Department of Health and Human Services 

OFFICE OF 

INSPECTOR GENERAL 

HOSPICE AND 

CONTRACTUAL 

NURSING HOME 

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. 

OEI’s 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 patient’s 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 Medicaid’s daily rate for nursing home care; 5 pay 105 percent, and 1 

pays 120 percent of Medicaid’s daily rate. Only one hospice pays less than 100 

percent of Medicaid’s 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 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 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 . . . . . . . . . . . . . 

Potential inappropriate referrals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . . . . . . . . . . . . . . . . . . . 4 

5 

_ 

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 Medicare’s 

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, Medicare’s 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 patient’s medical needs related to their terminal illness. 

However, Medicare will continue to pay for services furnished by the patient’s nonhospice attending physician and for the treatment of conditions unrelated to the 

terminal illness. 

Medicaid’s 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 patient’s 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 resident’s 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 

patient’s 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) 

audits, inspections and investigations examining 

Previously, OIG conducted a number of Hospice 

reports include individual hospice audits as well 

Insure Validity of Medicare Hospice Enrollments” 

conducted a number of different 

Medicare’s hospice benefit. 

audits in Puerto Rico. Other OIG 

as “Enhanced Controls are Needed to 

(A-05-96-00023). 

This report is a companion entitled “Hospice Patients and Nursing

Homes” (OEI-05-95-00250). 

for nursing home patients, 

by nursing home patients 

homes may be excessive. 

METJAODOLOGY 

For our inspection entitled 

to an earlier report 

In that report, we found that a lower frequency of service 

overlap of services, and questionable enrollment in hospice 

suggests that current payment levels for care in nursing 

“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 hospice’s 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 patient’s care. In addition, we requested 

from the nursing homes identified as the patient’s 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 patient’s 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 President’s 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 Medicaid’s 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 Medicaid’s daily rate. 

In almost all of the contracts we reviewed, hospices pay nursing homes either a flat 

daily rate to cover all the patient’s 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 Home’s 

policies, procedures, protocols, and agreements with the resident and the resident’s 

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 antikickback 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 patient’s 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 home’s Medicaid rate was $80.88 per day. The patient’s 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 patient’s 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 patient’s $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 Medicaid’s 

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

$2,635.00. Again the total patient’s 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 patient’s 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 patient’s share of cost. The total 

amount paid by the State for this patient’s 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 home’s patient 

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

6 
Patient - A 

Patient Elects Hospice 

Nursing Home Stay 

12/l/95 - 12L31P5 

Nursing Home - A 

Daily Rate for Nursing Home Care 

!&30.88 

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

Nursing Home Stay 

1211195- 12l31i95 

Nursing Home Bills Hospice at 105 % of Nursing home bills Medicaid at its daily rate 

Medicaid Daily Rate 

Service Charge Service Charge 

31 Days @ $85.00 

per day 

Patient’s Share of 

cost 

Total 

Hospice Paid 

Nursing Home 

$2,635.004

31 days @ $80.88 $2,507.28 

per day 

-$497.00 Patient’s Share of -$497.00 

cost 

$2,138.00 Total $2,010.28 

$2,138.00 Medicaid Paid $2,010.28 

t Nursing Home 

1 , 

Hospice bills Medicaid 

Service 

31 Days @ $75.73 

per day 

Medicaid paid 

hospice 

Hospice paid nursing 

home 

Difference between 

hospice payment and 

Medicaid payment 

Medicare payment to 

Hospice for Hospice 

Care 

Difference between hospice payment and $127.72 

Medicaid payment 

for room and board I I 

Charge 

$2,347.60 

$2,347.60 

$2,138.00 

$209.60 

$3,342.00 

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 hospice’s 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 hospice’s 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 hospice’s contract raises questions both about the 

appropriateness of hospice care as well as Medicare’s 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 patient’s 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 OIG’s 

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