Capital City Visiting Nurses Association (VNA) and Hospice has requested that Jasper Gardens enter into a contractual relationship to provide inpatient hospice services to Jasper residents. The organization is able to complete under existing Medicare regulations involving its skilled nursing facility (SNF). Capital City VNA and Hospice would provide all staffing and direct patient services in this new unit located at Jasper Gardens. Jasper Gardens would provide a dedicated wing, area, or building with private rooms for the patients, meals, general nursing supervision, and general services (housekeeping, etc.). They would pay Jasper Gardens a price per patient day to be negotiated. Jasper Gardens estimates that its direct costs would be approximately $75 per day for the services they have requested. Its pharmacy service would provide needed drugs and other durable medical equipment at cost that would be directly reimbursed to the pharmacy by Capital City VNA and Hospice. The initial estimate is that Jasper Gardens could add a new dedicated wing of four to eight private rooms at approximately $180,000 per private room (minimum four).

Note the following additional information:

National studies indicated that approximately 55% of all individuals who die from cancer enroll in hospice services prior to their death. Non-cancer enrollees include individuals who died from heart disease (12%); dementia, including Alzheimer's disease (11%); lung disease (8%); stroke (4%); kidney disease (3%); liver disease (2%); HIV/AIDS (0.6%); and other causes (11%).

On average, enrollees in a Medicare-certified hospice are enrolled for approximately 68.5 days prior to death. Note that 31% of enrollees died or were discharged from hospice in seven days or less. Studies also indicate that most hospice care is "regular care" provided in a patient's home based on periodic visits as needed.

Nationally, Medicare-certified patient care days are classified as routine care (96%), continuous (24/7) home care (1%), inpatient respite care (1%), and hospital general inpatient care (0.25%). These same studies indicate that of all patients in a Medicare-certified hospice, approximately 85%, are covered by Medicare, 4% are covered by private insurance, and 6% are covered by Medicaid. Currently, the maximum rate paid by Medicare is $150 per day of routine care, $850 per day for continuous home care, $160 per day for inpatient respite care, and $650 per day for general inpatient care. Also, the total annual cost per case cannot exceed $23,000 per hospital enrollee.

1. Should Jasper Gardens agree to enter into this contractual relationship?
2. How large a unit should they offer?
3. What price per day should they negotiate with Capital City VNA and Hospice?
4. What is the general estimate of the positive and negative impacts of this unit on the nursing home?