Introduction to Hospice Care Reimbursement
As readers of our ongoing article series know, we at Walters regularly work with hospice care providers to help them understand the intricacies of complex Medicare program reimbursement systems. For one, it’s important for them to know how best to follow the various rules and regulations – it is the law – and two, it’s important for maintaining the financial viability of their businesses. One essential compliance requirement in this is to understand and correctly complete the Self-Determined Hospice Cap (SDHC) report.
The SDHC report is used so that hospices stay within Medicare’s annual payment limits, known as the “aggregate hospice cap”. Failing to comply with these requirements can result in payment suspension, overpayment demands, and other serious financial consequences. Understanding the hospice cap, how to calculate it, and how to submit required reports are key for ongoing Medicare participation and cash flow stability.
Understanding the Self-Determined Hospice Cap Report
The SDHC report plays a major role in the Medicare reimbursement process. Every hospice must calculate whether its total Medicare payments for a fiscal year (October 1 to September 30) exceeded the allowable cap amount per patient, which is calculated based on the number of beneficiaries and the relevant cap amount. If so, the hospice is responsible for repaying the overage.
To prepare the report, hospices must access the Provider Statistical & Reimbursement (PS&R) System, which gives detailed data about Medicare beneficiaries served and reimbursements received. This data forms the foundation for the cap calculation.
The report requires hospices to:
- Summarize reimbursement data
- Perform cap calculations, and
- Certify the accuracy of the information with an authorized signature
Hospices must file their SDHC reports no earlier than 3 months after the end of the hospice cap year to follow regulatory timelines and submit the report by February 28/29 following the close of the cap year. Late submissions risk a “Past Due letter” from the Contractor, potential reimbursement holds, and additional administrative scrutiny. (Note: Either an Excel or PDF version of the SDHC report provided by the Medicare Administrative Contractor, or MAC, can be submitted.)
Special Considerations for New Hospices
An important element to point out is that new hospices must be especially careful in this process. Their first cap period may be prorated based on their Medicare certification date, meaning they need to adjust the aggregate cap amount proportionally. MACs typically provide guidance on prorating calculations, but hospices should pay attention to this, and work closely with either their internal financial teams or outside counsel to ensure accuracy of their prorating calculations. Failure to do so in that first year of business can lead to unexpected repayment demands and compliance flags.
Accessing Data through PS&R and EIDM Registration
To retrieve all necessary data for the SDHC report, hospices must access the Provider Statistical & Reimbursement (PS&R) System through Medicare’s Enterprise Identity Management (EIDM) system.
Steps for this include:
- Registering for EIDM access if not already completed
- Requesting and receiving a PS&R user ID
- Generating the correct PS&R reports (e.g., Beneficiary Count Summary)
- Verifying the accuracy of PS&R data before using it in cap calculations
Additionally, hospices must be prepared to upload their final report using the MAC’s eServices portal, which helps to facilitate faster electronic submissions and confirmation of receipt of the report.
Managing Cap Overpayments and Repayment Methods
If the completed SDHC report shows that a hospice exceeded the aggregate cap (meaning excess payments were received), repayment to Medicare is mandatory. Any overpayments must be repaid promptly to avoid future payment disruptions since Medicare may collect the amounts due by withholding future payments.
Hospices may satisfy the overpayment by:
- Submitting a check made payable to the appropriate MAC, or
- Using the eCheck payment option through the eServices portal for electronic processing
Important Tip: Hospices should retain proof of payment and make sure that payment references the cap year and provider number for accurate application.
Extended Repayment Schedule (ERS) Requests
As with all businesses, there may be cash flow crunches which can interfere with payment outlays. In cases where immediate repayment is financially burdensome on the hospice, the business can request what is called an Extended Repayment Schedule.
Key facts related to ERS include:
- ERS allows repayment over a series of monthly installments
- The hospice must submit supporting financial documentation, such as balance sheets, income statements, and cash flow statements to support the request
- MACs will provide specific ERS application forms and all instructions (available on their websites)
That said, an ERS is not something automatically granted. Rather, hospices must demonstrate legitimate financial hardship, plus the ability to meet the extended repayment terms agreed upon.
Submission and Repayment Process for the SDHC Report
The processes for submission and repayment also have rules to follow. Hospices must carefully adhere to these submission procedures so that their reports are offered on a timely basis to avoid delays and any compliance issues. Failure to submit the SDHC report on time can result in payments being suspended or withheld until compliance is met.
Preferred Submission Method
While hospices may submit the SDHC report via U.S. mail or overnight courier, email is the preferred method since it’s the quickest acknowledgment of receipt. Hospices should also choose just one method of submission to prevent duplicate processing and confusion.
The report must be sent to the specific MAC email (or mailing address if done by snail mail) designated for SDHC report submissions. Providers should retain a timestamped copy of their email or shipment tracking information as evidence of a timely filing.
Overpayment Adjustments and Revisions
After receiving the SDHC report, the MAC will review the data. If an overpayment is identified, the hospice will receive:
- A formal Overpayment Notice detailing the repayment amount, and
- Instructions on how to submit repayment or request an ERS
Also to note are the occasions when prior-year cap calculations are revised when material errors or changes are discovered. Hospices must maintain thorough records for each cap year to respond promptly to any adjustment inquiries.
Compliance and Best Practices for the Determined Hospice Cap
So why is following these specific procedures important? Failure to comply with SDHC report requirements often leads to serious financial repercussions, including payment suspensions and increased scrutiny by regulators. Hospices must make SDHC compliance a priority so they can protect their revenue streams and demonstrate strong operational governance practices. Hospices should also reference authoritative sources, such as the Medicare Benefit Policy Manual, to make sure they are submitting reports correctly.
Some best practices to include are:
- Start early. Begin gathering PS&R data and reviewing MAC guidelines well before the February 28/29 deadline. (Remember, the SDHC report must be filed no earlier than January 31 and no later than February 28/29 each year.)
- Double-check all calculations. Small errors in cap computation can trigger financial consequences, and as noted, increased scrutiny going forward.
- Use checklists. Maintain an internal checklist of SDHC report requirements, including certification signatures and backup documentation. (Training staff to do this is helpful!)
- Submit electronically whenever possible. Email and eServices portal submissions reduce lag time and provide proof of timely filing.
- Monitor regulatory updates. Medicare rules around hospice reimbursement can change (something we at Walters Accounting often point out); so, stay informed to avoid last-minute surprises.
With attention to detail and timely action, the SDHC process becomes a manageable, predictable part of hospice financial management.
Strategic Planning for Future Compliance
Hospices should engage in ongoing strategic planning to ensure continuous compliance with SDHC reports. So, developing a detailed plan for timely submission is smart. Remember to have a thorough review of relevant Medicare guidelines and instructions for completing the report; understand the cap period and aggregate cap amount; and review the Provider Statistical & Reimbursement reports for accuracy and completion.
Last but not least, hospice care businesses should consider long-term financial management strategies to effectively manage their hospice cap and avoid overpayments. Create a comprehensive plan for managing the aggregate cap amount and implement ways to reduce total days of care while optimizing reimbursement rates.
By integrating these strategic and financial practices, hospices can indeed navigate the complexities of the SDHC report process with confidence and maintain their financial health as well. And remember, there is outside support available if a hospice finds these processes too confusing or too onerous to handle alone.
