MedPAC Urges Congressional Halt on Hospice Payment Rate Increases Amid Squeezed Margins

The Medicare Payment Advisory Commission (MedPAC) has released draft recommendations urging Congress to halt increases in hospice payment rates beginning in fiscal year 2027. This recommendation comes amid ongoing margin compression in the hospice sector, particularly affecting nonprofit providers. According to MedPAC data, the average Medicare fee-for-service margin for hospices declined from 14.2% in 2020 to 8% in 2023, with nonprofits experiencing an average loss of 1.3% while for-profits maintained a margin of 13.7%. These figures exclude cap overpayments and non-reimbursable costs. Despite decreasing margins, hospice utilization has reached record levels, with 53% of Medicare decedents receiving hospice care in 2024. This resulted in over 1.8 million beneficiaries using hospice services for a total of 148 million days, reflecting increased demand across all demographic and clinical subgroups including age, gender, race, Medicare Advantage enrollment, and end-stage renal disease status. The average number of visits per patient slightly increased to 3.9 per week in 2024, though this remains below pre-pandemic rates. Total Medicare hospice expenditures rose significantly to $28.3 billion in 2024, up from $25.7 billion the previous year. Despite these rising costs and margin pressures, MedPAC maintains that hospices generally have stable financial conditions, citing sufficient access to capital and steady quality metrics reported publicly. The commission also notes adequate beneficiary access to care and unchanged quality outcomes. However, MedPAC highlights a data gap concerning the financial performance of nonprofit versus for-profit freestanding hospice providers, emphasizing limited available information for nonprofits. This lack of detailed insight complicates full assessment of sector-wide impacts. MedPAC's stance is that current hospice financial status does not warrant payment rate increases, reinforcing its recommendation to Congress to eliminate future hospice payment updates. The findings and recommendations have significant implications for hospice operators, policymakers, and other stakeholders focused on Medicare reimbursement strategies. Balancing the growing demand for hospice care with sustainable reimbursement and financial viability remains a critical challenge in the evolving U.S. healthcare landscape.