Nonprofit Hospices Fight to Compete with For-Profit Chains

Nonprofit hospices have been bleeding market share for several years—but are not going gentle into that good night. Rather, many nonprofits are adapting to compete with large for-profit providers that are entering the space in greater numbers.

In the 1980s and 90s nonprofits provided virtually all hospice care in the United States, but the balance has shifted. In 2016, 67 percent of Medicare-certified hospices were for-profit, and only 20 percent were nonprofits, according to the National Hospice and Palliative Care Organization.

For-profit hospices accounted for 100 percent of new providers established during 2017, the Medicare Payment Advisory Commission (MEDPAC) reported in March.

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“This is a real challenge. Many nonprofits have very slim margins—sometimes 1 or 2 percent—and are just trying to make ends meet,” Barbara Hansen, M.A., R.N., CEO of the Oregon Hospice and Palliative Care Association. “Nonprofit hospices need to be creative and look at how they can stay in business and compete with for-profits that may be better funded or better supported, especially in the back office.”

Nonprofits are addressing these challenges by adapting strategies often seen in the for-profit space, such as mergers and acquisitions, partnerships, participation in accountable care organizations, quality-focused marketing, and service diversification.

Earlier this year a collaborative of Tennessee-based nonprofit hospices merged and rebranded as Alleo Health System, becoming the parent company of four organizations with a combined workforce of 400 employees, serving 22 counties in Tennessee, Georgia, and North Carolina.

Organizations are also creating opportunities for mutual support through the formation of regional coalitions, without completing an actual merger. In February four nonprofit hospice organizations in Oregon affiliated under the brand Oregon Non-Profit Hospice Alliance (OHNA). The partnership collects donations to promote the benefits of non-profit hospice care in that state, as well as sharing opportunities for quality benchmarking, payer contracting, best-practice implementation, and cultivating greater efficiency.

The alliance is modeled after partnerships in other states, such as Ohio’s Hospice, founded in 2013. Such coalitions enable nonprofits to enter group purchasing agreements or contracting agreements, share marketing costs, or share staff, particularly for back office functions like billing.

“Many nonprofits are standalone operations covering a relatively small service area. When you are going up against a regional or national chain, you have to and band together,” Denis Viscek, CFO of Hospice by the Bay near San Francisco. “When you have one foot in the grave and the other one on a banana peel, you are going to have to join other organizations. You are not big enough. You do not cover enough territory.”

While hospices in several states have launched collaborations similar to those in Oregon and Ohio, others, including Hospice by the Bay, are seeking other partnerships through membership in accountable care organizations (ACOs).

Hospice by the Bay recently affiliated with an ACO formed by the University of California-San Francisco Medical Center, becoming a preferred partner with the hospital to increase referrals. This also supports negotiations with prospective payers, particularly in light of a coming Medicare Advantage carve-in. A large hospital system can push for plans to include hospices within their ACOs.

But to successfully engage in such a partnership, the hospice must be able to tout the quality of their care, backed up by publicly reported data, such as strong performance on Hospice Compare and Consumer Assessment of Healthcare Providers and Systems (CAHPS) surveys.

“To do this, you are going to have to provide good quality care, and you have to prove it with good quality scores, Viscek said. “You are going to have to show some geographic presence that you can handle that hospital’s footprint in a given market.”

Though an affiliated hospital does not gain ownership of a hospice, a hospice that offers to adopt the hospital’s electronic medical record systems will have an advantage, allowing for easy sharing of clinical information and closer coordination between the hospice and referring physicians.

Partnership or no, nonprofits must leverage strong quality performance in order to compete.

“You have to be able to say that you are better than the competition, and you have to have the data to back that up,” Hansen said. “In every market it’s going to be a little bit unique, but whether you are a for-profit or nonprofit you need to show what you can do better.”

Providing excellent service is critical, but developing new service lines can help. Increasingly, hospice providers are moving into home health and palliative care. Hospices provide most community-based palliative care in the United States, but have found it difficult to turn a profit on those services. However with palliative care primed for growth, it is likely a solid investment in the long term. Last year Hospice by the Bay provided palliative care to 50 patients, today they have 130.

Payer interest in palliative care is growing because, like hospice, it helps control costs and reduce hospitalizations. Offering palliative care as a precursor to hospice also helps streamline transitions of care when the patient becomes hospice eligible.

“Palliative care right now is in its infancy, and it’s difficult to make money on it, but that is going to change,” Viscek said. “Medicare hasn’t fully embraced it yet, but more private insurance companies are starting to cover it. I recently told our board that there is going to be a day when our palliative care census exceeds our hospice census.”

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