Medicare Hospice Cap: A FAQ Guide for Hospice Agencies

Imagine dedicating your days to offering comfort and care to individuals at life's final stage. It's a privilege, and as a hospice agency ­– you don’t need to imagine it, it’s what you love to do. Caring for patients at the end of life comes with a multitude of emotional and personal rewards, but the reality of the financial responsibilities can be daunting.

Medicare's Hospice Cap, a system for limiting reimbursement for hospice services, adds yet another layer of challenge. While this can feel like a bureaucratic hurdle that distances you from the core mission of providing compassionate care, it doesn’t have to be.

That’s why SimiTree is breaking down Hospice Cap without the complex financial jargon and obscure calculations so you can understand how it impacts the care your agency provides. If you worry about exceeding Hospice Cap, penalties, or compromising your ability to provide exceptional care, here’s the good news: you’re not alone. By the end of this blog, you’ll have the knowledge you need to feel empowered to make informed decisions for your agency.


So, what is Hospice Cap?

Hospice Cap acts as a safeguard, ensuring hospices don't receive more than the estimated cost of traditional end-of-life care. This helps Medicare manage its budget and ensure fair access to hospice services for all Medicare beneficiaries.


When is Hospice Cap Reporting Due to Medicare?

Each year, by the last day of February, your hospice needs to submit a Self-Determined Hospice Cap (SDHC) Report to your designated Medicare Administrative Contractor (MAC). Luckily, finding the right report and instructions is pretty easy!

Each MAC will send you an email and maintain a dedicated webpage with all the necessary information you need to complete your report. Once you've submitted the report, you'll receive a Final Determination letter from your MAC within 6-7 months, confirming whether your agency owes a liability back to the Medicare program and how much it may have changed since filing your SDHC Report. 

That's where SimiTree comes in. When it comes time to file your SDHC report is when SimiTree can step in to prepare your SDHC reports, confirm any amounts due to Medicare for liability, and identify your cap position for the most recently ended period 09/30. Although we cannot take away any liability you have already incurred and are filing on your SDHC report, we can help you mitigate liability in future years. Our cap experts analyze your data and trends to predict your future cap position and suggest operational changes to avoid cap liability going forward. This insight allows you to take preventative measures to avoid exceeding the cap in subsequent years and plan for your agency's future.

Hospice Cap shouldn’t just be about reporting past financials – it should also be about predicting and preventing future liabilities. Thinking about potential liability may not happen until reporting your estimated financial situation to Medicare.


Are there penalties for exceeding the Hospice Aggregate CAP?

Yes, there are penalties for exceeding the hospice aggregate cap. Any Medicare payments in excess of the aggregate cap are considered overpayments and must be returned to Medicare by the agency. Payment is due at the time of self-determination or over time with an Extended Repayment Schedule (ERS). Ultimately, you’ll want to avoid going over cap. If a hospice does not return overpayments to Medicare, it is considered a debt owed to the federal government. It comes with a series of unpleasant consequences that can significantly impact your agency. Neglecting to settle this debt comes with its own set of issues, like:

  • Repayment: This is the top priority. You'll be required to repay the entire amount of your cap liability to Medicare.
  • Penalties: If you fail to repay the cap liability promptly, you'll face additional financial penalties. These accrue over time, deepening the financial hole. The MAC can also withhold from agency remittances to collect payment.
  • Interest charges: As with any unpaid debt, interest starts adding to your cap liability from the date it's due.
  • Referral to the Treasury Department: In severe cases of non-compliance and persistent cap overpayments, Medicare may escalate the issue and refer it to the Treasury Department for further collection action. This can involve legal proceedings and significantly harsher consequences for your hospice.


How is it calculated?

Your cap is calculated based on the number of Medicare beneficiaries you serve, and the statutory cap amount set by Medicare each year.

There are two ways to count beneficiaries:

  • Proportional Method: This considers the fraction of a beneficiary’s total hospice care days spent with your agency across all providers and all cap years. Think of this as a time-weighted approach. All Medicare beneficiaries who received hospice care from any agency throughout all years are considered. Your agency’s beneficiary count includes the fraction of days the beneficiary was with your hospice over all days and all years and is updated daily to reflect additional days as the beneficiary remains in hospice care.
  • Streamlined Method: Only beneficiaries who haven't been included in any previous hospice cap calculations qualify. This means they haven't received hospice care from another provider during the current or past cap years. This option takes a simpler approach, focusing only on brand-new Medicare beneficiaries who chose your agency as their primary hospice provider during the current cap year. They are counted once, regardless of how long their care lasts.

