Type: Law Bulletins
Date: 08/01/2016

OIG Issues Favorable Advisory Opinion on Hospice Payments to Nursing Facilities

On July 20, the U.S. Department of Health and Human Services Office of the Inspector General (“OIG”) issued Advisory Opinion No. 16-08 ( “Opinion”), a favorable opinion allowing hospices to make supplemental payments directly to nursing facilities for dually eligible hospice patients under limited circumstances.

While this Opinion may only be relied upon by the requestor regarding the specific arrangement at hand, it is likely to be welcomed by the hospice and nursing facility community alike as it offers beneficial guidance for structuring payment arrangements between a hospice and nursing facility when a dually eligible hospice patient resides in a nursing facility.


When a patient who is dually eligible for Medicare and Medicaid elects hospice and resides in a nursing facility, Medicare is responsible for the patient’s hospice care and Medicaid is responsible for the nursing facility room and board expenses. Medicare makes a per diem payment to the hospice for each day of care, while Medicaid must provide a payment for room and board in an amount at least 95% of the state’s Medicaid daily nursing facility rate, which is the rate the nursing facility would have received if the patient had not elected hospice. Historically, Medicaid pays the hospice for a dually eligible patient's room and board, and in turn, the hospice passes this payment through to the nursing facility at a negotiated rate.

Proposed Arrangement

This Opinion involved a state’s managed care demonstration program (“Program”), whereby some of the Program’s participating managed care organizations (“MCOs”) paid the room and board fee for dually eligible hospice patients directly to the nursing facility, thereby removing the hospice as a pass through payor. Under the proposed arrangement, the hospice would pay a separate supplemental payment to the nursing facility. This stand-alone payment would result in the nursing facility receiving the same amount that it would have received from Medicaid if the patient did not elect hospice when combined with the payment made by the MCO to the nursing facility. (For example, if the MCO paid the nursing facility 95% of the Medicaid daily rate for room and board, the hospice would make a supplemental payment of 5%). Here, the hospice would require the nursing facility to show evidence of the amounts the MCOs pay the nursing facility for patients who have and have not elected hospice.

OIG Opinion

It its analysis, the OIG reiterated its 1998 Special Fraud Alert, where the OIG stated that generally a hospice may pay a nursing facility for the room and board of a dually eligible hospice patient in an amount not to exceed what the nursing facility would have received from Medicaid if the patient had not elected hospice. Here, the OIG found that this arrangement posed a low risk for abuse for two reasons:

  1. The supplemental payment made by the hospice would never result in the nursing facility receiving more for dually eligible hospice patients than it receives from the MCO for patients not electing hospice.
  2. The total reimbursement to the nursing facility would never exceed the Medicaid daily room and board rate.

The OIG stated that such safeguards would help ensure that the nursing facility has no incentive to discourage patients from electing hospice or to provide lower levels of service to dually eligible hospice patients. However, the OIG did warn that it may have reached a different conclusion if another individual or entity other than a hospice providing care to a dually eligible hospice patient in the Program was to offer stand-alone payments to the nursing facility in which the patient resides. Lastly, it should be noted that this Opinion is limited, as it applied only payments made involving the managed care demonstration program contemplated in the Opinion.

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