Key Takeaways
- • Private equity-owned hospices reported the highest profit margins at 7.6%, significantly outperforming other ownership structures while spending the lowest percentage of revenue on direct patient care services.
- • PE-owned hospices generated average total revenues of $194.4 per patient day, lower than not-for-profit-owned competitors, yet achieved superior profitability through cost containment strategies focused on reducing direct care spending and nonsalary administrative expenses.
- • Not-for-profit hospice ownership was associated with the greatest spending on direct patient care services, representing a fundamental operational and strategic divergence from the PE ownership model.
- • A peer-reviewed Health Affairs study (authored by A Soltoff, 2025) documented that patients in PE-owned hospices were more likely to receive care in nursing home settings rather than at-home care, suggesting structural differences in service delivery models.
- • The findings highlight a critical tension between financial performance optimization and care intensity allocation in the hospice sector, with material implications for healthcare quality metrics and Medicare/payer reimbursement policy.
Summary
A 2025 Health Affairs study examining ownership structures across the U.S. hospice sector reveals significant operational and financial disparities between private equity-owned providers and other ownership models. According to research led by A Soltoff, private equity-owned hospices achieved the highest profit margins in the industry at 7.6%, while simultaneously reporting the lowest expenditure levels on direct patient care and nonsalary administrative services.
The financial performance paradox is notable: PE-owned hospices generated average total revenues of $194.4 per patient day—actually lower than revenues reported by not-for-profit-owned hospice providers—yet achieved superior profitability through disciplined cost management. This margin expansion strategy appears driven by operational efficiency focused on limiting direct care spending rather than revenue enhancement, a model consistent with traditional private equity value creation playbooks in healthcare services.
The study documents a material care delivery divergence between ownership types. Not-for-profit hospice operators demonstrated the highest commitment to direct patient care spending, while PE-owned facilities showed a measurable shift in service location: patients in PE-owned hospices were more likely to receive care in nursing home settings as opposed to at-home care, the traditional hospice delivery model. This structural shift carries implications for patient experience, family involvement, and the fundamental value proposition of hospice services.
For institutional investors and hedge fund managers tracking healthcare consolidation trends, the findings underscore the financial viability of PE-backed hospice platforms while raising stakeholder scrutiny questions. The data suggests PE ownership models are extracting margin expansion through care cost management rather than operational scaling, a distinction relevant to valuations and exit multiple assumptions for existing portfolio companies and future acquisition targets in the sector.
The financial performance paradox is notable: PE-owned hospices generated average total revenues of $194.4 per patient day—actually lower than revenues reported by not-for-profit-owned hospice providers—yet achieved superior profitability through disciplined cost management. This margin expansion strategy appears driven by operational efficiency focused on limiting direct care spending rather than revenue enhancement, a model consistent with traditional private equity value creation playbooks in healthcare services.
The study documents a material care delivery divergence between ownership types. Not-for-profit hospice operators demonstrated the highest commitment to direct patient care spending, while PE-owned facilities showed a measurable shift in service location: patients in PE-owned hospices were more likely to receive care in nursing home settings as opposed to at-home care, the traditional hospice delivery model. This structural shift carries implications for patient experience, family involvement, and the fundamental value proposition of hospice services.
For institutional investors and hedge fund managers tracking healthcare consolidation trends, the findings underscore the financial viability of PE-backed hospice platforms while raising stakeholder scrutiny questions. The data suggests PE ownership models are extracting margin expansion through care cost management rather than operational scaling, a distinction relevant to valuations and exit multiple assumptions for existing portfolio companies and future acquisition targets in the sector.
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