Once you have your beneficiary count, you multiply it by the statutory cap amount set for that year. This number tells you the maximum amount of Medicare reimbursement your agency can receive throughout the cap year.


How to calculate your potential liability?

Compare your actual Gross Medicare payments from your Provider Summary & Reimbursement Report to the allowable payments (your Cap multiplied by the number of beneficiaries). If your payments are higher, you have a cap liability" - the amount you need to repay to Medicare. Simply put, think of your Cap as a financial fence, marking the boundary of allowable Medicare payments for your agency. Crossing that fence means exceeding the Cap and incurring potential liability.

To check how close you are, simply compare your actual Medicare payments to your allowable payments, calculated by multiplying the Cap amount by your beneficiary count. If your actual payments climb higher, you've entered cap liability territory," meaning you need to repay the difference to Medicare.


How can a hospice agency avoid exceeding the aggregate cap?

Hospices can take several steps to avoid exceeding the aggregate cap:

  • Careful Management of Resources: Hospices should be proactive in monitoring their operations and resources to have a better understanding of their position relative to reaching the cap. There should be a regular assessment and evaluation of the beneficiary count and patient care days.
  • Increasing Mix of Shorter Length of Stay Patients: Increasing the mix of shorter lengths of stay patients is a viable solution to address cap challenges. For example, if a patient is admitted and stays on service for 30 days before passing away, the hospice will receive the full cap credit.
  • Monitoring Cap and Potential Cap Liability: Hospices should monitor the cap and any potential cap liability throughout the year. The frequency of this activity should be dependent on the risk of exceeding the cap. Certain hospices should monitor potential liability monthly if CAP overpayment is imminent.
  • Repayment Arrangements: If it appears that the hospice will, or it is probable that the cap will be exceeded, hospices should begin to make repayment arrangements. Payment is due when the self-determination cap report is submitted.

Exceeding the Cap is not just a financial issue; it can also damage your reputation and lead to operational difficulties. Avoiding this scenario is crucial for the long-term sustainability and success of your hospice.


What is reopening?

Reopening is simply a process where Medicare revisits and adjusts previously calculated cap determinations for the three prior years after you file your current report. Reopenings happen every year for the three previous years before the filing year. This can lead to adjustments in your cap liability, sometimes increasing it. Think of it like a financial audit for your Cap. Just as you review past years' budgets, Medicare takes a second look at your beneficiary counts and payments for those three years.


What does reopening mean for your hospice?

If you had cap liability in previous years, reopening might result in a larger liability. This can be a significant financial burden, so it's crucial to be prepared. Here are some things you can do:

  • Stay informed: Keep track of your beneficiary counts and PS&R payments frequently throughout the year for the current cap year and three (3) previous years.
  • Proactively review your reports: Identify and address any potential errors or discrepancies with claims and payments to report to your MAC so adjustments can be made before your next reopening.
  • Seek professional guidance: partnering with an agency that understands hospice cap can help you navigate the complexities of reopening and minimize your financial risk.

Remember, reopening is a part of the Hospice Cap process. While it can be challenging, understanding it and taking proactive steps can help you navigate it with confidence and focus on what matters most – providing exceptional care to your patients.

This blog may have answered some of your Hospice Cap questions, but wouldn't it be great to have all your answers in one handy place? Download our COMPLIMENTARY FAQ handout – your personal cheat sheet to navigate Hospice Cap with confidence. Take control of your Cap compliance and focus on what truly matters – delivering the highest quality care to your patients. Grab your free copy HERE.


SimiTree: Your Hospice Cap Experts

At SimiTree, we understand the complexities of the Hospice Cap, and offer a range of services to help you meet your application deadline and mitigate surprises by helping with:

  • Self-Determination report preparation
  • Detailed Cap liability analysis
  • Mid-year Cap liability forecasts
  • Operational and root cause analysis of Cap issues
  • Development of Cap minimization plans

Don't let the Hospice Cap keep you up at night! Partner with SimiTree and achieve financial stability. Focus on what matters most – delivering exceptional care to your patients. We'll handle the complexities of the Cap, leaving you free to provide the comfort and compassion that truly defines exceptional hospice care.

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Let's work together to improve the health of your organization. At SimiTree, we balance financial expertise and clinical excellence to help our clients grow. How can we help you? Call us at 866.839.5471 or complete the form below.