Hospice leaders will need to keep their eyes on five key trends in the new year when it comes to compliance, business operations and finance.

Coupled with these trends is rising utilization. Hospice utilization reached 51.7% among Medicare decedents 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.

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.

Barring some extreme event — like a global pandemic, for example — a decline in utilization is unlikely in 2025 and beyond. In human terms, this means that millions of terminally ill patients will receive compassionate, person-centered care at the end of their lives. From a business perspective, this means hospice companies will have to rise to meet burgeoning demand and staff shortages and financial headwinds, including reimbursement that hasn’t kept pace with inflation rates.

In the midst of this, regulatory oversight continues to tighten as hospices contend with a shifting mergers and acquisitions market, increasing adoption of new(er) technologies and an expanding suite of services.

The end of the beginning in the fight against fraud

Hospices have been feeling the regulatory heat in recent years and 2024 was no exception. The past year has seen a slew of regulatory developments aimed at improving quality and combating fraud in the hospice industry.

The drive by regulators and members of Congress to strengthen oversight is fueled by two main factors. First, there are the two July 2019 reports on hospice quality from the Office of the Inspector General (OIG) in the U.S. Department of Health and Human Services (HHS). These spurred passage of the Helping Our Senior Population in Comfort Environments (HOSPICE) Act, which mandated the establishment of a hospice Special Focus Program (SFP), among other actions.

The second driving force was the emergence of fraudulent actors in the space in relatively large numbers, particularly concentrated in California, Nevada, Arizona and Texas.

One of the most significant changes is the implementation of the hospice SFP by the U.S. Centers for Medicare & Medicaid Services (CMS), which is being implemented this year.

Though the hospice community generally has voiced support for the program, many contend that the agency’s methodology for identifying hospices for the SFP is deeply flawed. Stakeholders, including hospice providers and members of Congress, have called on CMS to postpone the program and revise that algorithm.

The program will have the authority to impose enforcement remedies against hospices with poor performance based on its algorithm. Hospices flagged by the SFP also will be surveyed every six months rather than the current three-year cycle and could face monetary penalties or expulsion from the Medicare program. CMS will also make public the names of hospices selected for the SFP.

CMS will also make public the names of hospices selected for the SFP, and its first cohort has already been announced. This could create a “Scarlet Letter” for providers on the list that could deter patients and referral partners from working with those organizations. For some, rightfully so, but the possibility exists that some better quality hospices could erroneously be swept up into the program, according to Dr. Steven Landers, CEO of the National Alliance for Care at Home (the Alliance).

“We think that [the CMS] methodology [for the SFP] is likely flawed. It is likely to harm beneficiaries if it’s released, because it’s going to steer people away potentially from quality providers,” Landers said in a press briefing. “It might make them even fearful about hospice care, which is the last thing we want to see happen. At the same time, [CMS’] implementation misses likely lots of truly poor performing hospices that should be called out and addressed.”

This year, the hospice community will see the results of the SFP play out. Hopefully, CMS can use any lessons learned to work out potential kinks in the program. In the interim, hospice advocacy and lobbying groups like the Alliance, LeadingAge and the National Partnership for Healthcare and Hospice Innovation (NPHI) will be working behind the scenes to seek changes to the program’s structure, those organizations have indicated.

In addition to the SFP, auditing activity by Medicare Administrative Contractors (MACs) and other entities employed by CMS is unlikely to slow down and may heat up.

More than half of hospices nationwide underwent multiple audits simultaneously during 2023, according to survey findings from LeadingAge, the Alliance and NPHI.

A range of audit types are happening with rising frequency, including Targeted Probe and Education (TPE), Supplemental Medical Review Contractors (SMRC), Unified Program Integrity Contractors (UPIC) and Recovery Audit Contractors (RAC). A main purpose of most audit types is to identify hospice providers with frequent errors on their billing claims or other activity that CMS considers to be unusual.

