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A study of 191 for-profit hospices acquired by private equity firms found Medicare spending per stay rose 5.9% compared with similar hospices not acquired. Longer stays accounted for much of the increase; researchers found no rise in recorded services and said the findings were consistent with a shift toward patients who may need less ongoing care.
Medicare spending per hospice stay rose 5.9% after private equity firms acquired for-profit hospices, compared with matched for-profit hospices that were not acquired, according to a study published in the November issue of Health Affairs. Researchers said the increase was driven mainly by longer stays, while they found no corresponding increase in recorded care visits.
The researchers analyzed Medicare fee-for-service claims for 191 for-profit hospices acquired by private equity firms between 2018 and 2022, comparing them with 1,305 similar hospices that remained outside private equity ownership. They examined changes in the two years before and after each acquisition and compared them with changes at the control hospices.
After acquisition, the average hospice stay increased by 6.3 days. The acquired hospices also had fewer stays shorter than a week, more stays longer than six months, and a higher likelihood that patients were discharged alive. The share of admitted patients with dementia rose from 22.6% to 23.8%; the study said that share did not change at the comparison hospices.
The study found no significant increase in total visits or time spent on visits per week, including physician, nurse and home health visits. Patients received fewer social work visits, the report said. The authors said the pattern was consistent with longer stays being linked in part to a change in the mix of patients admitted, rather than more visits intended to keep patients alive longer.
How Longer Stays Raise Medicare Costs
Medicare generally pays hospices a set daily fee, regardless of how much care an individual patient needs on a given day. A longer stay can therefore generate more payments over time, while the hospice pays for services from that daily amount. The study’s findings focus attention on how this payment structure may interact with admission patterns and the duration of hospice care.
The issue reaches a large part of the health system: the report says nearly half of people who die in the United States are Medicare beneficiaries who use hospice, and up to a quarter of Medicare spending occurs in the last year of life. The study does not establish that any specific patient’s care was inappropriate, or that private equity ownership alone caused the observed patient mix. It does identify a difference in spending and length of stay after acquisition that policymakers may want to examine.
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Study Design and Hospice Payments
The study compared hospices that were already for-profit before acquisition with other for-profit hospices. This allowed researchers to examine whether outcomes changed after private equity ownership, rather than simply contrasting nonprofit and for-profit providers. Its conclusions apply to the hospices and Medicare fee-for-service patients included in the analysis; they do not automatically describe every hospice or every patient.
U.S. hospice ownership has shifted over the past two decades, with nearly three-quarters of hospices now for-profit, according to the source report. Private equity firms have become a growing owner category. In a typical deal, firms use investor funds and borrowing; the purchased company may be responsible for debt repayment. Those financing arrangements provide relevant industry context, but the study did not establish that debt obligations caused the changes it measured.
“The goal of hospice is to provide respectful, person-centered care that helps terminally ill people approach end of life with dignity, while minimizing pain and suffering.”
— Zirui Song, senior author and associate professor of health care policy at Harvard Medical School
What the Claims Data Cannot Show
The findings show associations after acquisition, but the available report does not establish why individual patients were admitted, whether each admission or discharge was clinically appropriate, or whether care quality changed in ways not captured by the claims measures. The researchers said the results were consistent with a shift toward patients who need less ongoing care; that interpretation is not proof of motive by a hospice or its owner.
The source material does not provide the study’s full methods, confidence intervals, or detailed estimates for every measure. It also does not establish whether the spending pattern applies to Medicare Advantage, hospices outside the study, or periods beyond the two years after acquisition that researchers examined.
Potential Changes to Hospice Payments
The researchers said Medicare policy changes may warrant consideration. One option discussed in the report is adjusting the daily payment according to a patient’s clinical needs, using diagnoses or other risk measures. That could reduce incentives to favor patients expected to need fewer services, but the authors also cautioned that risk adjustment could encourage coding practices aimed at raising payments.
The source report does not identify a proposed rule or a scheduled policy decision. For now, the study provides evidence for policymakers and researchers to weigh as they examine hospice payments, patient selection and care delivery. Further analysis would be needed to determine which payment changes, if any, could address the incentives without creating new ones.
Key Questions
How much did Medicare spending rise after the acquisitions?
The study found spending per hospice stay rose 5.9% at acquired hospices compared with matched for-profit hospices that were not acquired.
What drove the higher spending?
The researchers attributed much of the increase to longer stays. The average stay increased by 6.3 days, and the acquired hospices recorded more stays lasting over six months.
Did acquired hospices provide more visits?
No significant increase in total visits or time spent on visits per week was found. The study reported fewer social work visits, rather than a rise in recorded physician, nurse or home health visits.
Does the study prove that private equity caused patients to receive inadequate care?
No. The study found differences after acquisition and said they were consistent with a shift toward patients who may need less ongoing care. It does not establish that care was inadequate, explain individual admission decisions, or prove the owners’ motives.
What payment change did researchers discuss?
The researchers raised the possibility of adjusting Medicare’s daily hospice payment for patients’ clinical needs. They also noted that risk adjustment could create incentives to code diagnoses to increase payment.
Source: medicalxpress.com
