Hospices owned by private equity firms yield higher profit margins and spend fewer dollars on direct patient care, a new study in Health Affairs found.

For the study, researchers examined revenue and expensed data among providers using four types of ownership models: PE-backed, publicly traded companies, other for-profits and nonprofits. They found that nonprofits spend more on patient care, often driven by differences in nursing salaries.

PE-owned agencies reported the highest profits and lowest spending on patient care and nonsalary administrative services relative to publicly traded companies and other for-profit hospices.

“Our findings suggest that PE-owned hospices may follow distinct operational strategies, emphasizing nursing facility-based care and administrative efficiency while limiting direct patient care investments,” the study indicated. “Reduced spending on patient care may undermine hospice quality and shift costs to other areas of the health care system.”

The study used data from 2022 Medicare hospice cost reports. The sample consisted of nearly 3,000 freestanding hospices. Of those, 17.9% were PE-backed, 11% were publicly traded, 16.5% were nonprofits and nearly 55% were other for-profits.

Higher-acuity health care utilization has been correlated with lower hospice spending on direct patient care, including more hospital admissions, emergency department visits and intensive care unit stays, according to the research.

PE-owned hospices also spent more — and received more revenue from — nursing facility room-and-board in comparison to all other ownership models.

“To promote Medicare savings and better align payment with care delivery costs, policy makers could consider modifying the per diem model of hospice payment to reduce reimbursement when beneficiaries are co-located in nursing facilities,” the study authors wrote.