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A study of 191 hospices acquired by private equity firms found Medicare spending per stay rose 5.9% compared with similar, non-acquired for-profit hospices. The increase was mainly linked to longer stays and a shift in the types of patients admitted, not more visits or time spent providing care.
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. The increase was driven mainly by longer stays and a shift in patient mix, while researchers found no increase in care visits after acquisition.
Researchers compared 191 for-profit hospices acquired by private equity firms from 2018 through 2022 with 1,305 similar for-profit hospices that remained outside private equity ownership. Using Medicare fee-for-service claims, they examined changes in the two years before and after each acquisition and compared them with changes at the control hospices.
The average length of stay at acquired hospices rose by 6.3 days. Patients were less likely to have stays under a week, more likely to remain in hospice for more than six months and more likely to be discharged alive. The share of patients with dementia increased from 22.6% to 23.8%; the comparable share at control hospices did not change.
The study found no significant change in total visits or time spent on visits per week. Researchers also reported fewer social work visits, rather than expanded services. Medicare pays hospices a set daily amount regardless of a patient’s service needs, so a longer stay can raise spending even when the amount of care provided each day does not increase.
How Daily Payments Shape Hospice Costs
The findings matter because Medicare is a major payer for end-of-life care. 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. A change in spending or patient selection at hospices can therefore affect both public costs and access to care.
The study does not establish that private equity ownership caused any individual patient to receive inadequate care. It does, however, identify a pattern after acquisition: spending increased as stays lengthened, without a corresponding increase in measured visit volume or time. The authors said the change in patient mix may help explain the pattern. That raises questions about whether a flat daily payment rewards providers differently depending on patients’ care needs and how long they remain enrolled.
For patients and families, hospice is intended to provide support and comfort during a difficult period. A shift toward patients who need fewer services could affect which people providers admit, while longer stays and live discharges can complicate expectations about eligibility and care. The study documents changes at the hospice level, but it does not by itself establish how these changes affected individual patients’ experience or health outcomes.
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Study Compared Similar For-Profit Hospices
The researchers focused on a specific ownership change: acquisition by private equity of hospices that were already for-profit. This comparison helps distinguish the change from broader differences between nonprofit and for-profit providers, though it cannot account for every factor that may influence admissions, stays or spending.
The source report says hospice ownership in the United States has shifted over two decades from mostly nonprofit to nearly three-quarters for-profit, with private equity described as the fastest-growing owner type. In a typical private equity deal, firms combine investor funds with borrowing; the acquired company may carry the debt and must generate revenue to repay it. That financing structure provides background to the study, but the reported analysis measured spending and care patterns, not the effects of any specific firm’s debt or financial decisions.
Medicare’s daily hospice payment is central to the researchers’ interpretation. A patient with dementia who needs relatively few services may generate the same daily payment as a patient with cancer who requires frequent visits and complex pain management. The study found a higher share of dementia patients at acquired hospices, alongside longer stays, but these results do not prove why individual hospices changed their admissions.
“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 results show differences associated with acquisition in the hospices studied, but they do not establish why the patient mix changed or prove that private equity ownership alone caused the higher spending. The study compared acquired providers with matched controls, but other changes at individual hospices or in the populations they served could also contribute.
Researchers said the lack of increased visits, alongside longer stays and more live discharges, is consistent with a shift toward patients needing less ongoing care. The available source does not provide enough detail to determine how each admission decision was made, whether patients were appropriately eligible, or how patients and families experienced care. It also does not report the dollar amount of the spending increase per stay or explain whether the pattern varied by firm, region or hospice.
The research points to possible Medicare payment changes, including adjusting daily payments for patients’ clinical needs. The source report also notes a potential drawback: risk adjustment could create incentives to code patients in ways that increase payment. The study does not determine which policy would best balance care, access and costs.
Payment Policy Questions Remain
The researchers said policy changes to Medicare’s hospice payment system may be warranted. One option described in the report is adjusting the daily fee according to patient diagnoses or clinical need, as payment systems do in other parts of health care. Any such change would need to account for the possibility that diagnosis-based payments could affect coding practices.
The study itself does not announce a policy change or a timetable for one. Further evidence would be needed to assess whether the observed patterns persist across more hospices and over longer periods, and how changes in patient mix relate to care quality and patient outcomes. For now, the reported findings establish an association between private equity acquisition and higher Medicare spending per stay, while leaving the causes and best policy response open.
Key Questions
How much did Medicare spending per hospice stay increase?
The study found spending per stay rose by 5.9% at private equity-acquired hospices compared with similar for-profit hospices that were not acquired. The source report does not give the dollar amount behind that percentage.
Why did spending rise?
The increase was driven mainly by longer stays, which rose by an average of 6.3 days. Researchers also found a larger share of patients with dementia and more live discharges. They did not find an increase in total visits or time spent on visits per week.
Did the study find that private equity caused worse care?
No. The study reported spending, length-of-stay, patient-mix and visit patterns. It did not establish that private equity ownership caused worse care for individual patients or measure every aspect of hospice quality.
What change to Medicare payments did researchers raise?
The researchers said Medicare could consider adjusting the daily hospice fee to reflect a patient’s clinical needs. The report also notes that diagnosis-based adjustments could encourage coding aimed at increasing payments, so the effects of such a policy would need careful evaluation.
Source: medicalxpress.com
