Hospices Can Build Financially Sustainable Palliative Care Programs

Hospices provide 50% of the community-based palliative care delivered in the United States, but many find it challenging to make their programs profitable or break even, often relying on philanthropy to support their efforts. However, some organizations are implementing innovative models and developing payer relationships that can turn that trend around. 

Interest in palliative care is growing among health care providers, payers and policymakers due to the substantial potential savings in health care costs and the need to care for an aging population, a high proportion of which suffers from serious or chronic illness.

“I anticipate a significant change in the hospice arena for the next five to 10 years, and forward-thinking groups need to prepare themselves to move upstream and be ready for reimbursement changes from the traditional model,” Timothy Ihrig, M.D., chief medical officer for Crossroads Hospice & Palliative Care, said in a recent Hospice News webinar on the growth of palliative care in the United States. “Many are looking to mitigate financial risk associated with high-cost, high-need patients. We’re seeing a transition; it’s been underway for many years and still needs to evolve to full maturity —  of accountability for outcomes and patient care rather than [the health care system] just doing things to people.”


Palliative care consultations can reduce direct hospital costs by $3,000 per patient admitted, and up to $4,800 per admission for patients suffering from four or more diagnoses, according to a 2018 study. It can also reduce the frequency of 911 calls, emergency department visits, and unnecessary hospitalizations.

Home-based palliative care could reduce societal health care costs by $103 billion within the next 20 years, the nonprofit economic research group Florida TaxWatch said in a report.

Although no national Medicare benefit exists for palliative care, opportunities for hospices to work with payers, including the U.S. Centers for Medicare & Medicaid Services (CMS), are multiplying. 


For instance, the number of Medicare Advantage plans that are offering home-based palliative care as a supplemental benefit is on the rise. This year, 61 plans offer a palliative care benefit compared to 15 during 2019, a Duke University report indicates.

Through Medicare Advantage, CMS contracts with private insurance companies to provide coverage for Medicare beneficiaries. Law requires Medicare Advantage plans to cover all of the services offered by traditional Medicare, but also allows for certain supplemental benefits.

Historically these benefits were very limited, but the Creating High-Quality Results and Outcomes Necessary to Improve Chronic Care Act (CHRONIC), passed by Congress in 2018, expanded the range of those benefits to include programs to address some social determinants of health as well as home-based palliative care.

Hospices would benefit from educating themselves about Medicare Advantage and other payment models, including those involving Medicaid or private insurance.

“Many organizations coming from hospice don’t understand the reimbursement model of fee-for-service, and that can throw a monkey wrench into moving upstream, also not recognizing care opportunities which can translate into reimbursement opportunities,” Ihrig said. “We’ve seen a lot of reimbursement opportunities come to the fore over the last couple of years, and I anticipate more in the upcoming 12 to 24 months.” 

Among those opportunities is the Primary Care First Initiative, announced by CMS last April, which also promises opportunities for hospices and other providers to seek payment for palliative care services. The agency plans to implement the models in phases beginning in January 2021, initially in 26 regions throughout the United States.

Hospices and palliative care organizations are eligible to participate in the payment models provided they meet the program’s criteria. The program is designed to control costs, reduce avoidable hospitalizations and improve care coordination.

Eligible providers can choose to participate in one or both of two payment options under the program: A general payment option and a Seriously Ill Population payment option designed to serve patients with complex, chronic needs, through which providers focused on caring for that population would receive increased payments.

To capitalize on the growth of palliative care, providers also likely need to adapt their processes for billing and revenue cycle management.

“The hospice industry has a really good foothold on hospice billing and what that looks like. But the billing piece from the palliative side is very, very different, and understanding that piece is going to be important for the success of any palliative care program,” Clevis Parker, M.D., chief medical officer for ProCare Hospice Nevada, said in the Hospice News webinar. “There are mainly three types of reimbursements, arrangement or structure that we could follow. The one that most of us are familiar with is a fee-for-service, especially in the physician practice world. The other two suggested reimbursement models are partnering with the insurer or partnering with the managed care entities that are delivering care.” 

One potential benefit for providers to engage patients further upstream is increased referrals to their hospice program as well as moving eligible patients into hospice sooner. However, Ihrig and Parker caution hospices against focusing solely on that opportunity as the value proposition for their palliative care programs. 

“When you look at trying to develop a [palliative care] program, it’s a completely different program than your hospice, and you need to develop the skill set to perform well in that field. That space in my mind is really a practice of medicine space; we just happen to have interdisciplinary team members that are going to participate,” Parker said. “If you look at it as a standalone entity, it should be profitable. If you’re looking at increased referrals to hospice as your main driver for doing this, I don’t believe that usually translates into a very successful business model. Keeping the understanding that these are separate lines of business, making sure that you pay attention to the details, contracting with whoever you can to provide the extra layer of payment support would be in the best interest for sustainability.” 

Companies featured in this article: