Hospice Aggregate Cap Audit: How MACs Calculate Overpayments and How to Contest Them

Medicare limits the total amount it pays each hospice in a year through the hospice aggregate cap. When a hospice's total Medicare payments exceed its cap, the excess is an overpayment that must be repaid. For hospices with many long-stay patients, cap liabilities can reach hundreds of thousands or even millions of dollars.

Because cap overpayments are calculated from claims data, they can be affected by errors in beneficiary counts, payment totals, and the treatment of patients who received care from more than one hospice. Hospices that understand how the cap is calculated can estimate their exposure during the year, prepare an accurate self-determined cap report, review the MAC's final determination, and contest errors through the appeals process.

This article explains how the aggregate cap works, how the beneficiary count and payments are determined, the self-determination and MAC determination processes, the separate inpatient limit, common errors, and how to contest a cap determination. It is educational and does not replace legal, accounting, or professional advice.

The Legal Basis

The aggregate cap is required by Section 1814(i) of the Social Security Act and implemented at 42 CFR 418.308 and 418.309. Chapter 9 of the Medicare Benefit Policy Manual and Chapter 11 of the Medicare Claims Processing Manual provide additional guidance.

The Cap Amount

The cap amount is a dollar amount per beneficiary that is updated annually. Under current law, it is updated by the hospice payment update percentage. CMS's FY 2027 hospice final rule set the cap amount for the 2027 cap year at $36,174.75.

The Cap Year

The cap year runs from October 1 through September 30, aligned with the federal fiscal year. The FY 2027 cap amount applies to the cap year from October 1, 2026 through September 30, 2027.

How the Cap Is Calculated

A hospice's aggregate cap for a cap year equals:

• The cap amount, multiplied by

• The number of Medicare beneficiaries counted for the hospice in that cap year.

The hospice's total Medicare payments for services furnished during the cap year are compared with this aggregate cap. Payments above the aggregate cap are an overpayment.

Counting Beneficiaries: The Patient-by-Patient Proportional Method

Under 42 CFR 418.309, the number of beneficiaries is generally calculated using the patient-by-patient proportional methodology. Under this method:

• Each beneficiary who received hospice care from the hospice during the cap year contributes a fraction based on the number of days of hospice care the beneficiary received from that hospice during the cap year, divided by the total number of days of hospice care the beneficiary received from all hospices across all cap years.

• A beneficiary who received all hospice care from one hospice within one cap year counts as one.

• A beneficiary whose care spans multiple cap years or multiple hospices is divided proportionally.

Because a beneficiary's fraction depends on days in other years and at other hospices, a hospice's beneficiary count for a past cap year can change as patients continue to receive hospice care in later years. CMS and the MACs may update counts accordingly.

Payments Included

The payments compared with the cap generally include Medicare payments for hospice services furnished during the cap year, including routine home care, continuous home care, inpatient respite, general inpatient care, and service intensity add-on payments. Hospices should review the MAC's methodology and data to confirm what is included.

The Separate Inpatient Limit

Under 42 CFR 418.302(f), the total number of inpatient days, general inpatient and respite, for a hospice's Medicare patients may not exceed 20 percent of the total number of hospice days for those patients in the cap year. If the limit is exceeded, payment for the excess inpatient days is reduced to the routine home care rate. This limit is calculated separately from the aggregate cap but is often determined at the same time.

Self-Determination of the Cap

Under 42 CFR 418.308, hospices must determine their own aggregate cap for each cap year and file a self-determined cap report with their MAC. The rule requires hospices to:

• Calculate the aggregate cap using the patient-by-patient proportional method, using data that CMS and the MAC make available, such as the Provider Statistical and Reimbursement report.

• File the self-determined cap report and remit any overpayment within five months after the end of the cap year.

If a hospice does not file its self-determined cap report and pay any overpayment by the deadline, the MAC may suspend payments until the report is filed. The self-determined amount is subject to later adjustment by the MAC.

The MAC's Final Determination

After the self-determination, the MAC performs a final cap determination, using claims data and the beneficiary counts maintained by CMS. The MAC issues a notice of the determination, which shows:

• The number of beneficiaries counted.

• The aggregate cap.

• Total Medicare payments.

• Any overpayment, compared with the self-determined amount.

If the MAC's determination shows an additional overpayment, the MAC will demand payment. If it shows that the hospice overpaid in its self-determination, the MAC may return the difference.

Because beneficiary counts can change as patients continue to receive hospice care, the MAC may reopen and revise prior cap determinations within the allowable reopening periods.

Estimating Cap Exposure During the Year

Hospices should not wait for the end of the cap year to learn their cap position. Good practices include:

• Track Medicare payments and beneficiary counts monthly.

• Estimate each beneficiary's proportional fraction, recognizing that patients who continue on service into the next year will have their fractions reduced.

• Monitor average length of stay and the share of long-stay patients.

• Reserve funds for expected cap liabilities.

• Review admissions to make sure patients are eligible, because long stays of ineligible patients increase both cap exposure and audit risk.

Hospices should never manage the cap by discharging eligible patients or encouraging revocations. Discharges must be based on clinical criteria only.

Common Sources of Cap Errors

• Incorrect beneficiary counts, such as beneficiaries attributed to the wrong hospice or missing days from other hospices.

• Errors in days of service due to claims adjustments, cancellations, or late claims.

• Payments included for the wrong cap year.

• Failure to reflect claim adjustments after audits or appeals.

• Transfers between hospices that are not accurately reflected.

• Data timing issues, such as claims processed after the data used for the determination.

• Mathematical or data entry errors in the self-determined report.

Understanding the Data Behind the Cap

The Provider Statistical and Reimbursement Report

The Provider Statistical and Reimbursement report, often called the PS&R, summarizes claims data that hospices and MACs use for cap calculations. Hospices should obtain the PS&R reports available through their MAC and compare them with internal billing records.

Beneficiary-Level Data

The proportional beneficiary count depends on beneficiary-level data, including days of service at the hospice and at other hospices. Hospices should request beneficiary-level detail when reviewing a determination, so they can identify specific discrepancies rather than relying only on totals.

Timing of Data

Claims processed after the data used for the determination, claim adjustments after audits or appeals, and late claims can all change the results. Hospices should track these items and request updates through reopening when appropriate.

A Simple Cap Calculation Example

The following example uses round numbers for illustration only.

• Cap amount: $36,174.75.

• Beneficiary count using the proportional method: 100.

• Aggregate cap: about $3,617,475.

• Total Medicare payments for the cap year: $4,000,000.

• Cap overpayment: about $382,525.

If the beneficiary count is understated by five beneficiaries because of data errors, the aggregate cap is understated by about $180,874, and the overpayment is overstated by the same amount. This shows why accurate beneficiary counts matter.

How Long-Stay Patients Affect the Count

Under the proportional method, a long-stay patient whose care spans multiple cap years contributes only a fraction to each year's count. A patient who is on service for two full cap years contributes about half to each year. Because the patient's payments in each year are substantial, long-stay patients increase payments faster than they increase the count, which raises cap exposure.

Transfers Between Hospices

When a patient transfers between hospices, each hospice receives a fraction based on its share of the patient's total hospice days. Errors in transfer data can shift fractions between hospices. Hospices should confirm transfer dates and days of service with the other hospice and the MAC when discrepancies appear.

Planning for Cap Liabilities

• Build cap estimates into monthly financial reporting.

• Reserve funds as the year progresses.

• Discuss cap exposure with leadership and the governing body.

• Consider the effect of admission practices and average length of stay on future cap years.

Reviewing a Cap Determination

When the MAC issues a cap determination, hospices should:

• Compare the MAC's beneficiary count with internal records, beneficiary by beneficiary where possible.

• Compare total payments with internal payment records.

• Identify claims adjustments, cancellations, and appeals that may not be reflected.

• Check patients who transferred between hospices or had care spanning multiple years.

• Confirm the cap amount used.

• Confirm the inpatient limit calculation.

• Document every discrepancy with supporting data.

Contesting a Cap Determination

Informal Resolution

Many discrepancies can be resolved by contacting the MAC's audit and reimbursement staff with supporting documentation. Hospices may also request that the MAC reopen the determination to correct errors, within the time limits for reopening.

Formal Appeal

Under 42 CFR 418.311, a hospice that believes its payments have not been properly determined may request a review from the MAC or the Provider Reimbursement Review Board, in accordance with the procedures in 42 CFR Part 405, Subpart R. Under those rules:

• An appeal generally must be filed within 180 days after the hospice receives the determination.

• The amount in controversy determines the forum. Appeals with an amount in controversy of at least $10,000 may go to the Provider Reimbursement Review Board. Appeals with lower amounts, generally at least $1,000 but less than $10,000, may be heard by the MAC.

• The Board's procedures and deadlines are strict, and hospices should follow the Board's rules carefully.

Decisions of the Provider Reimbursement Review Board may be reviewed by the CMS Administrator and, ultimately, in federal court.

Practical Tips for Appeals

• Engage experienced reimbursement counsel or advisors.

• Identify each issue clearly and quantify its effect.

• Gather supporting data, including claims records, beneficiary-level data, and correspondence with the MAC.

• Meet every deadline, including deadlines for position papers and evidence.

• Consider whether a reopening request may resolve issues faster than an appeal.

Repaying a Cap Overpayment

If a cap overpayment is due:

• Pay by the deadline to avoid interest and recoupment.

• Consider an extended repayment schedule under 42 CFR 401.607 if immediate repayment would cause hardship.

• Understand that filing an appeal may not stop recovery of the overpayment, so plan cash flow accordingly.

How Cap Exposure Connects to Audit Risk

High cap exposure often reflects long lengths of stay, which are also a focus of medical review and CMS's new Service and Spending Variation Index. A hospice with a large cap overpayment should review its admission and recertification practices to confirm that patients are eligible. If audits find that some patients were not terminally ill, the hospice may have both cap liability and claim-level overpayments, and it must evaluate its obligations under the 60-day overpayment rule at 42 CFR 401.305.

A Hypothetical Example

A hospice's self-determined cap report for a cap year shows a cap overpayment of about $400,000. The hospice files the report and pays on time. Several months later, the MAC's final determination shows an overpayment of about $520,000. Reviewing the determination, the hospice finds that 12 beneficiaries who transferred from another hospice were counted as full beneficiaries at the other hospice and only small fractions at this hospice, and that several claim adjustments after successful appeals were not reflected in payments.

The hospice provides beneficiary-level data and appeal decisions to the MAC and requests a reopening. When the MAC does not resolve all issues, the hospice files a timely appeal with the Provider Reimbursement Review Board on the remaining amount, which exceeds $10,000. It also reviews its admissions practices because its average length of stay has grown, and it begins monthly cap monitoring.

Roles in Cap Management

• Finance staff track payments, estimate cap exposure, and prepare the self-determined report.

• Billing staff make sure claims and adjustments are accurate and timely.

• Clinical leadership manages admissions and recertifications to support eligibility.

• Compliance oversees audits of long-stay patients and overpayment obligations.

• Leadership and the governing body review cap exposure and approve reserves.

• Reimbursement counsel or advisors support reconciliation and appeals.

Common Mistakes

• Waiting until the end of the cap year to estimate exposure.

• Missing the self-determined cap report deadline.

• Accepting the MAC's determination without beneficiary-level reconciliation.

• Missing appeal deadlines.

• Using discharges or revocations to manage the cap.

• Ignoring the inpatient limit.

• Failing to connect cap exposure with admission and recertification practices.

A Cap Readiness Checklist

• We know the current cap amount and cap year.

• We track payments and beneficiary counts monthly.

• We estimate proportional fractions for long-stay patients.

• We reserve funds for expected liabilities.

• We file the self-determined cap report and pay on time.

• We reconcile the MAC's determination beneficiary by beneficiary.

• We track claims adjustments and appeal results.

• We know our appeal deadlines and forums.

• We review admissions and long-stay patients for eligibility.

• We never manage the cap through discharges or revocations.

Key Takeaways

• The FY 2027 cap amount is $36,174.75 for the cap year from October 1, 2026 through September 30, 2027.

• Beneficiaries are counted proportionally based on days of care across hospices and years.

• Hospices must file a self-determined cap report and pay within five months after the cap year ends.

• MAC determinations can contain data errors that hospices can identify and contest.

• Appeals go to the MAC or the Provider Reimbursement Review Board depending on the amount in controversy, generally within 180 days.

• Long stays increase cap exposure and audit risk, so admission and recertification practices matter.

Documentation to Keep for Every Cap Year

• The self-determined cap report and supporting calculations.

• PS&R reports and beneficiary-level data used.

• Proof of filing and payment.

• The MAC's final determination and any revised determinations.

• Reconciliation work papers comparing MAC data with internal records.

• Correspondence with the MAC.

• Reopening requests and appeal filings.

Retain these records for at least as long as determinations may be reopened or appealed.

Working With the MAC

Clear, documented communication with the MAC's audit and reimbursement staff can resolve many issues quickly. Keep a log of contacts, requests, and responses, and confirm important points in writing.

Questions Leadership Should Ask

• What is our estimated cap position for the current year?

• How much have we reserved?

• What is our average length of stay, and how is it changing?

• How many long-stay patients do we have, and when were they last reviewed for eligibility?

• Have we reconciled the last MAC determination, and are any appeals pending?