General Inpatient Care (GIP) has been a particular concern for auditing entities. Hospices have increasingly come under a regulatory microscope around GIP in particular during the past few years, particularly when it comes to stays longer than five days. An OIG study of hospice billing claims submitted during 2012 found that 31% of the GIP claims that providers submitted to CMS were inappropriately billed — to the tune of an estimated $268 million that year alone.

The industry will also likely see efforts continue to combat fraud, including the aforementioned audits and medical reviews. This year, CMS expanded its enhanced oversight for new hospices in fraud-ridden states, including California, Nevada, Arizona and Texas. A key component of the enhanced oversight includes a medical review of claims before Medicare will pay them.

The newly expanded oversight program will cover any new hospice or those pursuing a change of ownership. These companies may also undergo other forms of payment and medical reviews. Potential penalties for noncompliance could range from claims denials to expulsion from the Medicare program.

This is in addition to a rising number of investigations to root out fraud by agencies like CMS, the OIG, the U.S. Justice Department, the FBI and state authorities, which can lead to criminal prosecutions for bad actors.

Pendulum swings on M&A

The hospice industry will likely see a resurgence in mergers and acquisitions this year, though likely not to the record-breaking levels of 2019 through 2022. 

The hospice M&A market hit a slump in 2023 and 2024 due to a range of factors. These included rising interest rates and inflation, intensive regulatory activity, macroeconomic issues and gaps between sellers’ valuations and the amounts that buyers were willing to pay. Also, after the flurry of deals that came in 2021 and 2022, many companies took these years to focus on integration and value creation for their newly acquired assets.

But in 2025, the pendulum could start swinging in the other direction.

One key element is the Federal Reserve’s 0.5% interest rate cut in 2024, with more reductions expected over the course of this year.

Interest rates have widespread implications for the hospice mergers and acquisitions market, particularly when it comes to private equity investments. PE firms, and some publicly traded companies, tend to finance their acquisitions by taking on debt. The rate reduction — from close to 5.5% to between 5% and 4.75% — means that the flow of dollars may pick up as borrowing gets less expensive.

Rate hikes are the Fed’s primary weapon against inflation, which climbed at a record pace during 2022 and last year. Now, inflation is slowing down, dropping from 9.1% in 2022 to 2.5% currently, according to the Fed.

The rate reductions could boost not only deal volume, but valuations of companies that come up for sale.

So, an upswing in private equity buying and selling could materialize. A number of large assets purchased by PE firms in 2019 through 2022 are reaching maturity and ready to be sold once again. This is at a time when private equity firms are sitting on more than $800 billion in dry powder, according to the M&A advisory firm The Braff Group.

The prior two years also saw some earnings stabilization among publicly traded companies. Most of the major public hospice companies saw revenue increase year-over-year and sequentially during 2023, with one or two outliers. This trend will likely also fuel more acquisitions.

Consolidation will also likely continue to pick up in the nonprofit sector. Increasingly, nonprofits are pursuing acquisitions and affiliations, as well as forming regional collaboratives.

Rising operating costs and the need to build scale are key reasons that more nonprofits are banding together. Another important factor is the need to prepare to compete with other providers within proliferating value-based payment systems.

The gradual move toward value-based payment models is one of the biggest drivers for these types of arrangements.

Partnerships and affiliations can help hospices mitigate the payment reductions that will likely occur within Medicare Advantage, as health plans generally seek to negotiate for lower rates. These relationships can help generate cost savings and bolster hospices’ bargaining power.

Another consideration is simply time. More founders who began their organizations when the Medicare Hospice Benefit was established in the 1980s are reaching retirement. A large contingent will be seeking an exit strategy that will sustain their businesses.

Broader horizons with technology

Hospice providers, along with the rest of health care, are increasingly relying on technology for clinical and business operations. A rising number of providers are turning to emerging technologies,including artificial intelligence (AI), telehealth and robotic process automation (RPA), among other types of rapidly evolving technologies.

