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A study of 191 for-profit hospices acquired by private equity firms found Medicare spending per stay increased 5.9% compared with similar non-acquired hospices. The rise was linked mainly to stays that averaged 6.3 days longer, alongside shifts in patient mix and more live discharges; researchers found no overall increase in visits or time spent on visits.
Medicare spending per hospice stay rose 5.9% after private equity firms acquired for-profit hospices, compared with similar hospices that were not acquired, according to a study published in the November issue of Health Affairs. Researchers linked the increase mainly to stays averaging 6.3 days longer, while finding no overall increase in care visits or time spent on visits.
The researchers examined 191 hospices acquired by private equity firms between 2018 and 2022 and compared them with 1,305 matched, for-profit hospices that did not have private equity owners. Using Medicare fee-for-service claims, they tracked changes during the two years before and after each acquisition and compared them with changes at the control hospices.
After acquisition, patients were less likely to have hospice stays shorter than a week and more likely to remain in hospice for longer than six months. They were also more likely to be discharged alive. The study reported that the average stay increased by 6.3 days relative to the comparison group. That change was the main driver identified for the higher Medicare spending per stay.
The patient mix shifted as well: the share of patients with dementia rose from 22.6% to 23.8% at acquired hospices, while the share at control hospices did not change. Researchers found no significant change in total weekly visits or time spent on visits. Patients received fewer social work visits, according to the report; the study did not find increases in physician, nurse or home health visits.
Longer Stays Raise Payment Questions
The findings matter because Medicare pays hospices a set daily fee, rather than varying payment according to the amount of care each patient needs. Under that arrangement, the costs of visits and services come out of the daily payment. Researchers noted that a patient with dementia who needs relatively few services may receive the same daily fee as a patient with cancer who needs more frequent visits or complex pain management.
The study documents a pattern in which higher spending accompanied longer stays, more live discharges and no overall increase in measured visits. These findings are relevant to patients and families choosing hospice, as well as to policymakers weighing how Medicare pays providers.
Senior author Zirui Song said the findings raise a broader question about whether the payment model best meets patients’ needs and supports sustainable Medicare spending. The researchers said payment changes may warrant consideration, while the available study results do not establish which policy would work best.
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Private Equity’s Growing Hospice Role
The study focused on a specific ownership change: private equity acquisition of hospices that were already for-profit. The researchers asked whether outcomes differed after acquisition from those at other for-profit providers, which serve under the same Medicare payment system and also operate with a profit motive. Their comparison does not directly measure every difference between for-profit and nonprofit hospice care.
The report says that U.S. hospice ownership shifted over the past two decades from mostly nonprofit to nearly three-quarters for-profit, and that private equity firms are now the fastest-growing type of hospice owner. In a typical private equity deal, a firm uses investor funds and borrowed money to buy a company; the acquired company may then be responsible for repaying debt and interest. That description provides financial context, but the study does not establish that debt repayment caused the patient or spending changes it found.
Hospice use has broad implications for Medicare: the report notes that 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’s findings therefore speak to a substantial part of end-of-life care spending, while remaining limited to the providers and period examined.
“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 Study Cannot Establish
The study found an association between acquisition and changes in spending, length of stay and patient mix. Its comparison of hospices over time offers evidence about patterns after acquisition, but does not by itself prove why those patterns occurred.
The researchers identified a shift toward patients with dementia and said admitting patients who need less ongoing care was a more likely explanation for longer stays and live discharges than increased service provision. The supplied findings do not quantify how much of the spending rise was attributable to each factor, or report effects on patients’ comfort, quality of life or family experience.
A risk-adjusted daily payment is one possible policy option discussed by the researchers, but its effects remain uncertain. They cautioned that adjusting payment for patient risk could reduce incentives to select lower-risk patients while also creating incentives to code diagnoses to increase reimbursement.
Payment Policy Debate Continues
The researchers said the findings may warrant changes to Medicare’s hospice payment system. One option they discussed is adjusting the daily fee according to a patient’s clinical needs, using diagnoses in a way comparable to risk adjustment in hospital payment. The study does not report that such a change has been adopted or set a timetable for action.
Further policy decisions would need to weigh whether a revised payment formula better matches reimbursement to the services patients need, while limiting incentives to select patients with lower care needs or to code diagnoses strategically. For now, the published results document the spending and care patterns in the study sample; what Medicare or regulators will do next is not specified.
Key Questions
How much did Medicare spending increase after private equity acquired the hospices?
The study found Medicare spending per hospice stay rose 5.9% compared with similar for-profit hospices that were not acquired.
What was linked to the higher spending?
The increase was driven mainly by longer hospice stays. The study reported an average stay 6.3 days longer relative to the comparison group, along with fewer very short stays and more stays lasting longer than six months.
Did acquired hospices provide more visits?
No significant increase in total visits or time spent on visits per week was found. The report said patients received fewer social work visits; it did not find increases in physician, nurse or home health visits.
Did the patient mix change after acquisition?
Yes. The share of patients with dementia at acquired hospices rose from 22.6% to 23.8%, while it did not change at the control hospices. The researchers said a shift toward patients needing less ongoing care was a likely explanation for longer stays and live discharges.
Does the study prove that private equity caused worse hospice care?
No. It documents differences after acquisition, but does not prove the cause of those changes or establish effects on patient comfort, quality of life or family experience. The study also does not show that every acquired hospice changed in the same way.
Source: medicalxpress.com
