MEDPAC: For-Profits Account for 100 Percent of New Hospices

For-profit providers are dominating the hospice market. The number of hospice providers in the United States during 2017 rose 2.4 percent, with for-profit providers representing 100 percent of the growth, according to the Medicare Payment Advisory Commission (MEDPAC) annual report to Congress.

That same year, the number of non-profit hospices declined 3.5 percent.

Larger numbers of for-profit companies have been entering the hospice space seeking to capitalize on growing demand as the population ages. Non-profit organizations in 1990 provided 95 percent of hospice care in the United States. By 2017, for-profit companies represented 69 percent of the hospice market, while the non-profit market share dropped to 27 percent, MEDPAC reported. Government providers accounted for approximately 3 percent.

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“This is a real challenge for non-profit hospices. There are many [non-profit providers] who have very small margins and are just trying to make ends meet,” said Barbara Hanson, R.N., M.A., CEO of the Oregon Hospice & Palliative Care Association. “Non-profit hospices have had to get creative to make sure they can stay in business and compete with for-profit hospices who may be better funded and better supported in the back office area especially.”

Close to 1.5 million Medicare beneficiaries received hospice services during 2017, representing about 50 percent of Medicare decedents, up from 49.7 percent in 2016 and 22.9% in 2000. Medicare hospice expenditures have also trended upward, reaching $17.9 billion in 2017. Medicare expenditures have grown roughly 6 percent annually since 2014, according to MEDPAC.

A significant portion of increasing demand stems from terminally ill patients with non-cancer diagnoses choosing to enter hospice in larger numbers. In 2017, about 74 percent of Medicare beneficiaries who used hospice had a non-cancer diagnosis, compared to 48 percent in 2000, according to MEDPAC. These patients tend to survive longer than cancer patients and therefore see longer length of stays. The most common diagnoses included neurological conditions as well as heart and circulatory disorders.

In addition to reporting these data, MEDPAC each year makes recommendations to Congress regarding changes in Medicare payments. Since 2014, the commission has called repeatedly for a 2 percent cut in payment rates to hospice providers, based on its calculations of hospice margins relative to Medicare payments. This year was no exception. Though Congress has never enacted this proposed cut, hospice organizations were quick to react.

“We disagree with the recommendation in all respects,” National Association for Home Care & Hospice President William Dombi told Hospice News. “While there are some improvements in the way data is presented, the report continues to rely on simple averages that do not display the wide range in financials for providers, gives short shrift to hospital-based providers, and essentially ignores the overall financial status of home health agencies and hospices.”

The National Hospice and Palliative Care Organization (NHPCO) President Edo Banach in a statement to the organization’s members suggested an alternative approach based on quality scores. Instead of an across-the-board cut, Banach proposed a 2 percent payment reduction for providers who failed to report quality metrics.

“There is an acknowledged desperation among policymakers to solve the nation’s fiscal issues and preserve Medicare for future generations,” Banach said. “However, a 2 percent cut to hospice reimbursement may have unintended consequences affecting access to hospice and quality of care, and would likely increase overall Medicare spending by driving patients to more expensive and less appropriate care settings.”

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