CMS Says "Never Mind" about the Hospice Carve-In

By now I expect you’ve seen the news of the sudden announcement made by CMS on Monday: the Value-Based Insurance Design (VBID) hospice “carve-in” model will end on December 31, 2024. After building a future carve-in into hospice strategic planning since the demonstration program was announced in 2019, now all of us in the field are trying to quickly re-think. The first questions for many providers of hospice and palliative care are, why this sudden change, and what does this mean for the future of our field?

As for why the change, CMS cited feedback from hospice providers and beneficiaries about their experiences with VBID as they considered this decision. Hospice patients are by definition the system’s most frail and vulnerable. Everyone in the sector has been on record opposing the change, from NHPCO, to Leading Age, to large providers writing their own negative comments. But CMS hasn’t shown mercy to the Home Health sector, even though its providers have made similar complaints and already faced major price cuts in contracting with managed care payers.

Early indications are that the MA plans weren’t keen on the carve-in either. The number of participating payers declined from 2022 to 2023, and payers were also complaining that the logistics of network formation and service quality were a problem. I suspect that participation problems held at least equal weight in the CMS decision to fold. If there aren’t enough participating agencies to give you good data, then it’s not really an effective demonstration, is it?

Now for the more important question: What does this mean for hospice and palliative providers?

At first blush this may seem unalloyed good news for providers facing negative margins and tremendous competitive pressures. Most nonprofits were expected to be at a dangerous competitive disadvantage in contracting with payers, especially in competition versus for-profit providers that have lower-cost operations spread over huge geographies. I’ve been advising my clients for the past three years that they need to wring inefficiencies out of their operations starting Now. This halt to the carve-in may give everyone some needed breathing room, since it means hospices will no longer be facing direct price competition in the foreseeable future. But think again if you believe this means the hospice sector can just go back to business as it used to be.

The truth is the need to contract with MAOs for services will continue, just without the specific design and limitations of the proposed carve-in. After all, VBID and the advanced payment models aren’t going away, they just continue without a Hospice Benefit Component. Hospice and palliative providers will still need to be experts at analyzing their financial data, patient demographic mix, ability to avoid rehospitalization, and quality metrics. There are still new opportunities for developing value-based payment arrangements with Medicare Advantage.

But in the long term, I worry that this policy change may cause hospices to be further sidelined as a shrinking part of the healthcare continuum. More and more Medicare beneficiaries are flocking to MA plans because of the price of coverage, extra benefits, and aggressive marketing. The percentage of Medicare beneficiaries electing MAOs is likely to be more than 60% by the end of this decade. How will hospices solidify relationships with MAOs to ensure that they have a seat at the table when payers design upstream care services? I wonder if hospices risk becoming increasingly irrelevant in a world where palliative care is delivered by non-hospice providers, and lengths of stay in hospice grow ever shorter.

We’ve all got some hard thinking to do.

(Thanks to Judi Lund Person for edits and suggestions to this post)