patient  did not  elect  hospice 
care. 
2 
 California,  Florida,  Illinois,  New  York  and  Texas  and  6 hospices  from  the  remaining 

States.  From  these  sampled  hospices,  we  requested  the  hospices  Medicare  census  for 

December  1995.  We  received  responses  from  31 of  the  36 hospices. 

In  the  patient  census,  we  asked  the  hospice  to  identify  whether  the  patient  was  a 

resident  of  a nursing  home  and  receiving  hospice  services  and  whether  the  patient  was 

entitled  to  Medicaid.  Twenty-two  of  the  31 hospices  had  patients  who  were  residents 

of  a nursing  home  while  receiving  hospice  services.  We  requested  from  the  hospices 

the  complete  medical  and  financial  record  for  these  patients.  The  complete  financial 

record  included  the  written  agreement  between  the  hospice  and  the  nursing  home  and 

copies  of  receipts  and  distributions  for  the  patients  care.  In  addition,  we  requested 

from  the  nursing  homes  identified  as  the  patients  residence  copies  of  their  complete 

medical  and  financial  records. 

Based  on  our  sample,  51 percent  of  Medicare  hospice  patients  living  in  a nursing 

home  were  also  entitled  to  Medicaid.  For  these  residents,  we  requested  from  the 

State  Medicaid  agencies,  the  patients  complete  1995  claims  history.  We  received 

responses  from  each  State.  We  also  obtained  from  the  Health  Care  Financing 

Administration  claims  history  for  each  patient  in  our  sample.  Medical  review  was 

conducted  on  208  nursing  home  hospice  patients. 

We  reviewed  a sample  of  financial  records  from  each  hospice  to  examine  the  financial 

relationship  between  the  hospice  and  the  nursing  home.  A  total  of  22 hospices  were 

reviewed  although  3 hospices  served  no  Medicaid  patients  during  our  sample  period. 

No  payments  for  room  and  board  were  made  to  nursing  homes  by  these  three 

hospices.  Despite  the  absence  of  Medicaid  patients,  we  reviewed  the  contract 

language  since  the  contracts  contained  information  pertaining  to  room  and  board 

payments  for  patients  who  might  be  entitled  to  Medicaid.  National  projections 

regarding  our  findings  were  not  made. 

This  inspection  was  conducted  in  accordance  with  Quality  Standards  for  Inspections  as 

developed  by the  Presidents  Council  on  Integrity  and  Efficiency. 

3 
 FINDINGS 
Almost  all hospices reviewed pay nursing homes  the same  or more  than what 
Medicaid would have paid for nursing home  care  if the patient  had not elected 
hospice. 
We  reviewed  the  contracts  of  22 hospices  of which  17 had  sufficient  information  to 
determine  the  hospice  payment  to  the  nursing  home  for  room  and  board.  A hospice 
and  a nursing  home  must  have  a signed  agreement  detailing  the  responsibilities  of 
each  entity.  Of  the  17 hospices,  10 pay  100 percent  of  Medicaids  daily  rate  for 
nursing  home  care;  5 hospices  pay  105 percent  and  one  hospice  pays  120 percent. 
Only  one  hospice  appears  to  pay  95 percent  of  Medicaids  daily  rate. 
In  almost  all  of  the  contracts  we  reviewed,  hospices  pay  nursing  homes  either  a flat 
daily  rate  to  cover  all  the  patients  room  and  board  expenses  or  a rate  that  covers 
room  and  board  and  an  additional  amount  to  cover  supplies  and  services.  Currently, 
there  are  no  regulations  defining  what  is included  in  a room  and  board  payment  for 
hospice  patients.  When  the  contract  states  that  payment  will  be  a flat  rate  for  room 
and  board  and  an  additional  amount  for  supplies,  the  language  is typically  stated  as 
follows: 
For Hospice  Medicare  and Medicaid patients, Hospice  willpay  the Facility 95%  of 
the existing Medicaid  Nursing Facility Rate for  the patient, plus  an additional 5% 
for services purchased  by Hospice from  the Facility. 
According  to  many  of  the  contracts,  the  additional  5 percent  payment  covers  routine 

supplies  such  as  incontinent  pads,  ostomy  supplies  and  other  care  items  generally 

provided  by  the  nursing  home.  Many  of  these  supplies  and  items  are  not  ordered  by 

the  hospice,  rather  these  supplies  appear  to  be  part  of  the  routine  care  provided  by 

the  nursing  home  that  would  normally  be  reimbursed  in  the  Medicaid  daily  rate. 