For a number of years now, providers have leveraged AI to predict when a patient may become eligible for hospice or to determine the best time to begin palliative care. These practices are gradually becoming more widespread, and providers are also exploring new ways to apply AI.

Systems like AI can help hospices allocate the appropriate resources for patients’ changing needs as well as reduce redundancies in tasks like clinical documentation. As more technology seeps into the health care world, some hospices are leveraging new systems to improve compliance, standardize processes and anticipate patients’ needs.

An emerging trend is using AI for back office functions like scheduling and resource allocation. Providers are using these systems to analyze patterns in patient needs and staff availability, thereby optimizing schedules for patient visits. The theory is that this will help patients receive the right care at the right time, while reducing the burden on staff.

Hospices are also leveraging AI to detect potential errors in documentation or medication reconciliation to improve compliance and patient safety. In addition, they are using these technologies to assess risks to patients, such as the likelihood of wounds or falls. Some providers also use AI to screen potential candidates for hiring.

The number of potential applications for AI in hospice care is likely to grow as time goes on and these systems become more sophisticated.

All this being said, 2025 also will see more regulatory action governing how AI is deployed by health care providers and insurance companies. This trend started to pick up steam in the second half of 2024. A U.S. Senate subcommittee in October issued a report alleging major insurance companies leverage AI tools to inappropriately reject prior authorization claims, particularly related to post-acute care. Meanwhile, states such as Utah, Colorado and California have enacted legislation to govern certain uses of AI in healthcare.

So, while hospice providers will continue to embrace AI in 2025, they also need to be cognizant of the evolving regulatory landscape and the emergence of more refined best practices for how such technology is deployed in the health care sector.

New frontiers of care

“Hospice is no longer just hospice,” is a saying that has been floating around the space since at least 2019. Providers nationwide have expanded their scope of services to include other types of care, most prevalently palliative care.

However, more operators are now moving into the Programs for All-Inclusive Care of the Elderly (PACE) arena, while others are investing in disease-specific programs.

To qualify for PACE, residents must be 55 and older, in need of nursing home-level care and able to safely receive community-based services in a home-based setting. Most PACE participants are dually eligible for both Medicare and Medicaid, the CMS reported.

Currently, 155 PACE programs serve more than 70,000 participants in 32 states and the District of Columbia, according to the most recent data from the National PACE Association. However, new programs continue to crop up around the country.

PACE providers receive monthly Medicare and Medicaid capitated payments for each enrollee. They are also Part D providers that are responsible for their patients’ medications and pharmacy services.

Investing in PACE programs has benefits for hospices, but also comes with risks. These programs have complex licensing processes and starting them up is capital intensive. It often takes as long as three years to bring them into the black.

Nevertheless, this is the direction in which many hospice providers are going. By integrating with PACE services, hospices can focus on person-centered care, enhancing access and collaborating with community resources, paving the way for a more equitable and effective care system designed to better meet the needs of aging populations.

Within the past two years, a range of providers have launched PACE programs, including the Florida-based nonprofits Alivia Care and Empath Health, Virginia-headquartered Blue Ridge Hospice, Bluegrass Care Navigators in Kentucky and Hosparus Health, among others.

A second type of diversified services is gaining ground among hospice operators, those geared toward patients who have specific diagnoses and their unique needs.

One of the most frequently occurring examples is dementia care. Hospices are designing new programs around the needs and symptoms that these patients experience, as well as bolstering support for their family caregivers.

Hospice of the Chesapeake in 2024 unveiled a new dementia care program aimed at providing improved emotional, educational and practical support for patients and their caregivers as their conditions progress. The new dementia services are designed to support home-based care for dementia patients and provide assistance to their families and caregivers, including education on the skills and information needed to manage their loved ones’ care safely.

The Connecticut Hospice Inc. also recently expanded its disease-specific program for dementia patients, dubbed Magnolia Care. The program, which launched three years ago, offers specialized services for patients with dementia-related conditions nearing the end of life.

