Hospice care shifts the focus from curative treatment to comfort-focused, palliative care for individuals facing the end of life. The financial structure supporting this specialized care is distinct from most other health services, moving away from a transactional, fee-for-service model. The vast majority of hospice funding in the United States is channeled through the Medicare Hospice Benefit (MHB), a comprehensive benefit under Medicare Part A. Understanding how much a hospice provider receives per patient requires examining this government-regulated payment system.
The Medicare Hospice Benefit Framework
Access to the Medicare Hospice Benefit is governed by eligibility and certification requirements established by the Centers for Medicare & Medicaid Services (CMS). A patient must be entitled to Medicare Part A and have two physicians—the hospice medical director and the patient’s attending physician, if chosen—certify that the patient is terminally ill. This certification requires a medical prognosis of six months or less to live, assuming the illness runs its expected course.
The patient must formally sign an election statement, choosing the hospice benefit in place of standard Medicare coverage for the terminal illness and all related conditions. This election constitutes a mandatory waiver of curative treatments for the terminal diagnosis, though the patient may still receive care for unrelated health issues under standard Medicare. The initial benefit period consists of two 90-day segments, followed by unlimited 60-day periods, provided the patient is continually recertified as terminally ill.
The Core Payment Mechanism: Per Diem Rates
Once a patient is enrolled, Medicare reimburses the hospice provider through a Prospective Payment System (PPS). Instead of submitting claims for every individual service, medication, or supply, the hospice receives a fixed payment for each day the patient is under their care, known as a per diem rate. This daily rate is paid regardless of whether the patient receives a single visit or multiple visits, bundling all expected costs into a single sum.
This PPS structure incentivizes providers to manage resources efficiently over the patient’s entire length of stay. The standard rate for Routine Home Care (RHC) is tiered into two distinct rates: a higher payment for the first 60 days of care and a lower rate for days 61 and beyond. This adjustment acknowledges that resource intensity is typically greater when a patient first enters hospice care. An exception to the fixed daily rate is the Service Intensity Add-On (SIA) payment, an hourly rate for in-person visits by a registered nurse or social worker during the last seven days of life, paid in addition to the RHC per diem.
The Four Levels of Care and Their Reimbursement
The amount a hospice is paid per patient day depends directly on which of the four recognized levels of care is provided. The most common level is Routine Home Care (RHC), which covers services delivered in the patient’s residence and accounts for approximately 95% of all hospice days. For Fiscal Year (FY) 2024, the national standardized RHC rate was approximately $218.33 per day for the first 60 days of an election and about $172.35 per day thereafter, before local wage index adjustments.
The three other levels of care address periods of increased need or caregiver relief and carry significantly higher payment rates. Continuous Home Care (CHC) is provided during periods of crisis for a minimum of eight hours within a 24-hour period to achieve short-term symptom management. CHC is paid on an hourly basis, with the FY 2024 hourly rate being approximately $65.23.
Inpatient Respite Care (IRC) is a planned, short-term stay in an approved facility, such as a hospital or skilled nursing facility, intended to provide temporary relief for the primary caregiver. The IRC rate is a fixed per diem rate, set higher than RHC, with the FY 2024 rate around $285 per day. General Inpatient Care (GIP) is the highest-paid level, reserved for acute, short-term stays in a hospital or hospice inpatient unit where symptoms cannot be managed elsewhere. The GIP per diem rate for FY 2024 was substantially higher, reflecting the intensive staffing and resources required for crisis management. All these rates are adjusted based on the hospice’s geographic location via a wage index to account for local labor costs.
Beyond Medicare: Funding Sources and Coverage Scope
While Medicare is the primary payer, hospice services may also be funded through Medicaid and private insurance plans. Medicaid, the joint federal and state program, covers hospice in most states, though its reimbursement rates are often lower than Medicare’s. Private insurance and managed care organizations also offer hospice coverage, but the specific per diem rates and coverage scope are determined by individual contracts and vary widely among payers.
Regardless of the source, the per diem payment is intended to be an all-inclusive bundle for all services related to the terminal illness. This comprehensive coverage includes:
- Skilled nursing care
- Physician services
- Social work, spiritual, and dietary counseling
- Necessary medical equipment and supplies
- All drugs required for pain and symptom management related to the terminal condition
This all-encompassing payment model ensures that the patient and family receive coordinated, holistic care without the financial burden of multiple bills.