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A study of 191 hospices acquired by private equity firms from 2018 to 2022 found Medicare spending per stay rose 5.9% compared with similar, non-acquired for-profit hospices. The rise was mainly associated with stays that averaged 6.3 days longer and a shift toward patients with dementia; researchers found no increase in care visits and reported fewer social work visits.
A study of 191 for-profit hospices acquired by private equity firms found that Medicare spending per hospice stay rose 5.9% after the deals, compared with similar for-profit hospices that were not acquired. Published in the November issue of Health Affairs, the analysis linked the rise mainly to longer stays and a shift in the types of patients admitted, rather than increased service visits.
Researchers compared Medicare fee-for-service claims for hospices acquired between 2018 and 2022 with claims from 1,305 matched, non-acquired for-profit hospices. They examined changes over the two years before and after each acquisition, relative to changes at the comparison hospices. The study reports an average 6.3-day increase in length of stay at acquired hospices compared with the controls.
After acquisition, a smaller share of patients had stays shorter than a week, while more stayed in hospice for longer than six months. Patients were also 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 control hospices, according to the report. The researchers said the patient mix shifted toward people who generally need less ongoing care.
The study found no significant increase in total visits or visit time per week, including physician, nurse and home health visits. It reported fewer social work visits. The authors said these findings do not support increased visits as an explanation for longer stays. The analysis identifies associations following acquisition; it does not establish that private equity ownership alone caused each change.
How Hospice Payments Shape Spending
The findings matter because Medicare pays hospices a set daily amount, rather than adjusting payment directly to the level of care each patient needs. A patient with dementia who requires relatively few services can bring in the same daily payment as a patient with cancer who needs frequent visits or complex pain management, while the hospice pays for those services from that amount.
In that system, longer stays can raise spending even if the number of visits does not increase. The researchers said admitting more patients who require less care may also affect the relationship between payments and providers’ costs. The study does not establish that patients received inadequate care or that the reported pattern occurred at every acquired hospice, but it raises questions about whether the payment structure rewards patient selection in ways that align with hospice’s role.
The issue reaches a large part of the health system: 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. The study’s results add evidence for policymakers considering how to pay for end-of-life care while supporting appropriate services and controlling public spending.
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Private Equity’s Growing Hospice Role
The study focused on a specific comparison: hospices that were already for-profit before private equity acquisition versus other for-profit hospices. That design allowed researchers to ask whether ownership changes were associated with differences beyond those already present in the for-profit sector. The results should not be read as a comparison of all private equity-owned hospices with all nonprofit providers.
U.S. hospice ownership has shifted over the past two decades from a sector that was mostly nonprofit to one that is nearly three-quarters for-profit, according to the source report. Private equity firms have become a fast-growing type of owner. In a typical deal, buyers use investor funds and borrowing; the acquired company may carry debt that must be repaid from its revenue. That financial structure is relevant background, but the study did not test whether debt payments caused the observed changes in patient mix or care.
Senior author Zirui Song, an associate professor at Harvard Medical School and a general internist at Massachusetts General Hospital, said the analysis examined whether private equity acquisition changed costs and care even when both groups of hospices were for-profit and operated under the same Medicare payment system.
“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 at Harvard Medical School
What the Study Cannot Establish
The study reports changes associated with acquisition, but the source material does not establish the reasons for each hospice’s decisions or prove that private equity ownership caused the changes. The analysis covers fee-for-service Medicare claims and the specified acquisition and comparison groups; the provided report does not say whether the findings apply to other payment arrangements or all hospice providers.
It is also unclear from the reported findings whether the longer stays and live discharges reflected patient selection, changes in how patients were assessed or other factors. The researchers described a shift toward patients who may need less care as the more likely explanation, but that remains an interpretation of the observed patterns. The report does not provide further detail on patient-level outcomes or the quality of care received.
The supplied source text ends while discussing a possible risk of adjusting payments for clinical need: providers could code diagnoses to increase reimbursement. It does not provide the remainder of that discussion, a specific policy proposal or a timeline for any Medicare action.
Payment Policy Questions Ahead
The researchers said changes to Medicare’s hospice payment system may be warranted. One option they described is adjusting the daily payment according to a patient’s clinical needs, using diagnoses in a way similar to hospital payment. Such an approach could reduce incentives to favor patients expected to need fewer services, the report says, while creating a risk that providers might code diagnoses to secure higher payments.
The study does not announce a policy change, and the source material gives no schedule for federal action. Any next steps would require policymakers to weigh payment incentives against the risk of coding responses and the practical needs of patients and families. The available report also does not specify a planned follow-up study or a formal response from Medicare officials.
Key Questions
How much did Medicare spending rise after private equity acquisition?
The study found that Medicare spending per hospice stay rose 5.9% at acquired hospices compared with similar, non-acquired for-profit hospices. The source report gives that comparison but does not provide a dollar amount per stay.
What was associated with the spending increase?
The study linked the increase mainly to longer stays, which averaged 6.3 days more than at comparison hospices, along with changes in patient mix. The report says there was no significant increase in total visit time or visits per week.
Did the study find more care visits after acquisition?
No. Researchers found no significant increase in total visits or time spent on visits per week; the report also says patients received fewer social work visits. That does not, by itself, establish whether overall care quality changed.
Did researchers prove private equity caused the changes?
No. The analysis found differences after acquisition compared with matched for-profit hospices that were not acquired. Those findings show an association, but the reported evidence does not prove that ownership alone caused the changes.
Could Medicare change how it pays hospices?
The researchers said payment changes may be warranted and described adjusting daily payments for clinical need as one possible option. The report does not say that Medicare has adopted such a change or set a date for action.
Source: medicalxpress.com
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