Top Factors Fueling Investor Interest in Coming ‘Golden Decades’ for Hospice

Investors of all types have increasingly recognized the value proposition of hospice to improve quality and reduce costs at the end of life – a trend not anticipated to abate anytime soon. Staffing pressures are also a major contributing factor to the hospice investor outlook.

Nonprofit providers have largely made up the bulk of organizations in the end-of-life care space since the Medicare Hospice Benefit was established roughly four decades ago. Private equity investors have increasingly stepped into the hospice space in recent years, raising concerns among some in the industry around program integrity. But professionals in the sector foresee a healthy investor mix as helping to propel the industry forward.

Hospices can expect a continued diverse mix of investor interest in coming years, according to David DeGumbia, senior vice president and chief development officer at Compassus. The Nashville-based hospice, home health and palliative care provider is a portfolio company of the private equity firm TowerBrook and the nonprofit health system Ascension Health.


Two driving forces in both the for-profit and nonprofit spheres are hospices’ cost-savings potential and decades of evidence-based quality metrics, DeGumbia said.

“Hospice is such an important part of the health care continuum [and] hospice is going to continue to grow,” DeGumbia said at Hospice News’ recent Elevate conference in Washington D.C. “The future is so bright because we need to get patients into hospice quicker not only for the cost savings to the ecosystem, but also what it does for families and patients. We’re going to start to see the whole continuum come together … as we start to deliver great cost-effective, value-based care to the health system in the United States.”

David DeGumbia Hospice News photo by Merz Photography
David DeGumbia, senior vice president and chief development officer, Compassus

Investors see big growth potential

Hospice care saves Medicare approximately $3.5 billion for patients in their last year of life, representing an overall 3.1% reduction potential, according to recent research from National Hospice and Palliative Care Organization (NHPCO), the National Association for Home Care & Hospice (NAHC) and NORC at the University of Chicago.


These services are vastly underutilized by dying populations nationwide. Roughly half of Medicare decedents utilize hospice each year, reported the U.S. Centers for Medicare & Medicaid Services (CMS).

The untapped potential of hospice utilization growth among a swelling aging population is among the large drivers of investor interest, according to Eugene Goldenberg, managing director at Edgemont Partners.

“The [hospice] business is going to be significantly larger than it is today,” Goldenberg told Hospice News at the conference. “The baby boomer wave is not yet being served by hospice in any meaningful way. The peak utilization of hospice today is actually by the silent generation, which came before the baby boomers. With hospice utilization sitting today in the ballpark of about 50%–51%, I could absolutely see getting into the 70%. All that would take is an incremental 1% utilization [increase] per year, and that’s very, very reasonable. From 2025 to 2055 and the next 20–30 years after that is going to be the ‘golden decades’ of hospice utilization.”

Eugene Goldenberg Hospice News photo by Merz Photography
Eugene Goldenberg, managing director, Edgemont Partners

Staffing needs driving consolidation

Demographic trends have made the hospice market an “undeniable” area of investor interest expected to grow “dramatically” in coming years, according to Tom Lillis, partner at Stoneridge Partners Strategic Consulting.

However, supporting a growing hospice patient population will take significant resources in clinical workforce development, he indicated. Greater investments are needed to educate, recruit and retain sufficient hospice staff volumes in a competitive health care workforce environment, Lillis said.

Staffing pressures are fueling hospice deals among private equity investors and nonprofit organizations alike, according to Lillis. Among a hospice’s largest selling points are its organizational culture and its ability to retain quality clinicians, he stated.

“[With] staffing for hospice, you can have the greatest [staffing] model but if you don’t have the personnel, you’re challenged,” Lillis told Hospice News at the conference. “We’re seeing more and more deals that in actuality are almost considered more a consolidation where they’re buying for the staff. One of the recommendations is to respect their tenure level, because if you don’t then you’re telling those clinicians that they’re free agents and you don’t want to do that. That’s a big part of what you’re buying.”

Tom Lillis Hospice News photo by Merz Photography
Tom Lillis, partner, Stoneridge Partners Strategic Consulting

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