Department of Health and Human Services
 

OFFICE OF 

INSPECTOR GENERAL 

MEDICARE HOSPICE CARE: A
 

COMPARISON OF BENEFICIARIES 


IN NURSING FACILITIES AND 


BENEFICIARIES IN OTHER 


SETTINGS
 

Daniel R. Levinson
 

Inspector General 


December 2007
 

OEI-02-06-00220
 
 

 

 

 

 

 

 

 

 

 

 

 

 

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Δ EXECUTIVE SUMMARY 

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 

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E X E CUTIVE S U MMAR Y 

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 Alzheimer’s 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 Alzheimer’s 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, 

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E X E CUTIVE S U MMAR Y 

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 country’s 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. 

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Δ TABLE OF CONTENTS 

EXECUTIVE SUMMARY ..................................... i 
 

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

FINDINGS ................................................. 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 
 

CONCLUSION ............................................ 16

 Agency Comments...................................... 16 
 

APPENDIXES ............................................. 17 
 

 Beneficiaries Who Resided in Nursing Facilities 

 and Other Settings, 2005 ..................... 17 
 

Appendix A: Demographic Characteristics of Medicare Hospice 

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 
 

ACKNOWLEDGMENTS .................................... 23 
 
 

 

 

 

 

Δ INTRODUCTION 

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 Medicare’s 

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 Medicare’s 

Hospice Benefit” (March 2000) p. 4. 

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INTRODUCTION 

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 physician’s 

and/or hospice medical director’s clinical judgment regarding the normal 

course of the disease.5 Upon a beneficiary’s election of hospice care, the 

hospice provider assumes the responsibility for medical care related to 

the beneficiary’s 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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INTROD U C T I O N 

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 individual’s 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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INTROD 
 UCTION 

•	 counseling (including dietary counseling) with respect to care of 

the terminally ill individual and adjustment to the individual’s 

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 beneficiary’s 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 

beneficiary’s 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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INTRODUCTION 

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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INTROD 
 U C T I O N 

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 Medicarecertified 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 resident’s 

time in a facility and when a resident’s 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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INTROD U C T I O N 

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 President’s 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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Δ 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 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. 

FIGURE 1: 

Medicare Hospice 

Beneficiaries, 2005 

Hospice beneficiaries 

residing in nursing
 

facilities for part of
 

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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FINDING 
 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 

general inpatient care at 

some time during the year, in 

contrast to 24 percent of 

beneficiaries in other 

settings. Seven percent of 

beneficiaries in nursing 

facilities and 6 percent of 

beneficiaries in other settings 

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. 

Table 1: Levels of Hospice Care, 2005 

Level of Hospice Care Beneficiaries in Nursing 

Facilities 

Beneficiaries in Other 

Settings 

Routine Home Care 94% 85% 

General Inpatient Care 15% 24% 

Continuous Home Care 7% 6% 

Respite Care 3% 2% 

Source: Office of Inspector General analysis of Medicare claims and MDS data, 2007. 

Note: Levels of care are not mutually exclusive. 

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FINDINGS 

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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FINDINGS 

Hospice beneficiaries in nursing facilities were 

more than twice as likely as beneficiaries in 

other settings to have terminal diagnoses of illdefined conditions, mental disorders, or 

Alzheimer’s disease 

A beneficiary must be diagnosed 

with a terminal illness with a 

life expectancy of 6 months or 

less to be eligible for Medicare 

hospice care. In 2005, 

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) Alzheimer’s 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 Alzheimer’s 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 Alzheimer’s disease is listed under diseases of the nervous system and sense organ in 

the ICD-9-CM. 

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FINDINGS 

FIGURE 2: 

Common 

Diagnoses for 

Medicare 

Hospice 

Beneficiaries, 

2005 

20% 20% 20% 

15% 

13% 

10% 

41% 

20% 

6% 

7% 

0% 

5% 

10% 

15% 

20% 

25% 

30% 

35% 

40% 

45% 

Ill-defined 

Conditions 

Neoplasms (Cancer) Circulatory Diseases Mental Disorders Alzheimer's Disease 

Diagnosis Category 

Percentage of Beneficiaries 

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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FINDINGS 

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, 

compared to an average of 62 days 

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 Alzheimer’s 

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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FINDINGS 

FIGURE 3: 

Average 

Number of 

Days in 

Hospice Care 

by Diagnosis 

Category, 2005 

102 

92 

84 

75 

64 

100 

87 

75 

71 

46 

0 

20 

40 

60 

80 

100 

120 

Alzheimer's Disease Mental Disorders Ill-defined 

Conditions 

Circulatory Diseases Neoplasms (Cancer) 

Diagnosis Category 

Average Days in Hospice Care 

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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FINDINGS 

Table 3: Average Medicare Reimbursement by Level of 

Hospice Care, 2005 

Level of Hospice Care Beneficiaries in Nursing 

Facilities 

Beneficiaries in Other 

Settings 

Routine Home Care $10,174 $8,664 

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. 

Specifically, Medicare paid on 

average $4,836 for beneficiaries 

residing in nursing facilities, 

compared to $3,634 for 

beneficiaries residing in other 

settings. 

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EXECUTIVE SUMMARY Δ 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 country’s 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 CMS’s comments. 

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Δ APPENDIX~A 

Demographic Characteristics of Medicare Hospice Beneficiaries Who Resided in Nursing 

Facilities and Other Settings, 2005 

Variable Beneficiaries in Nursing Facilities 

(n=240,217) 

Beneficiaries in Other Settings 

(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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 Δ APPENDIX ~B 

Diagnosis Categories for Hospice Beneficiaries, 2005 

Diagnosis Category 

Beneficiaries in 

Nursing 

Facilities 

(n=240,217) 

Beneficiaries 

in Other 

Settings 

(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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Δ APPENDIX~C 

Length of Stay in Hospice Care, 2005 

Beneficiaries in Nursing 

Facilities (n=240,217) 

Beneficiaries in Other 

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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Δ APPENDIX ~D 

Average Number of Days Spent in Hospice Care by Diagnosis Category, 2005 

Diagnosis Category 

Beneficiaries in 

Nursing Facilities 

(n=240,217) 

Beneficiaries in 

Other Settings 

(n=631,220) 

Alzheimer’s 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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Δ APPENDIX~E 

Agency Comments 

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APPENDIX ~ E 

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Δ ACKNOWLEDGMENTS 

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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