The Medicare Hospice Payment System: A Consideration of Potential Refinements

The purpose of this article is to examine variation in resource utilization across and within patient stays in the context of Medicare's per diem payment system for hospice. Visit-level resource utilization data were linked to patient-level diagnosis and demographics covering more than 68,000 Medicare patients admitted in 2002 and 2003. Our findings suggest that case mix adjustment based on diagnosis and demographics does not improve our ability to explain variation in resource utilization across stays. However, we do find that there is substantial variation in resource utilization within stays that may not be captured in the current per diem payment system.