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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 hospices that were not acquired. Longer stays accounted for much of the rise; researchers also found a shift toward more patients with dementia and no increase in overall visits or time spent providing care.
A study of 191 for-profit hospices acquired by private equity firms found that Medicare spending per hospice stay rose 5.9% after acquisition, compared with similar hospices that were not acquired. Published in the November issue of Health Affairs, the research linked much of the increase to patients staying in hospice longer, without a corresponding rise in the overall amount of care delivered.
Researchers compared Medicare fee-for-service claims for hospices acquired between 2018 and 2022 with claims for 1,305 matched for-profit hospices that remained outside private equity ownership. They examined the two years before and after each acquisition and compared changes with those at the control hospices. The 5.9% figure is the difference in Medicare spending per stay after acquisition relative to the comparison group, not a measure of total national hospice spending.
Average hospice stays at acquired facilities increased by 6.3 days. Patients were less likely to have very short stays of under a week, more likely to remain enrolled for more than 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 control hospices.
The study found no significant change in total visits or time spent on visits per week after acquisition. Researchers reported no increase in physician, nurse or home health visits and found that patients received fewer social work visits. The authors said the pattern was consistent with a change in the mix of patients served, including a greater share who may need less ongoing care; the findings do not establish that private equity ownership caused any individual patient’s longer stay or live discharge.
How Longer Stays Affect Medicare
The results matter because Medicare pays hospices a set daily rate, rather than paying according to the amount of care each patient receives. Under that arrangement, a longer stay can increase Medicare payments even if the hospice does not provide more visits. The study’s findings raise questions about how the payment structure interacts with admission patterns and length of stay at facilities under new ownership.
Hospice is a major part of end-of-life care financed by the federal program: 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 a person’s last year of life. Those figures put the study in a wider policy debate about access to appropriate hospice care and the sustainability of Medicare spending. They do not mean that every longer stay is inappropriate or that the study found individual patients were denied needed care.
Senior author Zirui Song said hospice should provide respectful, person-centered care while supporting patients and families at a stressful time. The study reports differences in spending, patient mix and service patterns; it does not assess every dimension of care quality or establish what any particular patient’s care should have been.
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The Study’s Comparison Groups
The research focused on a specific ownership change: private equity acquisition of hospices that were already for-profit. The authors compared those facilities with other for-profit hospices, rather than with nonprofit providers. That design allowed them to examine whether outcomes changed after acquisition against changes at similar facilities operating under the same broad Medicare payment system.
Hospice ownership in the United States has shifted over the past two decades from mostly nonprofit toward nearly three-quarters for-profit, according to the source report. Private equity firms have become a growing type of owner. Such firms commonly use investor money and borrowing to buy companies; the acquired company may carry debt and need to generate revenue to meet its obligations. That general description does not establish the finances or motives of any individual hospice in this study.
The payment structure offers relevant context for the patient-mix finding. Medicare pays the same daily fee for a patient with dementia who may need relatively few services as for a patient with cancer who may need frequent visits and complex pain management. The hospice pays for care and provider visits from that daily amount. Researchers said the change in diagnoses and length of stay could fit incentives in this system, but the study did not directly determine why each hospice admitted particular patients.
“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 study documents changes associated with acquisition, but its comparison of claims does not by itself prove that private equity ownership caused the changes or explain the decisions behind them. The source report does not provide a dollar estimate of the spending increase, the overall national effect, or a breakdown of results by individual owner or hospice.
It also remains unclear whether the altered patient mix reflects changes in referral patterns, admission decisions, local patient needs or other factors. The researchers found fewer social work visits and no overall increase in visits or visit time, but those measures alone do not establish whether patients received appropriate care or how their health outcomes were affected. The reported increase in live discharges likewise does not explain why patients left hospice alive.
The study’s findings apply to fee-for-service Medicare claims and to for-profit hospices acquired during the study period. The source material does not establish whether the same patterns apply to nonprofit hospices, other payment arrangements or acquisitions outside the period examined.
Payment Policy and Further Evidence
The authors said Medicare hospice payment changes may warrant consideration. One option described in the report is adjusting the daily payment according to a patient’s clinical needs, using diagnoses in a way similar to hospital payment systems. The source also notes a concern: risk adjustment could reduce incentives to select patients expected to need less care, but it could create incentives to code diagnoses to increase payment.
The report does not identify a specific proposal, timetable or agency decision. Any policy response would need to weigh payment accuracy against the possibility of gaming and consider how changes affect access and care. Further research could help clarify whether the observed patterns persist, what drives shifts in admissions and discharges, and how those changes relate to patient outcomes. For now, the study offers evidence of higher spending per stay and longer stays after acquisition, while leaving the causes and consequences for individual patients unresolved.
Key Questions
How much did Medicare spending rise?
Spending rose by 5.9% per hospice stay at acquired hospices compared with similar for-profit hospices that were not acquired. The figure is for spending per stay, not total national spending.
What drove the increase?
The study linked much of the increase to longer stays. Average stays rose by 6.3 days, while researchers found no significant increase in total visits or time spent on visits per week.
Did the study find that patients received more care?
No overall increase in visits or visit time was found. The researchers reported no increase in physician, nurse or home health visits and found fewer social work visits. Those measures do not, on their own, determine whether care was appropriate for each patient.
Does the study prove private equity caused the changes?
No. The study compared changes at acquired hospices with changes at matched for-profit hospices, but the findings do not establish the reason for every change or prove causation for individual patients.
What payment change did researchers suggest?
The authors said Medicare could consider adjusting hospice payments for patients’ clinical needs. They also noted that risk adjustment could encourage more diagnosis coding to maximize payment, a trade-off that policymakers would need to address.
Source: medicalxpress.com
