Cash squeeze triggers hospice mergers

Hospices facing pay cuts under new Medicare reimbursement rules are merging to reduce costs and cope with new regulatory burdens.

In April, Lafayette-based TRU Community Care and Greeley-based Hospice of Northern Colorado announced that they would merge their operations in order to better weather the storm of changes.

Determining just how much will be lost is a “moving target” said Darla Schueth, president and chief executive of TRU Community Care, but her organization is expecting a decrease in reimbursements for the daily rate of care of about 5 percent in 2015, equivalent to about $350,000 for the year.

TRU already raises $1 million every year from philanthropic donors to cover its costs, Schueth said, and will have to raise more in the coming years as Medicare reduces the amount it pays per patient. Many nonprofits are vying for dollars in the area, Schueth said, making the odds that the hospice will be able to increase its philanthropic income past $1 million slim.

Medicare pays the hospice the same amount regardless of the severity of a patient’s condition, Schueth said, with the assumption that less money will be spent on healthier people, freeing up more dollars to help sicker people.

But with an overall reduction in reimbursement, there is less money to spread around, she said, making it difficult to maintain acceptable care standards.

At the same time, Schueth said, new regulations are adding costs for hospice care providers. On May 1, a new regulation placing more burden for payment for prescription drugs under Medicare part D was passed that will add a $250,000 annual expense to TRU’s budget.

The hospice cares for about 250 people per day, with nurses visiting homes to teach primary caregivers how to care for patients, who are usually near the end of their lives. Nurses at TRU carry caseloads of about 12 to 15 longer-term patients, with additional cases that come and go quickly from TRU’s system.

The hospice employs about 150 people full-time, Schueth said.

Hospices rely heavily on Medicare reimbursements since most of their patients are Medicare-eligible, Schueth said.

In 2012, 83 percent of payments made to hospices nationwide came from Medicare, according to the National Hospice and Palliative Care Organization.

Merging is one of the few options for hospices that want to continue providing the levels of care they have maintained in the past, said Don Schumacher, president and CEO of National Hospice and Palliative Care Organization.

New oversight and reductions in reimbursement have made it “very complicated” for hospices to meet regulatory standards while continuing to care for patients, he said, so combining back-office functions between programs is a “smart move.”

The number of hospice mergers has increased steadily over the last few years, said Schumacher, as the choice for many is to either merge or shut down.

In order to maintain the same standard of care on less income, TRU and Hospice of Northern Colorado will merge officially beginning in mid-summer. Full integration will take place during the next year.

Each entity will continue to operate under its existing name, but will combine operational experience and administrative functions to reduce cost, although no layoffs are expected, according to an April interview with Cindi Werner, director of operations at Hospice of Northern Colorado. Werner will become executive director of Hospice of Northern Colorado, which employs 55 people, on July 1.

The two hospices have been connected from their beginnings in the late 1970s, with TRU, then called Boulder County Hospice, helping Hospice of Northern Colorado’s founder, Hope Cassidy, get the organization off the ground.

“This consolidation represents, in many ways, coming full circle in our relationship to each other,” said Mark Heyart, chair of the Hospice of Northern Colorado board of directors, in a statement.

Molly Armbrister can be reached at 970-232-3129 or marmbrister@bizwestmedia.com. Follow her on Twitter at @marmbristerBW. 

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Molly Armbrister covers real estate, banking and health care for the Northern Colorado Business Report. She can be reached at 970-232-3139, marmbrister@ncbr.com or twitter.com/MArmbristerNCBR
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