Patients with dementia-related conditions often face more complicated end-of-life trajectories that require caregivers to have a deeper well of supportive resources and knowledge compared to others. Dementia-related illnesses are also among the fastest growing diagnoses among hospice patients.

Further growth in these types of programs can be expected, driven in part by the Center for Medicare and Medicaid Innovation’s Guiding an Improved Dementia Experience (GUIDE) payment model demonstration. The model is designed to address care coordination, behavioral, medical and functional needs.

More than 40 hospice- and palliative care-specific organizations are participating, including Bluegrass Care Navigators’ Palliative Care Center, as well as Lower Cape Fear LifeCare, Hospice of Wake County, Hospice of the Western Reserve and Cedar Valley Hospice, among others.

Other types of disease-specific hospice programs are also growing. Case in point, last year the North Carolina-headquartered health system Novant Health launched a new palliative care program to help improve quality of life for patients with heart failure, in partnership with the hospice and palliative care provider Lower Cape Fear LifeCare.

The hospice provider VIA Health also has long invested in disease-specific programs. In 2024, the North Carolina-based nonprofit launched a program to amplify its support for congestive heart failure patients.

The organization recently achieved a Heart Failure Certification from the American Heart Association, which is evaluated in accordance with evidence-based standards designed to ensure high quality care and adherence to clinical practice guidelines. The certification process takes into account six domains: program management, personnel education, patient and caregiver education, care coordination, clinical management and performance improvement.

The heart failure program is nestled in with a range of other disease-specific programs at VIA Health, including those for respiratory illnesses and dementia.

The hospice space will likely see more such programs emerge in the coming years.

Hospice as ‘personalized medicine‘

Personalized medicine, also sometimes called “precision medicine,” is gaining ground in health care. The term “personalized medicine” is often used to describe health needs based on a patient’s genetics. However, more stakeholders are applying the term to hospice and palliative care.

Personalized medicine is a step away from a “one-size-fits-all” approach to health care. The model uses information gathered from a patient’s genome to plan for care, treatment and services, and to some extent, predict a likely health trajectory, according to the National Human Genome Research Institute, part of the National Institutes of Health.

But some argue that hospice and palliative care — which focus heavily on patients’ own wishes and goals — are forms of personalized medicine, Dr. Bill Logan, national medical director and chief medical officer for Carelon Health, a subsidiary of Elevance Health (NYSE: ELV), said at the Hospice News Palliative Care Conference in Tampa, Florida.

“Every single individual is impacted somewhat differently by their disease processes. We can personalize people right down to their genome. Unfortunately, that gives you a genotype of that individual, but it doesn’t give you their phenotype,” Logan said at the conference. “Palliative care is a specialty that is specifically focused on mitigating suffering, and suffering can literally be from any aspect of that person’s life journey, or health care journey. This is the part that involves a human sitting in front of another human gathering information, getting to know that individual and planning an approach to that person’s health care journey that fits them specifically.”

Though hospice election generally does not involve genetic testing, one could argue that hospice — with its focus on interdisciplinary, person-centered care oriented around an individual’s specific needs, goals and wishes — is the original incarnation of “personalized medicine.” Hospice providers examine patients’ individual attributes to assess how to help them achieve the best possible quality of life in their final days.

Today, with the prevalence of AI and predictive analytics, this may be even more the case as hospices can now better anticipate what patients will need and when. Indeed, the use of predictive tools is a hallmark of personalized medicine in general.

Even outside of the hospice and palliative care arena, personalized medicine programs can help steer patients toward those services. Predictive analysis of genetic test results can spur hospice and palliative care referrals for patients with conditions like cancer, a study published in the journal Nature found. The researchers called for more investigation into the ways genetic testing can be integrated into palliative-oriented health care services.

Other research, tailored towards patients with kidney diseases, indicated that personalized medicine could help health care providers better understand patients’ symptomology and improve prognoses, which are key to hospice care.

Taken together, these five trends show how hospice care is evolving, clinically and from a business perspective, while staying true to its compassionate roots and core values.