Confessions of a Board Member: Small Hospice Non-Profits Will Not Survive

Hospices nationwide are increasingly impacted by consolidation not only in their own sector but among their referral partners, including acute care hospitals. These consolidations particularly threaten smaller, nonprofit providers who are struggling to compete with large, national for-profit entities.

When groups of acute care providers consolidate, many seek a single post-acute provider who can offer a continuum of services that go beyond end-of-life care and shut out smaller organizations focused solely on hospice.

Hospice News’ Confessions interviews give hospice and palliative care professionals a space to sound off on the pressing issues that affect their businesses and patients. This piece has been condensed and edited for clarity, as well as to protect the anonymity of today’s subject.

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Hospice News recently sought the perspective of a board member of a nonprofit hospice on the West Coast about the impact of consolidation and subsequent changes in referral patterns.

As a hospice board member, what are some of the most significant frustrations that you encounter?

There appears to be a lack of real interest on the part of CEOs of smaller hospices in recognizing the dangers to their organizations from not doing something to ensure their long-term survival in the face of competition from large for-profit entities and widespread consolidation among their referral partners.

There are a significant number of relatively small to modestly sized nonprofit hospices who often hang by a financial thread, and there seems to be no way to get them to understand that a small, particularly nonprofit, hospice in today’s environment will not survive in the long run.

Many are convinced that the key to their long term viability is to join forces with a hospital or health care system that might be providing a significant amount of referrals, only to discover as has happened to other hospices over the years that they wind up becoming a component of the hospital rather than a separate entity.

This manifests itself in the inability of the CEOs — and these are all very bright and talented people — to encourage their boards to reach out to other hospices for possible affiliations, involving the sharing of back office resources and other low hanging fruit that could begin a more meaningful structure in order to ensure their long term viability.

For example, our organization looked at the Ohio model, but we couldn’t get hospices in our area interested in pursuing that kind of affiliation, and this is going on across the country.

What do you see as the threats to that long term viability?

In the health care environment of [our state] their is huge consolidation of acute care organizations, both in an organizational sense and most recently through the development of a [regional organization] that includes 12 to 14 acute care hospitals. Right now, that is a loosely affiliated organization, but clearly one that is moving in the direction of a closely knit network in which some of the hospitals will over time lose their community identity.

In that structure — because hospices rely on the referrals of not only physicians but of hospital discharge planners for their lifeblood — these consolidations create the risk of that the hospital group will seek out one organization that can provide a range of post-acute care services, including hospice, palliative care, home health care and others as a turn-key operation. Currently, the only ones who can do that are the large for-profit companies, and that could be the death knell certainly for some of the smaller hospices.

A number of hospices are diversifying their services, adding palliative care, home health care, home-based primary care and other offerings. Do you think that is a viable solution or should they really be focused on partnerships?

I think there are several paths they could go down simultaneously. Adding palliative care is a good thing for hospices, and home care if done correctly is another good thing. You can also at the same time discuss affiliations or mergers or other collaborative ways of knitting together a group of hospices that can withstand the onslaught of the large companies that have brought all of those services together, making themselves look very attractive to the acute care world.

But not all of the smaller hospices see it that way, and that’s where the nonprofits take great risks.

We are the only hospice and palliative care provider in our county, though our service area covers part of an adjacent county. We have been trying to work with [an organization operating two acute-care hospitals and one behavioral health organization], from which we receive about 35-to-40% of our referrals. Our [C-suite executives] have been encouraging them to work with us, enabling us to take over their home health agency, because often acute care folks don’t understand how to manage home health care.

We have been talking with them for four years about the benefits of doing this. However, we recently heard that they are now holding serious negotiations with a nationwide for-profit that has come into the community and offered them a turn-key operation to do hospice, palliative care and home health. If that happens, we could take a very big hit on our referrals.

However, if we were able to affiliate with the other large hospices that cover the patient territory of the hospital group, we would be in a much stronger position to blunt the entry of this national for-profit company.

Will we go out of business by the end of the week? Certainly not. Are we going to go out of business in a year or two? Most likely not. But when we think three to five years in advance, we could very well be picked if we can’t convince some of the more short-sighted hospices in our area to collaborate with us.

How would leaders pursue these kinds of affiliations? How would you guide a CEO who might want to pursue this?

I would attempt to make sure that they, along with key members of their board of directors, understand the changing acute care dynamics in our state, which are representative of what is happening nationwide. And I would try to figure out to what extent they keep their ear to the ground about those issues. I would find out if they are having conversations with acute care organizations in their community and make sure they have they have a clear understanding of the impact of the consolidation among acute care providers in their region.

It’s amazing how disconnected [some hospice leaders] are from what is going on around them including their own community, and that leads me to question how hospice boards recruit members from the health care environment who understand that dynamic.

Some organizations don’t have a single health care professional on their board. They have human resources professionals, finance professionals, investment professionals — all key areas to have represented on your board — but often there isn’t one health care person on that board. That makes it very difficult when you go into these meetings and talk about how they have got to be careful, especially if they have an affiliation with an acute care hospital that in a heartbeat could find one of these turn key operations and stop referrals to that hospice.

What do you think are some of the factors that contribute to that lack of understanding?

Though they are all well intended, some of the boards that I have worked with almost unanimously feel that their responsibility is writing the checks while allowing the CEO to do whatever they do.

This is what often happens when you have a board that doesn’t have adequate health care experience. You have a CEO who doesn’t have the support of a board with any health care knowledge.

Are there ways for hospices to better engage their board to help them being more engaged and aware in the health care landscape?

Let me tell you what we do here. Our strategic planning committee meets regularly throughout the year, and we spend a portion of the meetings talking about local, state, and national trends in the health care environment.

Our CEO, COO, and CFO are very active with the national industry organizations, and they also bring their perspective on what is going on in many communities.

When the strategic planning committee has its annual retreat, we ask our facilitator to do interviews with key stakeholders and then present all of that information to our members. We ultimately decide on the strategic plan for the coming year, but a good portion of that meeting is spent educating the board on what is happening in the health care space.

Hospice leaders, including CEOs, need to understand that their survival depends on more than the services that they provide in their community, and that they have to get their board on board, kicking and screaming if they have to.