Key Trends That Will Shape the Hospice Industry in 2023

Most hospices are sliding into 2023 between a rock and a hard place, beset by headwinds, labor shortages and questions with no easy answers.

Through the cracks, providers can see glimmers of improvement. A number of hospice leaders anticipate that the industry will settle into a “new normal,” having absorbed the shock of the pandemic with a better understanding of how to navigate the transformed landscape.

But this optimism is tempered by uncertainty. If COVID taught health care providers anything, it was first and foremost to expect the unexpected.

From our current vantage point, three principal forces will drive change in hospice during 2023: a changing regulatory landscape, unprecedented labor pressures and a gradual movement towards greater system-wide integration.

Be ready for regulation

Government oversight of hospice providers will tighten during 2023. With fair and effective implementation, this can be a good thing — despite the potential for additional burdens on providers.

Hospices have faced ever-intensifying scrutiny from regulators in recent years. Many operators have voiced frustration with the cavalcade of costly audits and the lengthy process to appeal negative findings. In some instances, the argument could be made that some of these probes illustrate a disconnect between payment models and patients’ health care needs.

While issues like recertifications, long lengths of stay and the duration of general inpatient care may be indicators of malfeasance, they could also genuinely reflect the medical reality of patients’ conditions.

Note the conditional language. Little words like “may” or “could” are signals that easy answers are rare when it comes to these concerns. Fraud does happen. People are admitted who should not be, and some hospice owners are more devoted to a quick buck than quality care for patients. 

Though in my view recent attempts to paint the hospice community with the same broad brush have been misguided, unearthing and eliminating these unethical and illegal practices must be addressed. This is by no means how all or even most providers operate, but regulators and other stakeholders have a responsibility to root out the subset that does engage in these violations.

California’s crackdown

This year, California emerged as the apparent epicenter of a disturbing trend. Hundreds of newly licensed providers have cropped up in the state, as well as in Arizona, Nevada and Texas. The California Department of Justice (CDOJ) reported that the proliferation of these companies did not correlate with community needs, and a Los Angeles Times investigation found that this fostered an environment rife with fraud, neglect and deceptive practices.

California has since cracked down on these providers, with several new laws, a licensing moratorium, and a spate of litigation, investigations and arrests.

A coalition of hospice industry organizations recently urged the U.S. Centers for Medicare & Medicaid Services (CMS) to examine the issue and to consider actions like targeted moratoria on licenses. Signatories on the joint letter included LeadingAge, the National Association for Home Care & Hospice (NAHC), the National Hospice and Palliative Care Organization (NHPCO), and the National Partnership for Healthcare and Hospice Innovation (NPHI).

Numerous hospice providers have expressed support for efforts to stem this problem, though many retain the trepidation that good, ethical providers might be caught in the crossfire.

Sound ideas falter with poor execution. It will be incumbent on CMS, the U.S. Department of Health and Human Services Office of the Inspector General (HHS-OIG), state agencies and other enforcers to design interventions carefully to ensure that only the guilty are punished.

These concerns will be a hot topic in the new year, but other regulatory actions are also underway for 2023.

Redesigned survey process

CMS will require hospice surveys to be conducted by multidisciplinary teams, as well as implement a redesigned surveyor training process and new protections against conflicts of interest. Surveyors from accreditation organizations with deeming authority will now have to undergo the same training as those employed by government agencies and use similar assessment forms during surveys.

The agency will also implement a hospice program complaint hotline through which the public can report issues to CMS.

In development for subsequent years is a Special Focus Program (SFP) with a range of enforcement powers up to and including civil monetary penalties and revocation of Medicare certification, among others. CMS initially proposed the SFP for 2023, but later decided to convene a Technical Expert Panel to inform the program’s design. That work is underway.

OIG has eyes on eligibility

Also beginning next year is a nationwide OIG audit of hospice eligibility that will focus on patients who did not have a hospitalization or emergency department visit prior to electing hospice.

Questions around eligibility have been at the core of many of the top regulatory concerns of the past several years, including False Claims Act violations, improper payments and factors that CMS considers to be red flags like live discharges and long lengths of stay.

The agency will be contacting individual hospices to request information on Medicare claims and associated documentation.

Now would be a good time for providers to assess their compliance programs and processes. Hopefully, they will have started this already. Hospices may benefit from practices like internal audits to ensure their documents are consistent with their degree of compliance.

Staffing crisis not going away

It almost goes without saying that the ongoing labor pressures will persist for the near term, and associated disruption extends beyond the scarcity of jobseekers in the field. Providers are also bearing the weight of rising wages, and in many cases the need to offer sign-on or retention bonuses to remain competitive with other health care employers.

Moreover, the atrophy in the workforce has constrained clinical capacity, meaning not only lower service revenue but more patients and families going without care.

Referral rejection rates are reaching record highs throughout the post-acute space — with workforce pressures as a leading culprit. During the past two years, these rates reached 88% among skilled nursing operators and 71% for home health providers, according to WellSky. Hospice rejection rates hit an all-time high of 41%.

The compensation conundrum

Some providers report that compensation increases and bonus programs have yielded positive results when it comes to recruitment and retention. But questions linger about their long-term sustainability — and what will happen in the labor market when hospices start phasing the bonuses out. For some, the costs have been “astronomical.”

Industry-wide, these bonuses in 2021 averaged from $2,038 for hospice aides to $9,056 for executive leaders, according to the 2022-2023 Hospice Salary & Benefits Report, published by Hospital & Healthcare Compensation Service (HCS) in cooperation with NAHC. The average bonus for registered nurses was $6,330. 

This year, the average hourly wage for hospice aides and CNAs rose 9.09% in 2022, compared to a 4.52% increase in 2021, and the rate for nurses rose nearly 6%, the salary report indicated.