Beyond  these  routine  services  and  supplies,  almost  all  of  the  contracts  allow  nursing 

homes  to  bill  the  hospice  in  addition  to  the  5 percent  for  additional  supplies  and 

services  ordered  by  the  hospice  when  related  to  the  terminal  illness.  Examples  of 

these  items  include  speech  therapy,  drugs,  or  other  services  not  normally  covered  in 

the  Medicaid  daily  rate. 

Almost  all the  contracts  state  that  the  hospice  expects  the  nursing  home  to  provide  the 

same  level  of  services  and  care  to  hospice  patients  that  would  have  been  provided  had 

the  patient  not  elected  hospice.  A typical  example  of  language  found  in  most 

contracts: 

The Home  shall furnish  to the individual who is both a resident of The Home  and 
a Hospice patient  all ofthose services which The Home  normally would have 
4  provided  in the absence  of The Hospice program,  as provided for  in The Homes 
policies, procedures,  protocols,  and  agreements  with the resident and  the residents 
family. 
The  six hospices paying more  than  100 percent  of the Medicaid  daily rate  for nursing 
home  care  have a higher percentage  of patients in nursing homes. 
Our  analysis  indicates  that  hospices  that  pay  more  than  100 percent  of  the  Medicaid 
daily  rate  for  nursing  home  care  have  a higher  percentage  of  patients  in  nursing 
homes.  The  six hospices  that  paid  over  100 percent  of  the  Medicaid  daily  rate  had,  on 
average,  49 percent  of  their  Medicare  patients  living  in  nursing  homes.  Two  of  these 
six hospices  had  close  to  100 percent  of  their  patients  living  in  nursing  homes.  The  11 
remaining  hospices  had,  on  average,  24 percent  of  their  Medicare  patients  living  in 
nursing  homes. 
If the  purpose  of  the  additional  payment  to  the  nursing  home  is to  induce  the  referral 
of  patients,  the  hospice  and  nursing  home  are  potentially  in violation  of  42 U.S.C. 
section  1320a-7b(b).  This  statute  makes  it illegal  to  offer  or  solicit  anything  of value 
to  induce  the  referral  of  a patient  to  a person  for  furnishing  or  arranging  a service  for 
which  payment  may  be  made  under  Federal  health  care  programs  (including  Medicare 
or  Medicaid).  This  statutory  prohibition  is generally  referred  to  as the  Medicare  anti-
kickback  law. 
However,  if the  nursing  home  provides  legitimate  services  for  hospice  patients  beyond 
those  routine  services  normally  provided  to  nursing  home  patients  and  covered  by  the 
daily  rate,  it would  be  appropriate  for  the  hospice  to  reimburse  the  nursing  facility  for 
those  services. 
Based  on  a review  of  patients  financial  and  medical  records,  it is unclear  whether 
payments  made  by  hospices  for  additional  services  provided  by  the  nursing  home 
warrant  payment  in  excess  of  100 percent  of  the  Medicaid  daily  rate  for  nursing  home 
care.  We  believe  that  payments  that  exceed  100 percent  may  implicate  the  Medicare 
anti-kickback  statute. 
Both  the hospice  and the nursing home  can benefit financially by enrolling patients in 
hospice. 
While  a hospice  appears  to  lose  money  by paying  a nursing  home  more  than  it 
receives  from  the  State,  this  may  not  always  be  the  case.  In  one  example,  both  the 
hospice  and  the  nursing  home  appear  to  profit  from  their  arrangements. 
The  following  example,  illustrated  on  page  7, shows  how  at  least  one  hospice  and 
nursing  home  benefitted  financially  from  their  arrangement.  In  this  example,  the 
nursing  homes  Medicaid  rate  was  $80.88  per  day.  The  patients  share  of  their  nursing 
home  cost  was  $497.00  per  month.  Under  current  Medicaid  regulations,  individuals 
living  in  nursing  homes  must  have  a post-eligibility  determination  made  to  apply  some 
5 
 of  their  income  to  the  costs  of  nursing  home  care.  This  patients  share  also  applies 

when  a nursing  home  patient  elects  hospice  care. 

