Hospices Must Invest in Staff, Expand Referral Sources to Meet Rising Demand

The hospice industry is likely to boom in coming years, but in order to thrive providers need to make serious investments to grow their workforce, expand referral partnerships and prepare for a value-based payment environment.

Favorable demographics point towards accelerated growth for hospice providers, according to the 2021 Post-Acute Care Industry Trend Report by Trella Health.

Hospice was the least-affected health care sector when it comes to admissions drops due to COVID, according to the report. Year-over-year hospice admissions rose an average of 4% during the last seven quarters despite pandemic-related disruption.

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Moreover, the eldest baby boomers are turning 77-years-old this year. As Trella indicated in the report, baby boomers will begin to reach the average age of hospice patients of 82 in five years.

Without reductions in hospitalizations and emergency department visits, the costs of caring for this population could skyrocket. Consequently, more stakeholders are focusing their eyes on hospice, which has a strong track record in reducing utilization of higher-acuity care.

“Across the board, hospice care just does a phenomenal job of reducing costs associated with the end of the patient’s life,” Carter Bakkum, senior data analyst for healthcare insights at Trella Health, told Hospice News. “Skilled nursing claims are also massively reduced.”

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During the third quarter of 2021, the average total cost of care in the last month of life was close to seven times lower among hospice patients than those in other settings, Trella found. Hospice patients also had 10 times fewer inpatient claims during their final month compared to other decedents.

Hospice saves billions of dollars in health care expenditures, an amount that could grow exponentially if more terminally ill patients accessed the benefit earlier in the course of their illnesses, the report indicated.

In addition to the cost savings, this track record means a better quality of life patients and families who likewise wish to avoid hospitalization.

“When value-based care [expands], I think a lot of people are just going to look at the cost reductions, but there’s a major element of the increasing quality of life,” Bakkum said. “Very few Medicare beneficiaries want to spend their last month of life going to hospitals or going into ERs trying to get stabilized. They want to spend that time with their family, getting the comfort that they need.”

The hospice space took its first steps towards value-based payment last year with the launch of the Medicare-Advantage (MA) hospice carve-in.

Participation in the four-year demonstration, formally known as the hospice component of the value-based insurance design (VBID) model, doubled between 2021 and 2022, according to the U.S. Centers for Medicare & Medicaid Services (CMS).

The demonstration also coincides with rising consumer interest in MA, in which close to half of all Medicare beneficiaries are now enrolled, CMS reports.

Depending on their geographic markets, MA plans will likely represent a high proportion of the patients that post-acute providers will care for in the coming years, including hospices, according to the Trella report.

Providers need to prepare to demonstrate their value to these payer organizations, particularly because many hospices will encounter fierce competition for contracts as the program expands.

In these negotiations, robust data on quality and cost optimization will give hospices a competitive edge, Trella indicated.

All of these factors point towards significant hospice growth during the next 10 years, but this means individual providers must begin to prepare themselves to handle the anticipated rise in volume.

“Hospice agencies need to invest a ton in their business right now,” Bakkum said. “Hospice agencies specifically need to use this time before the massive influx to invest in their business, or they will just be totally swamped with patients in the coming years.”

Priority investments for providers include ensuring they have sufficient workforce to meet that demand, as well as a growing list of referral partners and the infrastructure necessary to collect the data that payers want to see. This means integration of emerging technology such as sophisticated artificial intelligence and machine learning tools to identify eligible patients earlier, calculate their market share, and optimize the speed of claims and reimbursement, Bakkum told Hospice News.

But among these, the workforce issue is likely at the top of the list.

Labor pressures are the industry’s strongest headwind, and hospices are fighting tooth and nail to rebuild their diminishing workforce while competing for hires with other, often larger, health care employers.

Many providers already that have devoted more resources during the past two years have tried revamping their recruitment and retention efforts. Some have invested in clinical education programs at colleges and universities, raising wages and offering signing bonuses, among a host of other initiatives. 

Without effective strategies to address this problem, providers’ ability to ensure that the supply of service can meet the demand is severely threatened.

On the other side of the coin, building relationships with new referral sources is essential to access those incoming patients.

This will require more than acumen in sales and marketing. The Trella report indicated that educating physicians in other settings on the benefits of hospice care remains a crucial area of improvement.

As they pursue growth, providers should be sizing up new markets for expansion, with a focus on geographies that currently lack sufficient access to care, according to Bakkum. Many of these areas are rural.

Trella data indicates significant variation in utilization across regions, thus showing that certain markets need either more providers to come in or for existing local operators to expand.

When setting up shop in markets with low population density, hospices are faced with a “traveling salesman problem,” according to Bakkum. They need to find the most efficient use of their time and resources to not only maximize their returns, but to simply reach patients that are geographically dispersed.

“With the increased demand that’s going to come, you need to have a really sophisticated model for optimizing and reducing all the costs associated with travel time,” Bakkum said. “This includes making sure they have all the tools for the therapies they are providing to patients. Better time delivery and more of the needed equipment is absolutely essential, especially in a razor thin margin market.”

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