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A study published in Health Affairs found Medicare spending per hospice stay rose 5.9% after private equity firms acquired for-profit hospices, compared with similar hospices that were not acquired. Researchers linked the increase mainly to longer stays and a shift in patient mix, while finding no increase in service visits.
A study of 191 for-profit hospices acquired by private equity firms found that Medicare spending rose 5.9% per hospice stay after acquisition, compared with spending at similar for-profit hospices that were not acquired. The increase was driven mainly by longer stays, while researchers found no increase in visits or time spent providing care, raising questions about how Medicare’s daily hospice payment rewards providers.
Researchers used Medicare fee-for-service claims to compare the acquired hospices with 1,305 matched, non-acquired for-profit hospices. They examined changes in the two years before and after each acquisition and compared them with changes at the control hospices. The acquisitions took place from 2018 through 2022.
After acquisition, the average length of a hospice stay increased by 6.3 days. Patients were less likely to have stays of under a week, more likely to remain in hospice for over six months, and more likely to be discharged alive. The share of patients with dementia rose from 22.6% to 23.8% at acquired hospices, while it 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. Researchers reported fewer social work visits. They said the findings point toward longer stays and a change in the types of patients admitted, rather than more services, as key factors behind the spending increase. The study was published in the November issue of Health Affairs.
How Daily Hospice Payments Shape Costs
Medicare pays hospices a set daily rate that does not vary according to the amount of care a patient needs on a given day. The arrangement can mean that a person with dementia who needs relatively few services brings in the same daily payment as a person with cancer who needs frequent visits and complex pain management. The hospice pays for care and staff out of that daily amount.
Against that payment structure, longer stays can raise total spending per patient, even if the number of services provided does not rise. The researchers said the shift toward patients who may need less ongoing care could be financially advantageous to a for-profit provider under the current model. Their results document an association following acquisitions; they do not, by themselves, establish why each hospice changed its admissions or prove that ownership alone caused every difference.
The issue affects both Medicare’s finances and patients and families relying on hospice during a difficult period. The source 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. Payment design can influence which patients providers serve and how public funds are used, making the findings relevant to care quality as well as spending.
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A Changing Hospice Ownership Landscape
U.S. hospice ownership has shifted over the past two decades from mostly nonprofit providers to nearly three-quarters for-profit, according to the source report. Private equity firms are described as the fastest-growing type of hospice owner. The study focused specifically on what happened when a private equity firm acquired a hospice that was already for-profit, rather than comparing for-profit providers with nonprofit ones.
In a typical private equity deal, a firm uses investor funds and borrowing to buy a company; the acquired company may take on debt that must be repaid. The researchers framed their comparison around providers operating under the same Medicare payment system and serving the same broad population. They sought to test whether outcomes and costs changed after private equity ownership beyond changes seen at other for-profit hospices.
Senior author Zirui Song is an associate professor of health care policy at Harvard Medical School and a general internist at Massachusetts General Hospital. The source report notes that his previous research on private equity in health care has examined changes in spending, staffing and patient outcomes in other settings. Those earlier findings are background, not results of this hospice study.
“That makes sense from the point of view of a for-profit facility that looks to generate revenue under this payment system.”
— Zirui Song, senior author and Harvard Medical School associate professor
What the Study Cannot Establish
The comparison found changes after acquisition, but the supplied report does not establish that private equity ownership alone caused them. It also does not explain the reasons behind individual admission decisions or determine whether specific patients received care that matched their clinical needs. The reported change in dementia cases was 1.2 percentage points; the study summary does not provide a full breakdown of all diagnoses or patient-level care needs.
The findings do not show that every private equity-owned hospice changed in the same way, nor do they establish whether longer stays or live discharges were inappropriate for individual patients. The source material also does not give the dollar amount represented by the 5.9% increase, the study’s full methods or confidence intervals, or the financial effect of any proposed payment change. It reports fewer social work visits but does not specify the size of that decline.
Researchers said the results may support changes to Medicare’s hospice payment system, including adjusting daily payments for a patient’s clinical needs. The available material does not describe a specific adopted policy or indicate that Medicare has announced a change in response.
Payment Reform Remains a Policy Question
The immediate next step is consideration of the study’s findings in debates over Medicare hospice payment and oversight. The researchers identified adjusting the daily fee to reflect clinical need as one possible policy approach. Such a change would aim to better account for differences in the care patients require; the source report does not say that this option has been selected or set out a proposed schedule.
Further evidence would help clarify how widespread the observed patterns are, what explains changes in patient mix and length of stay, and how payment adjustments might affect access and care. For now, the study offers a comparison of acquired hospices with similar for-profit providers over time, while the precise causes of the changes and any policy response remain open.
Key Questions
How much did Medicare spending rise after the acquisitions?
The study found 5.9% higher spending per hospice stay at private equity-acquired hospices compared with similar for-profit hospices that were not acquired. The supplied report does not give the corresponding dollar amount.
What was the main driver of the increase?
Researchers attributed the increase mainly to longer stays: the average stay rose by 6.3 days. They also observed more patients with dementia and more live discharges, alongside no significant increase in total visits or time spent on visits.
Did acquired hospices provide more services?
The study found no significant increase in total visits or time spent on visits per week. It reported fewer social work visits, but the source summary does not give the size of that reduction.
Does the study prove private equity caused the changes?
No. It found differences after acquisition compared with matched hospices, but the results do not establish that ownership alone caused each change or explain every provider’s decisions.
Has Medicare changed its hospice payment policy?
The supplied report describes payment reform as a possible policy response, including rates adjusted for patients’ clinical needs. It does not report that Medicare has adopted such a change.
Source: news-medical.net