If the  patient  had  not  elected  hospice  care,  the  total  amount  that  would  have  been 

paid  by Medicaid  for  nursing  home  care  in December  1995 would  have  been  $2,507.28 

minus  the  patients  $497.00  for  a total  Medicaid  reimbursement  of  $2,010.28. 

However,  the  patient  did  elect  hospice  care.  The  hospice  and  nursing  home 

negotiated  a rate  for  room  and  board  of  $85.00  per  day  or  105 percent  of  Medicaids 

per  day  rate.  The  total  amount  that  the  nursing  home  billed  the  hospice  was 

$2,635.00.  Again  the  total  patients  share  of  cost  was  $497.00  which  was  deducted 

from  the  $2,635.00.  The  total  amount  paid  by  the  hospice  was  $2,138.00.  This 

exceeded  the  $2,010.28  that  the  nursing  home  would  have  been  paid  by  Medicaid  by 

$127.72. 

The  hospice  then  bills  the  State  Medicaid  agency  for  the  patients  room  and  board. 

The  average  daily  rate  paid  by  the  State  for  room  and  board  for  hospice  patients  was 

$75.73  per  day.  This  amount  is slightly  less  than  95 percent  of  the  Medicaid  daily  rate. 

This  may  represent  a partial  adjustment  for  the  patients  share  of  cost.  The  total 

amount  paid  by  the  State  for  this  patients  room  and  board  for  December  1995  was 

$2,347.60  which  exceeded  the  $2,138.00  paid  by  the  hospice  to  the  nursing  home  by 

$209.60.  In  addition  to  the  Medicaid  and  hospice  payments  for  room  and  board  for 

the  hospice  patient,  Medicare  paid  the  hospice  $3,342.00  for  hospice  care  or  $107.80 

per  day. 

This  situation  could  provide  a strong  incentive  for  nursing  homes  and  hospices  to 

prematurely  enroll  patients  who  do  not  meet  the  criteria  for  entitlement  to  the  benefit 

into  the  hospice  program.  Other  advantages  for  hospices  include  increasing  the 

average  length-of-stay,  (as  noted  in  hospice  industry  presentations)  and  increasing  the 

efficient  utilization  of  human  resources. 

The  advantages  for  the  nursing  homes  include  increasing  reimbursement  for  Medicaid 

patients,  receiving  additional  staff  hours  at  no  additional  cost  and  reducing  the  supply 

and  medication  costs  when  the  hospice  provides  or  pays  for  the  supplies.  Another 

potential  advantage  for  the  nursing  home  is increasing  the  nursing  homes  patient 

census  by  admitting  hospice  patients  who  were  previously  living  at home. 

