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A study of 191 for-profit hospices acquired by private equity firms found Medicare spending per stay rose 5.9% compared with similar hospices that were not acquired. The increase was mainly associated with stays averaging 6.3 days longer and a shift in the types of patients admitted, not with more reported care visits.
A study of 191 for-profit hospices acquired by private equity firms found that Medicare spending rose 5.9% per hospice stay compared with similar for-profit hospices that were not acquired. Published in the November issue of Health Affairs, the research links the increase mainly to stays that averaged 6.3 days longer and to changes in the patients admitted, rather than to an increase in reported care visits.
Researchers used Medicare fee-for-service claims to compare acquired hospices with 1,305 matched for-profit hospices that remained outside private equity ownership. They examined changes during the two years before and after each acquisition, comparing them with changes at the control hospices. The reported spending increase is a difference in spending per stay relative to those comparison providers.
After acquisition, patients were less likely to have stays of under one week and more likely to remain in hospice for over six months. They were also more likely to be discharged alive. The share of admitted patients with dementia rose from 22.6% to 23.8%; the study said that share did not change at the comparison hospices. The report describes this as a shift toward patients who may need less ongoing care.
The researchers found no significant increase in total visits or time spent on visits per week after acquisition. They reported no increases in physician, nurse or home health visits and found that patients received fewer social work visits. The findings point to longer stays and patient mix—not increased service delivery—as the main factors associated with the higher spending, though the study does not establish the reasons for every individual admission or discharge.
How Longer Stays Affect Medicare
The results matter because Medicare pays hospices a set daily fee, rather than varying the payment directly with the amount of care each patient requires. A patient who needs relatively few services and one who needs more frequent visits or complex pain management can bring in the same daily payment, while the hospice pays for care from that fee. The study’s authors say this structure may create financial incentives around which patients are admitted and how long they remain enrolled.
Hospice is a significant part of end-of-life care and Medicare spending. The report notes that nearly half of people who die in the United States are Medicare beneficiaries who use hospice, and that up to a quarter of Medicare spending occurs in the last year of life. The findings raise questions about whether current payments support patient needs while keeping spending sustainable. They do not, on their own, show that private equity ownership caused harm to individual patients or that longer stays were inappropriate.
Senior author Zirui Song, a health care policy researcher at Harvard Medical School and a general internist at Massachusetts General Hospital, said hospice should provide respectful, person-centered care while helping patients approach the end of life with dignity and minimizing suffering. He said the system needs to work for patients and families while remaining financially sustainable.
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Private Equity in Hospice Ownership
The study focused on a specific ownership change: private equity firms buying hospices that were already for-profit providers. Researchers asked whether outcomes and spending changed beyond what occurred at other for-profit hospices serving the same population under the same Medicare payment system. Their comparison does not directly measure private equity acquisitions of nonprofit hospices.
The report says U.S. hospice ownership has shifted over the past two decades from mostly nonprofit to nearly three-quarters for-profit, with private equity firms described as the fastest-growing type of owner. In a typical private equity deal, a buyer uses investor funds and borrowing; debt may be assigned to the acquired company, which then has to generate revenue to repay it and interest. That financing description is general context, not evidence that debt caused the spending pattern in the hospices studied.
The researchers also cited prior work by Song on private equity ownership in other health care settings, including hospitals and physician practices. Those earlier findings provide context for the research question, but they are separate studies and do not prove that the same mechanisms occurred in hospice care.
“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 study reports differences associated with acquisitions, but its findings do not establish why each hospice changed its admissions or length of stay, or whether private equity ownership alone caused the observed changes. The comparison with matched hospices helps account for changes in similar providers, but does not answer every question about decisions made by facilities or the clinical circumstances of individual patients.
The report says the researchers found no increase in measured visit volume or time, but those measures do not by themselves show whether every patient received appropriate care or whether outcomes changed. The supplied study summary does not give detailed results on patient experience, symptom relief or the reasons patients were discharged alive. It also does not quantify how much of the spending increase came from longer stays versus other factors.
The study summary says payment changes could include adjusting the daily fee for clinical need, potentially using diagnoses. It also warns that risk adjustment could encourage providers to code diagnoses to obtain higher payments. The effects of such a change, and what safeguards might be needed, remain unsettled.
Payment Policy Under Review
The researchers said their findings may warrant changes to Medicare’s hospice payment system, including considering whether daily payments should reflect patients’ clinical needs. The report does not identify an adopted policy, a formal implementation date or a specific next step by Medicare officials. Any payment proposal would need to address both the mismatch the researchers describe and the possibility that diagnosis-based payments could affect coding practices.
For now, the study adds evidence for policymakers evaluating how Medicare pays hospices and how ownership changes relate to spending and care patterns. Readers should distinguish the reported association—higher spending per stay after acquisition—from broader conclusions about quality or the motives of individual providers, which the study summary does not establish.
Key Questions
How much did Medicare spending rise after the acquisitions?
The study found 5.9% higher spending per hospice stay at acquired hospices compared with similar for-profit hospices that were not acquired. The comparison is per stay, not an overall national spending total.
What was linked to the spending increase?
The increase was mainly associated with stays averaging 6.3 days longer and a changed mix of admitted patients. Researchers did not find a significant increase in total visits or time spent on visits per week.
Did acquired hospices provide more services?
The study found no significant change in total visits or time spent on visits per week, and it reported fewer social work visits. It did not find increases in physician, nurse or home health visits.
Does the study prove private equity caused worse patient care?
No. It reports changes associated with acquisitions, including longer stays and higher Medicare spending per stay, but the supplied findings do not establish that patients received worse care or explain the circumstances of every admission and discharge.
What policy change did the researchers discuss?
They said Medicare could consider adjusting hospice payments to reflect clinical need. The report also notes a potential risk: diagnosis-based adjustments could encourage coding aimed at increasing payments. No specific policy adoption or timeline was reported.
Source: medicalxpress.com
