Fact sheet

FY 2016 Hospice Payment Rate Update

FY 2016 Hospice Payment Rate Update

CMS finalizes updates to the wage index and payment rates for the Medicare Hospice Benefit for FY 2016 (CMS-1629-F)

On July 31, 2015, the Centers for Medicare & Medicaid Services (CMS) issued a final rule (CMS-1629-F) that updates fiscal year (FY) 2016 Medicare payment rates and the wage index for hospices serving Medicare beneficiaries. The FY 2016 provisions and other issues discussed in the final rule are summarized below.

Changes to Payments under the Medicare Hospice Benefit

Hospices will see an estimated 1.1 percent ($160 million) increase in their payments for FY 2016. The $160 million increase in estimated payments for FY 2016 reflects the distributional effects of the 1.6 percent FY 2016 hospice payment update percentage ($250 million increase), the use of updated wage index data and the phase-out of the wage index budget neutrality adjustment factor (-0.7 percent/$120 million decrease) and the implementation of the new Office of Management and Budget (OMB) Core Based Statistical Areas (CBSA) delineations for the FY 2016 hospice wage index with a one-year transition (0.2 percent/$30 million increase). The elimination of the wage index budget neutrality adjustment factor (BNAF) was part of a 7-year phase-out that was finalized in the “Medicare Program; Hospice Wage Index for Fiscal Year 2010” final rule (74 FR 39384, Aug. 6, 2009), and is not a policy change.

Final Rule Details

Budget Neutrality Adjustment Factor phase-out

The BNAF was implemented in 1997, when CMS moved from an outdated wage index to a more current and accurate method for determining hospice payments. The FY 2010 Hospice Wage Index final rule finalized a schedule to phase-out the BNAF over seven years, reducing it by 10 percent in FY 2010 and by 15 percent each year from FY 2011 through FY 2016.

Alignment of Cap Year

This final rule will align the cap accounting year for both the inpatient cap and the hospice aggregate cap with the fiscal year for FY 2017 and later. This allows for the timely implementation of the Improving Medicare Post-Acute Care Transformation Act of 2014 (IMPACT Act) changes while better aligning the cap accounting year with the timeframes described in IMPACT Act. The IMPACT Act mandates that the hospice aggregate cap be updated by the hospice payment update percentage, rather than using the CPI-U, for a specified time. In addition, we will align the timeframe for counting the number of beneficiaries with the fiscal year for FY 2017 and later.

CBSA-OMB Delineations

This rule adopts changes to the delineations of Metropolitan Statistical Areas, Micropolitan Statistical Areas, and Combined Statistical Areas, and guidance on the uses of these delineations reflected in the OMB Bulletin No. 13-01. These changes will be implemented using a blended wage index with a one-year transition, which aligns with the policy finalized for the Skilled Nursing Facility PPS and Home Health PPS in FY 2015 and calendar year (CY) 2015, respectively. For each county, a blended wage index will be calculated as fifty percent of the FY 2015 wage index using the current OMB delineations and fifty percent of the FY 2015 wage index using the revised OMB delineations.

Proposed Routine Home Care Rates

This rule implements two different payment rates for routine home care (RHC) that result in a higher base payment rate for the first 60 days of hospice care and a reduced base payment rate for 61 or more days of hospice care. These differing payment rates further the goal of more accurately aligning the per diem payments with visit intensity and the cost of providing care. The two RHC rates will become effective on January 1, 2016. Between October 1, 2015 and December 31, 2015, hospices will continue to be paid a single RHC rate updated for FY 2016.

Service Intensity Add-On

This final rule will implement a Service Intensity Add-On (SIA) Payment effective January 1, 2016 and beyond in conjunction with the finalized RHC rates. The final SIA payment is a payment that will be made for care provided to Medicare beneficiaries by a hospice in the last seven days of life if certain criteria are met. This payment is in addition to the per diem rate for the RHC level of care and will encourage visits to patients at the end of life when more resource-intensive days typically occur.

Clarification Regarding Diagnoses on Claim Form

We are clarifying that hospices are required to report all diagnoses identified in the initial and comprehensive assessments on hospice claims, whether related or unrelated to the terminal prognosis of the individual. ICD-9-CM coding guidelines (and effective on October 1, 2015, ICD-10-CM) state to report all diagnoses that affect patient care. This also includes the reporting of any mental health disorders and conditions that would affect the plan of care, as hospices are to assess and provide care for identified psychosocial and emotional needs, as well as for physical and spiritual needs.

The final rule went on display on July 31, 2015 at the Federal Register’s Public Inspection Desk and will be available under “Special Filings,” at

For further information, see