6 
 Nursing Home - A 

Daily Rate for Nursing Home Care 

!&30.88 

5
Patient  - A  Patient  - A (Hypothetical)
Patient  Elects  Hospice  Patient  Does  Not  Elect  Hospice 

Nursing  Home  Stay  Nursing  Home  Stay 

12/l/95  - 12L31P5  1211195- 12l31i95 

Nursing  Home  Bills Hospice  at 105 % of  Nursing  home  bills Medicaid  at its daily rate 
Medicaid  Daily  Rate 
Service  Charge  Service  Charge 
4
31 Days @ $85.00  $2,635.00	 31 days @ $80.88  $2,507.28 
per day  per  day 
Patients  Share  of  -$497.00 	 Patients  Share  of  -$497.00 
cost  cost 
Total  $2,138.00  Total  $2,010.28 
Hospice  Paid  $2,138.00  Medicaid  Paid  $2,010.28 
Nursing  Home  t  Nursing  Home 
,  1 
Difference  between  hospice  payment  and  $127.72 
Medicaid  payment 
Hospice  bills Medicaid  for room  and board  I  I 
Service  Charge 
31 Days @ $75.73  $2,347.60 
per day 
Medicaid  paid  $2,347.60 
hospice 
Hospice  paid  nursing  $2,138.00 
home 
Difference  between  $209.60 
hospice  payment  and 
Medicaid  payment 
Medicare  payment  to  $3,342.00 
Hospice  for Hospice 
Care 
Some  hospice  contracts  with nursing homes  contain provisions that raise  questions 
about inappropriate  patient  referrals  between  hospices and nursing homes. 
Language  in  three  hospice  nursing  home  contracts  raises  the  possibility  that  nursing 
homes  and  hospices  are  inappropriately  referring  patients  to  each  other,  potentially 
violating  the  Medicare  anti-kickback  statute.  This  statute  makes  it illegal  to  offer  or 
7  solicit  anything  of value  to  induce  the  referral  of  a patient  to  a person  for  furnishing 
or  arranging  a service  for  which  payment  may  be  made  under  Federal  health  care 
programs  (including  Medicare  or  Medicaid).  Below  is an  example  of  language 
pertaining  to  patient  referrals  found  in  a hospices  contract  with  a nursing  home. 
The Home  agrees to exert its best efforts to promote  the use of Hospice  home  care 
services by directing the personnel  of The Home  to refer all terminally ill patients, 
subject to the informed  consent  of the patient  and  the approval of the attending, to 
The Hospice. 
In  another  contract  from  the  same  hospice  but  with  a different  nursing  home  the 
language  regarding  referral  asks  that  the  nursing  home  promote  the  concept  of 
hospice  to  patients  who  may  require  hospice  care. 
In  another  hospices  contract,  the  hospice  and  nursing  home  agree  to 
formulate  an assessment system within each  of their structures to funnel 
patients to the services of the other. 
Another  potential  abuse  of  the  current  system  is providing  free  care  in  return  for 
patient  referrals.  One  hospices  contract  raises  questions  both  about  the 
appropriateness  of  hospice  care  as well  as Medicares  Skilled  Nursing  Facility  benefit. 
The  contract  states  that: 
For  residents who are eligible for Medicare  skilled nursing home  room  and  board 
reimbursement,  Hospice  willprovide  its core services without charge  until nursing 
home  Medicare  reimbursable  days expire before  the patient  elects the Medicare 
Hospice  Benefit. 
This  language,  along  with  examples  of  patients  moving  between  the  hospice  benefit 
and  regular  Medicare  benefits,  raises  questions  as to  whether  the  hospices  and  nursing 
homes  are  placing  patients  for  reimbursement  reasons  rather  than  patient  needs. 
8 
 RECOMMENDATIONS 
Given  the  above  information,  and  information  in  our  companion  report  entitled 
Hospice  Patients  in  Nursing  Homes,  we  are  concerned  that  some  decisions  about 
patient  care  can  be  potentially  influenced  by  financial  rather  than  clinical  factors. 
Financial  incentives  between  hospices  and  nursing  homes  that  induce  referrals  may 
implicate  the  Medicare  anti-kickback  statute. 
Any  contracts  with  potentially  troublesome  language  will  be  reviewed  further  by 
appropriate  components  of  the  Office  of  Inspector  General.  These  offices  may  take 
additional  action  as necessary. 
We  recommend  that the Health  Care  Financing Administration  (HCFA)  work with 
the hospice  associations  to educate  the hospice and nursing home  communities  to help 
them avoid potentially fraudulent and abusive activities that might influence decisions 
on patient benefit choices  and care. 
In addition, we recommend  that HCFA  work with the States  to develop  regulations 
defining what is included in their nursing home  room  and board  payment. 
AGENCY  COMMENTS 
We  received  comments  from  HCFA  and  they  concur  with  both  of  our 

recommendations.  They  state  that  HCFA  staff  and  the  regional  home  health 

intermediaries  are  in  constant  touch  with  the  national  and  local  hospice  associations 

and  are  working  to  educate  them  regarding  potentially  fraudulent  and  abusive 

practices.  Also,  HCFA  is currently  developing  technical  regulations  for  Medicaid 

hospice  care  that  will  discuss  the  issue  of what  constitutes  room  and  board  for  nursing 

home  patients  electing  hospice  care. 

The  HCFA  suggested  that  the  OIG  issue  guidance  to  the  hospice  and  nursing  home 

industries  and  the  Medicare  intermediaries  about  the  problems  we  identified  in  our 

report.  In  addition  we  hope  to  make  our  report  widely  available  for  this  purpose, 

both  by  sending  it to  the  affected  industry  organizations  and  intermediaries  and 

making  it available  on  the  internet.  We  will  discuss  our  plans  with  HCFA  to  ensure 

adequate  dissemination  of  these  results. 

