The nation’s hospice utilization rate among Medicare decedents has once again surpassed 50%, for the first time since the pandemic. However, fraud issues in the space create questions around the quality of care patients are receiving.

Hospice utilization reached 51.7% in 2023, up more than two percentage points from the prior year, according to recent data from the Medicare Payment Advisory Commission (MedPAC). This is the highest rate since 2019. MedPAC observed increases in utilization across the board, even when stratified into subgroups by age, sex, race and rural or urban location.

Other indicators also suggest that the nation’s terminally ill patients have good access to hospice care, MedPAC indicated. The number of hospice care days also saw increases, as did average length of stay and average number of patient visits per week. Total Medicare hospice payments in 2023 reached $25.7 billion.

Despite these positive trends, an influx of new hospices continued in states considered hotbeds for Medicare fraud, including Arizona, California, Nevada and Texas.

Many of these new additions came in areas where additional hospices were likely not necessary based on the needs of the patient population. Georgia also saw a large spate of new providers emerge in 2023.

The total number of hospice providers exceeded 6,500 last year, serving more than 1.7 million Medicare beneficiaries, MedPAC reported. Overall, this represents a more than 10% increase in the number of U.S. hospices, almost all of which were for-profit companies.

“The number of providers entirely reflects an increase in the number of for-profit providers. A few states had very large increases in the raw number of providers such as Arizona, California, Georgia, Nevada and Texas,” Kim Neuman, principal policy analyst for MedPAC said in the commission’s December meeting. “It is notable that for four of these five states [the U.S. Centers for Medicare & Medicaid Services (CMS)] announced in August 2023 it was implementing an enhanced period of program integrity oversight for new hospices in the states.”

A key component of the enhanced oversight includes a medical review of claims before a Medicare Administrative Contractor (MAC) will pay them, among other steps.

These and other regulatory actions follow reports of potentially unethical or illegal practices among hospices, particularly among new companies popping up in those four states. CMS and the State of California have already implemented a series of new regulations designed to combat fraud, waste and abuse.

Nevertheless, the number of new providers in those states continues to climb, including in the fraud hotbed of Los Angeles County in California, MedPAC indicated.

The positive utilization trends, suggesting that patients have ample access to hospice care in most markets, spurred MedPAC to reiterate its prior recommendation that Congress and CMS eliminate the base payment rate increase for 2026.

A second factor underlying this recommendation is providers’ access to capital, in which margins are a key metric. On average, hospices had a marginal profit of more than 14% last year. However, these numbers were skewed heaving towards for-profits, which saw an aggregated 16% margin in 2023. Nonprofits’ margins hovered around 0.3%, according to MedPAC.

“Overall access to capital remains positive. In terms of for-profit providers, we continue to see substantial entry of new providers. Also, reports on publicly traded hospice companies indicated generally strong financial performance through the third quarter of 2024 …,” Neuman said. “Financial analysts report the hospice sector continues to be viewed favorably by investors. In terms of nonprofit hospices, we have less information on their access to capital.”