Hospice spending increased 5.9% after private equity takeovers, with researchers pointing to changes in patient admissions rather than expanded care services, a Harvard-led study found.
Private equity ownership of for-profit hospices was associated with higher Medicare spending, longer patient stays and an increase in live discharges, according to a new study published in the November issue of Health Affairs.
“The more likely explanation for the longer stays and live discharges was a shift toward admitting patients who required less care,” said senior author Zirui Song, associate professor of health care policy at Harvard Medical School and associate professor of medicine at Massachusetts General Hospital, in a statement.
Researchers found that Medicare spending increased by an average of $993 per hospice stay following private equity acquisitions, up from a baseline of $16,922. The increase was primarily driven by patients remaining in hospice an average of 6.3 days longer than those receiving care at comparable, non-private equity-owned providers.
The findings suggest that changes in the types of patients admitted, rather than increases in care provided, may help explain the higher spending, study authors reported.
The study examined 191 for-profit hospices acquired by private equity firms between 2018 and 2022 and compared them with 1,305 similar for-profit hospices that were not acquired. Researchers analyzed Medicare fee-for-service claims from the two years before and after each acquisition.
Researchers also found an increase in admissions among patients with dementia, whose share of hospice patients rose from 22.6% to 23.8%. The proportion remained unchanged at comparison hospices.
The study found no corresponding increase in the services provided after private equity acquisitions. Total visits and time spent providing care each week did not significantly change. Patients also received fewer social work visits.
There was no significant increase in physician, nursing or home health visits that might otherwise help explain longer hospice stays, according to the researchers.
The findings come as private equity firms become an increasingly prominent force in the U.S. hospice industry.
Over the past two decades, hospice ownership has shifted from predominantly nonprofit organizations to nearly three-quarters for-profit providers. Private equity firms have emerged as the fastest-growing category of owners.
Changes to Medicare’s hospice reimbursement system could help address financial incentives that may influence which patients providers admit, the research indicated. One potential approach would be to adjust daily payments according to patients’ clinical needs and diagnoses, similar to payment models used in hospitals, they said.
However, the authors cautioned that risk-adjusted payments could create incentives for providers to increase diagnostic coding to qualify for higher reimbursement.
Another option would be to establish separate payments for specific services, accompanied by oversight to prevent unnecessary care and improper billing, the study authors proposed.
“The goal of hospice is to provide respectful, person-centered care that helps terminally ill people approach end of life with dignity, while minimizing pain and suffering,” Song said.
Companies featured in this article:
