Key Takeaways
- • Medicare spending for for-profit hospices acquired by private equity firms rose 5.9%, or $993 per hospice stay, compared with non-PE-owned for-profit hospices, according to a federally funded study published in Health Affairs.
- • PE-acquired hospices saw average length of stay rise by 6.3 days relative to comparison hospices, and beneficiaries were more likely to be discharged alive.
- • The share of dementia patients at PE-acquired hospices rose from 22.6% to 23.8% after acquisition, while the share at other hospices did not change.
- • Researchers led by Harvard Medical School and the University of Pittsburgh called on policymakers to consider reforming Medicare's flat daily hospice payment rate, which is not risk-adjusted.
Summary
A federally funded study led by researchers from Harvard Medical School and the University of Pittsburgh found that Medicare spending for for-profit hospices acquired by private equity (PE) firms increased by 5.9%, alongside longer patient stays and more live discharges. The study, published online in the November issue of Health Affairs, compared 191 for-profit hospices acquired by PE firms between 2018 and 2022 with 1,305 similar for-profit hospices that were not PE-owned. The researchers analyzed Medicare fee-for-service claims for two years before and after acquisition and compared the changes with the control group.
For PE-acquired hospices, Medicare paid $993 more per hospice stay than for non-PE-owned for-profit hospices, a 5.9% increase from a baseline of $16,922. Average length of stay for beneficiaries in PE hospices rose by 6.3 days relative to the other hospices, and beneficiaries were more likely to be discharged alive. The researchers found no statistically significant changes in total visits per week or time spent with patients, and PE-acquired hospices had fewer social work visits weekly.
The authors pointed to a shift in patient mix as a possible mechanism. Dementia and cancer are the two largest patient groups in hospice, and Medicare pays the same daily rate for a patient with gradual dementia decline who needs relatively few services as for a cancer patient requiring frequent visits and complex pain management. After acquisition, the share of dementia patients at PE hospices rose from 22.6% to 23.8%, while the share at other hospices did not change. The authors wrote that this could be consistent with PE firms taking advantage of the payment system, and they raised concerns that shifts toward lower-risk patients who stayed longer than six months and were discharged alive may reflect potentially inappropriate or inappropriately early admissions, given the benefit's focus on palliative care in the last six months of life.
Senior author Zirui Song, associate professor of healthcare policy at the Blavatnik Institute at Harvard Medical School and an internal medicine physician at Massachusetts General Hospital, said in a Harvard blog post that the central question is whether the current payment model best meets the needs of hospice patients and ensures Medicare spending is sustainable. The researchers recommended that policymakers consider reforms such as adjusting the daily fee based on clinical need, similar to hospital payment, or separating fees for needed care while monitoring for unnecessary use or overbilling.
For PE-acquired hospices, Medicare paid $993 more per hospice stay than for non-PE-owned for-profit hospices, a 5.9% increase from a baseline of $16,922. Average length of stay for beneficiaries in PE hospices rose by 6.3 days relative to the other hospices, and beneficiaries were more likely to be discharged alive. The researchers found no statistically significant changes in total visits per week or time spent with patients, and PE-acquired hospices had fewer social work visits weekly.
The authors pointed to a shift in patient mix as a possible mechanism. Dementia and cancer are the two largest patient groups in hospice, and Medicare pays the same daily rate for a patient with gradual dementia decline who needs relatively few services as for a cancer patient requiring frequent visits and complex pain management. After acquisition, the share of dementia patients at PE hospices rose from 22.6% to 23.8%, while the share at other hospices did not change. The authors wrote that this could be consistent with PE firms taking advantage of the payment system, and they raised concerns that shifts toward lower-risk patients who stayed longer than six months and were discharged alive may reflect potentially inappropriate or inappropriately early admissions, given the benefit's focus on palliative care in the last six months of life.
Senior author Zirui Song, associate professor of healthcare policy at the Blavatnik Institute at Harvard Medical School and an internal medicine physician at Massachusetts General Hospital, said in a Harvard blog post that the central question is whether the current payment model best meets the needs of hospice patients and ensures Medicare spending is sustainable. The researchers recommended that policymakers consider reforms such as adjusting the daily fee based on clinical need, similar to hospital payment, or separating fees for needed care while monitoring for unnecessary use or overbilling.
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