By Steve Altenburger, Maureen Miller, Wendy Weingart

Through recent issuances, CMS has exhibited serious concern about the appropriate billing of drugs given to beneficiaries in hospice care. This is one part of the “beam of scrutiny” now focused on the Medicare hospice program because of coverage discrepancies.

Drugs and biologics covered under the Medicare Part A hospice per diem payment are excluded from coverage under Part D. This per diem payment amount includes the cost of drugs used to treat the terminal illness and related conditions of beneficiaries enrolled in hospice. If these drugs are billed to Part D, Medicare would be paying twice for the same drug — first under the hospice per diem, second under Part D. There are associated legal and contractual risks with this potential for double-coverage for PDPs, MAPDs, and PBMs (as well as hospices). In addition, incorrect coverage under Part D could lead to added true out-of-pocket (TROOP) expenses for beneficiaries and additional incurred drug costs by a Part D drug plan during the initial through catastrophic coverage phases of the Part D drug benefit.

Concerns with the duplication of payments prompted a 2012 analysis by Abt Associates on behalf of CMS. Results provided evidence suggesting that drugs qualified for coverage under hospice were being billed to Part D. In fact, $12.9 million in analgesic claims alone were billed to part D when they most likely should have been covered under the hospice benefit. In an effort to address this growing issue, CMS issued initial guidance in December 2013 and final guidance in a memo to Part D sponsors and hospice providers on March 10, 2014. CMS outlined its expectation for plans to determine payment responsibility and avoid double payments for drugs under Part A and D for the 2014 plan year, with the policy clarification effective May 1, 2014.

Who is responsible and when? CMS defines when drugs are to be covered by each of the following:

  • Hospices – When used for the palliation and management of the beneficiary’s terminal illness and related conditions.
  • Part D – When used for the treatment of a condition that is completely unrelated to the terminal illness or related conditions.
  • Beneficiary responsibility – a. When hospice determines a drug is not reasonable and necessary for the palliation of pain and/or other symptom management, the  beneficiary still choses to have the medication. b. When the beneficiary opts to use a non-formulary drug to manage the terminal illness without trying a formulary alternative first.


Determination of payment responsibility resides with the plan. After notification of hospice election, plans are expected to implement point of sale (POS), patient level prior authorizations to assess payment responsibility on every drug for hospice beneficiaries. Plans will need to communicate with hospice organizations and prescribers to obtain information to make appropriate determinations for payment.

Plans must have procedures to a handle the following types of determinations:

  •  Prospective – Prior to a claim submission, hospice organizations may initiate communication with a Part D plan to provide documentation that satisfies the patient level prior authorization requirements.
  • Concurrent – After submission of a claim, the prior authorization is subject to Medicare Part D coverage determination and appeal requirements and should be processed accordingly by Part D plans.
  •  Retrospective – In the event a plan has already paid claims before receiving the notification of hospice election, it must conduct retrospective reviews of all claims and coordinate efforts to reconcile payments with hospice providers and/or beneficiaries.


We, at Visante, perceive the following impacts in 2014 for plans as a result of this guidance change:

  1. Increased reconciliation efforts: Due to a multi-step data flow of hospice indicators, plans will receive delayed notification of hospice elections as well as revocations/terminations. This will likely result in an increased need to conduct retrospective reviews and subsequent reconciliation of claims.
  2. No mechanism to govern disputes: Part D plans and hospice organizations must work together to resolve payment disputes. Without an independent mediation process in 2014, responsibility for payment of claims could result in unresolved or improper payments.
  3. Increases in task volumes, resource requirements, and costs: Due to the new process, plans will likely see an increased volume of activity and increased resource consumption in numerous operational areas in order to be in compliance, resulting in increased costs.
  4. Systems must accommodate guidance changes: Plans will need to conduct system modifications to accommodate everything from the appropriate storage of hospice indicators to the coding of beneficiary level prior authorizations.
  5. New audit risks: Due to the “beam of scrutiny” it is likely that CMS financial and performance audits will target hospice drug coverage as early as 2015.


As of May 1, 2014 plans were expected to be in compliance with the final guidance released in March. While this guidance covers the 2014 plan year, CMS recently released proposed rules for public comment in the May 8, 2014 edition of the Federal Register. This targeted area of Med D operations should be on every sponsor’s radar now and for the foreseeable future!

Note: To assist plans with compliance, you may contact any of the authors of this article for a hospice risk assessment or to conduct a related operations and claims analysis.

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