We  appreciate  the  work  that  HCFA  is dong  in this  area.  The  full  text  of  their 

comments  can  be  found  in Appendix  A. 

9 
 APPENDIX  A 

AGENCY  COMMENTS 
 DATE: 
TO: 	 June Gibbs Brown 
Inspector  General 
FROM:  Nancy-Am  Min DePark 
wm
Deputy Administrator 
SUBJECT: 	 Office of Inspector General (0%)  Draft Report: Hospice and Nursing 
Home Contractual  Relationships,  (OEI-05-95-0025 1) 
We reviewed  the above-referenced  report that examkz  contractual  relationships  between 
hospices and nursing homes. 
Hospice care is an approach  to treatment that recognizes the impending  death of an 
individual  may w-t  a change in focus from curative to palliative  care.  Hospice  helps 
patients face death while minimizing  pain and disruption of normal activities.  The 
Medicare hospice  benefit  was established  in 1983. In 1986, Congress  allowed  states to 
add a hospice benefit  to their state Medicaid plans. 
For nursing home patients  who are dually entitled to Medicare and Medicaid  and who 
choose the hospice  benefit,  Medicaid pays the hospice for the patients  room and board 
(no less than 95 percent of the Medicaid daily rate), and Medicare pays the hospice  for 
the hospice benefit.  The hospice then pays the nursing home for daily care and, 
depending on the arrangement  made between the hospice and the nursing home, for other 
services as well. 
Based on evaluations,  audits, anecdotal  evidence, and a review of statutory  provisions, 
OlG decided to examine  whether contractual  arrangements between hospices  and nursing 
homes present vulnerabilities  for inappropriate  or excessive Medicare and Medicaid 
payments being made to hospices  or nursing homes. 
The Health Care Financing  Administration  (HCFA) concurs with all of OIGs 
recommendations.  Our detailed  comments are as follows: 
OIG Recommendation  1 
HCFA should work with the hospice  associatiotls to educate the hospice  and nursing 
home communities  to help them avoid potentially  fraudulent and abusive activities  that 
might influence  decisions  on patient benefit choices and care. 
A-2 
 HCFA  Response 
We concur.  It is important  to note that both I-iCFA staff and our contractors,  the regional 
home health intermediaries  (RHHIs), are in regular contact with the national  and local 
hospice associations,  and are working to educate them regarding poientially  fraudulent 
and abusive activities.  The RI-MIShave been instructed  to conduct educational  seminars 
for providers,  physicians,  and/or consumers when there is a general misunderstanding  of 
coverage, widespread overutilization  in areas, or issues  all parties may not be aware of 
that might impact utilization  of servxes.  We will encourage the RHHIs to re-emphasize 
this aspect of potentially  fraudulent  and abusive actii-ities in their continuing  educational 
efforts. 
OIGRccommendationZ 
HCFA should work with the states to develop regulations defining  what is included  in 
their nursing home room and board payment. 
HCFA ResDonse 
We concur.  HCFA is currently  developing technical regulations for Medicaid  hospice 
care.  It should be noted that the Omnibus Budget Reconciliation  Act of 1989 (OBRA 
1989) included  a definition  for nursing home room and board.  However, before this 
provision could be incorporated  into the Medicaid regulations, rhe statute was repealed 
with OBRA 1990.  As a technical  regulation, we are implementing the requirements  of 
section  1905(o) of the Social Security Act.  In the preamble, there will be a discussion  of 
nursing  home room anA board for those individuals =ho elected hospice care.  We expect 
this information  will clar~fj~some of the confusion  surrounding  this issue and may negate 
the need for a separate regulation.  However, we will include in the preamble a reqt  st 
for comment from the public on the need to develop separate regulations  for room and 
board. 
Additional  Comments 
We agree the hospice  associations  should be informed of situations considered  to be 
potentially  fraudulent  and abusive.  It would be helpful if OIG prepared a document/alert 
that outlines  potential  anti-kickback  violations  so that HCFA could work with the 
associations  and the RHHIs. 
A-3