While most discussions of the labor shortage center on clinical staff, hospices are seeing similar trends among administrative and back-office occupations, providers have told Hospice News. These workers are not always included in bonus programs, though they have a turnover rate that exceeds 23%. As of July, they also represent close to 11% of job vacancies, the HCS/NAHC report found.

Certainly, compensation is not the only strategy that hospices have implemented, but it likely represents one of the most significant draws amid rising inflation.

Hospices get creative to build their ranks

Operators have worked to implement other features and benefits that workers value. More flexible scheduling is often high on that list, but others include increased paid time off and greater engagement with staff to gauge their satisfaction and identify their pain points and needs.

Hospices that are starved for staff have also turned to technology. Variations of the predictive analytics systems that helped them identify eligible patients sooner are now helping providers find candidates earlier in their job searches. Similar applications have helped alert employers to workers who may be likely to leave the company, providing opportunities to intervene.

Virtual onboarding is helping a contingent of companies accelerate the process of getting new hires up to speed. And automation programs have in some cases built-in new efficiencies to reduce the administrative burden on employees and allow clinicians to spend more time focusing on their patients.

But again, these systems cost money that some providers may not be able to spare. A growing number of hospices have shut their doors or scaled back services due to their inability to retain a sufficient workforce.

Another key strategy is far less expensive, though its impact is more difficult to measure — leveraging the mission.

Hospice employers have made a point of keeping front and center the critical nature of their work and the difference they make for patients and families. The intent is to foster a sense of appreciation, dedication and fulfillment among their teams, whether they do their work at the bedside, the back office or the board room.

A drive towards system integration

Hospice providers can also anticipate movement towards health care system integration and care coordination. Recognition is growing among health care providers, payers and policymakers that the system’s history of building silos around individual care settings can drive up costs and adversely affect patient outcomes.

Ultimately, this is going to require system-wide change. But in the interim individual providers are seeking more opportunities for collaboration and working across settings.

Hospices diversify services

This trend is manifesting through several permutations. For one, many hospices continue to diversify their service lines to include upstream care like home health, PACE, home-based primary care, palliative care, and, in some cases, behavioral health care to name a few examples.

These programs allow hospices to create new revenue streams, more quickly identify patients who become hospice eligible and participate in emerging payment models. They also have the potential to improve patient transitions between settings and shrink gaps in the continuum where patients have fallen through the cracks.

Joint ventures spreading like wildfire

We are also seeing hospices and other home-based care providers forming joint ventures with health systems. Large companies have led the way on this, including LHC Group (NASDAQ: LHCG), Enhabit Inc. (NYSE: EHAB), Bayada Home Health Care and Amedisys Inc. (NASDAQ: AMED). For Amedisys, many of these JVs are centered around their high-acuity home care subsidiary Contessa. 

But the industry giants are not alone in taking this approach; some smaller companies and nonprofits have also pursued JVs, such as Florida’s Alivia Care, Kore Cares in South Dakota, Maryland-based Gilchrist Hospice Care, Texas Palliative Care and the seven nonprofits that comprise Advanced Illness Partners.

Establishing JVs allows each stakeholder to expand their care continuum and reach a larger patient population while leveraging their respective core expertise. In other words, a health system can partner with a home health or hospice company to expand its reach into the home setting with a shorter learning curve — or having to build the infrastructure from the ground up.

Health systems homeward bound

In a similar vein, we also see more health systems expanding the scale of services that extend beyond their walls with or without a JV partner, particularly when it comes to care in the home.

Of course, one impetus is a desire to capitalize on the rising demand for home-based services. Another driver is the potential for cost savings. All things considered, each of these trends toward integration has a straightforward business case underlying it.

But running parallel to the business considerations is the opportunity to offer a more coordinated care experience that re-imagines the traditional model of handing patients off from one provider to the next with limited communication between them.

Payment models can drive change

Development of new payment models is a slow process. Most emerge from the Center for Medicare & Medicaid Innovation (CMMI) as demonstration projects that typically last four years.

If a model becomes one of the chosen few that becomes a permanent fixture in Medicare, that too won’t happen overnight. Virtually every step of the process can take years.

But regardless of speed, new payment models can create opportunities for partnerships that can foster improved coordination across the continuum.

The prospect of ACO REACH

The Accountable Care Organization Realizing Equity, Access and Community Health (ACO REACH) payment model will launch on Jan. 1, 2023, and hospices that collaborate with participating ACOs could realize some unique benefits.

CMMI announced the program in February to replace the Global and Professional Direct Contracting (GPDC) models. The agency said that ACO REACH reflects its redesigned strategy for payment system demonstrations, with advancing health equity as a key tenet.

While few hospices are likely to participate in ACO REACH directly, they can enter preferred provider relationships with Accountable Care Organizations. This could give them access to some data that they typically don’t have, including details about the characteristics of a region’s patient population or their most prevalent health conditions.

These relationships can also promote more effective communication with patients’ primary care providers and offer a clearer picture of those individuals’ previous care experiences. Additionally, hospices could gain the ability to network and collaborate with other affiliated providers such as care management services.

This model is not the only payment demonstration with the potential to foster greater coordination. Medicare Advantage, Primary Care First and other models also present opportunities. But the unique features of ACO REACH make it a worthy exemplar of how payment structures can influence the ways providers can collaborate.

One closing consideration is that CMMI will continue to churn out model demonstrations — with great care coordination as a key objective.

CMMI last year announced a “strategy refresh” that would guide development of its future payment models. Orienting systems around integrated, person-centered care was among the pillars on which the strategy is built, along with diversity, equity and inclusion; alignment of patients with accountable care entities; health care affordability and development of partnerships to achieve these aims.

System-wide change will likely be slow, but health care has taken its first steps.

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