of Caps and Limitations on Hospice Payments 
statute requires that hospice payments be limited by an inpatient cap
and by an aggregate cap. Medicare contractors make the cap
calculations annually, after the end of the aggregate cap year, which
runs from November 1
October 31
Contractors send each provider a cap determination letter, which
serves as a notice of program reimbursement under 42 CFR
§405.1803(a)(3), showing the results of those calculations. Any
amounts in excess of either cap are considered to be overpayments,
and must be repaid to Medicare. Contractors compute the inpatient cap
and the aggregate cap in order to determine whether a provider has
exceeded the allowable hospice cap amount. The contractor shall issue
a demand for the overpayment from hospices that exceeded the
allowable hospice cap amount.

on Payments for Inpatient Care
to a hospice for inpatient care are subject to a limitation on the
number of days of inpatient care furnished to Medicare patients.
During the 12-month period beginning November 1 of each year and
ending October 31, the aggregate number of inpatient days for general
inpatient care and inpatient respite care may not exceed 20 percent
of the aggregate number of days of hospice care provided to all
Medicare beneficiaries in that hospice during that same period. This
limitation is applied once each year, at the end of the hospices’
period‖ (November 1 – October 31). The inpatient cap is calculated
by the contractor as follows:
  1. 1.
    The maximum allowable number of inpatient days is calculated by
    multiplying the total number of days of Medicare hospice care by
  1. 2.
    If the total number of days of inpatient care furnished to Medicare
    hospice patients is less than or equal to the maximum, no adjustment
    is necessary.
  1. 3.
    If the total number of days of inpatient care exceeds the maximum
    allowable number, the limitation is determined by:

  1. Calculating
    the ratio of the maximum allowable inpatient care days to total
    inpatient care days reported on the Provider Statistical and
    Reimbursement Report (PS&R). The calculated ratio is multiplied
    by the total reimbursement for inpatient care (general inpatient and
    inpatient respite reimbursement) paid to the provider.
  1. Multiplying
    the excess inpatient care days by the routine home care (RHC) rate,
    wage adjusted for the location of the hospice.
  1. Adding
    together the amounts calculated in the two bullets above to derive
    the total allowable payments for inpatient care.
  1. Comparing
    the total allowable payments for inpatient care in bullet 3 above
    with actual payments made to the hospice for inpatient care during
    period” in order to determine the overpayments paid to the
excess reimbursement must be refunded by the hospice.