Reopening Versus Appeal

A reopening asks the MAC to correct its own determination, often for data or calculation errors. An appeal asks an independent body to decide a dispute. Reopenings can be faster and less formal, but they are at the MAC's discretion and subject to time limits. Appeals have strict deadlines and procedures but provide formal review. Hospices often pursue both: requesting a reopening for clear errors while filing a timely appeal to preserve their rights.

Frequently Asked Questions

What is the FY 2027 hospice cap amount?

$36,174.75 for the cap year from October 1, 2026 through September 30, 2027.

How are beneficiaries counted?

Generally using the patient-by-patient proportional method, based on each beneficiary's days at the hospice in the cap year compared with total hospice days across all hospices and years.

When is the self-determined cap report due?

Within five months after the end of the cap year, along with payment of any overpayment.

Can a cap determination be appealed?

Yes. Under 42 CFR 418.311, hospices may seek review by the MAC or the Provider Reimbursement Review Board under 42 CFR Part 405, Subpart R, generally within 180 days of the determination, depending on the amount in controversy.

Does the inpatient limit count toward the cap?

The 20 percent inpatient limit is a separate calculation. Excess inpatient days are paid at the routine home care rate.

Conclusion

The hospice aggregate cap is a predictable but complex liability. By understanding the cap amount, the cap year, the proportional beneficiary count, and the self-determination and final determination processes, hospices can estimate their exposure, prepare accurate reports, and identify errors in the MAC's calculations. When errors occur, reopening requests and timely appeals to the MAC or the Provider Reimbursement Review Board offer a path to correction. And because cap exposure often reflects long lengths of stay, careful admission and recertification practices protect hospices from both cap liabilities and audit risk.

How HealthBridge Can Help

HealthBridge is a healthcare management consulting firm that helps hospices monitor cap exposure, prepare self-determined cap reports, reconcile MAC cap determinations, support reopening requests and appeals alongside reimbursement counsel, and review admissions and long-stay practices. If you have questions about your hospice cap, please get in touch with us. We will be happy to help you with this topic.

References

• Electronic Code of Federal Regulations. 42 CFR 418.308, Limitation on the Amount of Hospice Payments. https://www.ecfr.gov/current/title-42/chapter-IV/subchapter-B/part-418/subpart-G/section-418.308

• Electronic Code of Federal Regulations. 42 CFR 418.309, Hospice Aggregate Cap. https://www.ecfr.gov/current/title-42/chapter-IV/subchapter-B/part-418/subpart-G/section-418.309

• Electronic Code of Federal Regulations. 42 CFR 418.302, Payment Procedures for Hospice Care. https://www.ecfr.gov/current/title-42/chapter-IV/subchapter-B/part-418/subpart-G/section-418.302

• Electronic Code of Federal Regulations. 42 CFR 418.311, Administrative Appeals. https://www.ecfr.gov/current/title-42/chapter-IV/subchapter-B/part-418/subpart-G/section-418.311

• Electronic Code of Federal Regulations. 42 CFR Part 405, Subpart R, Provider Reimbursement Determinations and Appeals. https://www.ecfr.gov/current/title-42/chapter-IV/subchapter-B/part-405/subpart-R

• Electronic Code of Federal Regulations. 42 CFR 401.607, Claims Collection and Compromise. https://www.ecfr.gov/current/title-42/section-401.607

• Electronic Code of Federal Regulations. 42 CFR 401.305, Requirements for Reporting and Returning of Overpayments. https://www.ecfr.gov/current/title-42/chapter-IV/subchapter-A/part-401/subpart-D/section-401.305

• Centers for Medicare & Medicaid Services. Medicare Benefit Policy Manual, Chapter 9, Coverage of Hospice Services Under Hospital Insurance. https://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/downloads/bp102c09.pdf

• Centers for Medicare & Medicaid Services. Medicare Claims Processing Manual, Chapter 11, Processing Hospice Claims. https://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/downloads/clm104c11.pdf

• Federal Register. Medicare Program; FY 2027 Hospice Wage Index and Payment Rate Update and Hospice Quality Reporting Program Requirements (August 3, 2026). https://www.federalregister.gov/documents/2026/08/03/2026-15686/medicare-program-fy-2027-hospice-wage-index-and-payment-rate-update-and-hospice-quality-reporting

• Centers for Medicare & Medicaid Services. Provider Reimbursement Review Board. https://www.cms.gov/medicare/regulations-guidance/provider-reimbursement-review-board

• U.S. Social Security Administration. Social Security Act, Section 1814(i). https://www.ssa.gov/OP_Home/ssact/title18/1814.htm