Key Takeaways
- • Medicare spending per hospice stay rose an average of $993 following private equity acquisitions, from a baseline of $16,922, an increase of roughly 5.9%, according to a Harvard-led study published in the November issue of Health Affairs.
- • The increase was driven primarily by patients remaining in hospice care an average of 6.3 days longer than at comparable non-private equity-owned providers.
- • Researchers attribute the higher spending to a shift toward admitting patients who required less care, not to expanded services: total visits and weekly care time did not significantly change, and social work visits declined.
- • The study covered 191 for-profit hospices acquired by private equity firms between 2018 and 2022, compared with 1,305 similar non-acquired for-profit hospices, using Medicare fee-for-service claims from the two years before and after each acquisition.
- • The authors suggest Medicare reimbursement reform, such as clinically risk-adjusted daily payments or separate service payments with oversight, could address the financial incentives driving admissions.
Summary
A Harvard-led study published in the November issue of Health Affairs found that private equity acquisitions of for-profit hospices were associated with a 5.9% increase in Medicare spending, along with longer patient stays and a rise in live discharges. Medicare spending increased by an average of $993 per hospice stay after acquisition, up from a baseline of $16,922. The increase was primarily driven by patients remaining in hospice an average of 6.3 days longer than those at comparable non-private equity-owned providers.
The researchers attribute these patterns to changes in patient admissions rather than to expanded care. Senior author Zirui Song, associate professor of health care policy at Harvard Medical School and associate professor of medicine at Massachusetts General Hospital, said "the more likely explanation for the longer stays and live discharges was a shift toward admitting patients who required less care." Admissions of patients with dementia rose from 22.6% to 23.8% of hospice patients, while the proportion stayed unchanged at comparison hospices.
The study examined 191 for-profit hospices acquired by private equity firms between 2018 and 2022 and compared them with 1,305 similar for-profit hospices that were not acquired, analyzing Medicare fee-for-service claims from the two years before and after each acquisition. It found no significant increase in total visits or weekly care time, no meaningful rise in physician, nursing or home health visits, and fewer social work visits after acquisition.
The findings come as private equity has become a prominent force in U.S. hospice ownership. Over the past two decades, hospice ownership has shifted from predominantly nonprofit organizations to nearly three-quarters for-profit providers, with private equity firms the fastest-growing owner category.
The authors argue that Medicare's hospice reimbursement design could help address the financial incentives shaping admissions. One option is adjusting daily payments to patients' clinical needs and diagnoses, similar to hospital payment models, though they caution this could encourage providers to increase diagnostic coding. Another is establishing separate payments for specific services, paired with oversight to prevent unnecessary care and improper billing.
The researchers attribute these patterns to changes in patient admissions rather than to expanded care. Senior author Zirui Song, associate professor of health care policy at Harvard Medical School and associate professor of medicine at Massachusetts General Hospital, said "the more likely explanation for the longer stays and live discharges was a shift toward admitting patients who required less care." Admissions of patients with dementia rose from 22.6% to 23.8% of hospice patients, while the proportion stayed unchanged at comparison hospices.
The study examined 191 for-profit hospices acquired by private equity firms between 2018 and 2022 and compared them with 1,305 similar for-profit hospices that were not acquired, analyzing Medicare fee-for-service claims from the two years before and after each acquisition. It found no significant increase in total visits or weekly care time, no meaningful rise in physician, nursing or home health visits, and fewer social work visits after acquisition.
The findings come as private equity has become a prominent force in U.S. hospice ownership. Over the past two decades, hospice ownership has shifted from predominantly nonprofit organizations to nearly three-quarters for-profit providers, with private equity firms the fastest-growing owner category.
The authors argue that Medicare's hospice reimbursement design could help address the financial incentives shaping admissions. One option is adjusting daily payments to patients' clinical needs and diagnoses, similar to hospital payment models, though they caution this could encourage providers to increase diagnostic coding. Another is establishing separate payments for specific services, paired with oversight to prevent unnecessary care and improper billing.
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