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A study of 191 for-profit hospices acquired by private equity firms found Medicare spending per stay was 5.9% higher after acquisition than at matched, non-acquired for-profit hospices. The increase was driven mainly by stays that were 6.3 days longer on average, without an increase in measured visits or time spent providing care.
A study of 191 for-profit hospices acquired by private equity firms found that Medicare spending was 5.9% higher per hospice stay after acquisition than at similar for-profit hospices that were not acquired. The difference was mainly associated with stays that averaged 6.3 days longer, rather than an increase in measured patient visits or care time, according to research published in the November issue of Health Affairs.
The researchers compared Medicare fee-for-service claims for the 191 hospices acquired between 2018 and 2022 with claims for 1,305 matched for-profit hospices that were not owned by private equity firms. They examined changes in the two years before and after each acquisition and compared them with changes at the control hospices. The reported spending difference is per hospice stay, not an estimate of total national spending.
After acquisition, patients were less likely to have stays shorter than a week and more likely to remain in hospice for more than six months. They were also more likely to be discharged alive. The share of patients with dementia rose from 22.6% to 23.8% at acquired hospices, while that share did not change at the comparison hospices.
The study found no significant change in total visits or time spent on visits per week. It did not find increases in physician, nursing or home health visits, and reported fewer social work visits. The authors said the pattern was consistent with a shift toward patients who generally need less ongoing care; the findings do not by themselves establish why hospice stays lengthened or why the patient mix changed.
How Medicare’s Daily Hospice Fee Matters
The results matter because hospice payment is structured as a set daily fee, regardless of how much care an individual patient requires that day. Under that system, a longer stay can mean more daily payments, while the costs of visits and other services are covered from that fee. The study’s authors said the findings raise questions about whether the payment approach adequately reflects differences in patients’ needs.
Hospice is a major part of care near the end of life: the report says nearly half of people who die in the United States are Medicare beneficiaries who use hospice, and up to a quarter of Medicare spending occurs in the last year of life. The study documents a spending change at the hospices examined; it does not show that every acquisition led to the same result or determine how the change affected patient comfort, family experience or quality of care.
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Private Equity’s Growing Hospice Role
The study focused on a specific question: whether ownership by private equity changed spending or care at hospices that were already for-profit. The researchers compared them with other for-profit providers, rather than with nonprofit hospices, to examine the effects of acquisition within the same broad ownership and payment setting.
According to the report, U.S. hospice ownership has shifted over two decades from mostly nonprofit to nearly three-quarters for-profit, with private equity firms becoming a fast-growing owner type. The report describes a typical private equity purchase as using investor funds and borrowing, with acquired companies responsible for repaying debt. That business model is background to the research, not proof that debt or a particular management decision caused the study’s findings.
Senior author Zirui Song, an associate professor at Harvard Medical School, has previously studied private equity in health care. In this hospice study, the researchers assessed spending, length of stay, patient characteristics and service use in Medicare fee-for-service claims. The findings were published in Health Affairs.
“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.”
— Zirui Song, senior author and associate professor of health care policy at Harvard Medical School
What the Claims Data Cannot Show
The study reports an association between private equity acquisition and higher Medicare spending per stay; it does not establish that the acquisitions alone caused the changes. Claims data show recorded payments, patient characteristics and billed services, but do not fully explain why a hospice admitted a particular patient, why a patient stayed longer, or the quality and experience of care.
The findings also do not establish whether longer stays or live discharges were appropriate for individual patients, or whether they resulted from changes in eligibility decisions, patient needs, hospice practices or other factors. The report does not provide evidence that the reduction in social work visits caused the longer stays. The extent to which the results apply to other hospice owners, Medicare payment arrangements or care settings is also uncertain.
Payment Policy Questions Ahead
The researchers said changes to Medicare’s hospice payment system may be warranted. One option they identified is adjusting the daily fee according to a patient’s clinical needs, using diagnoses in a way similar to how hospitals are paid. They also cautioned that risk adjustment could encourage providers to code patients in ways that maximize payment. The study does not specify that policymakers have adopted or scheduled such a change.
The immediate policy question is how to balance payment that reflects the resources different patients need with safeguards against incentives to select patients or alter coding. Further work would be needed to assess possible reforms, their effects on access and care, and whether the spending and patient-mix patterns persist beyond the study period.
Key Questions
How much did Medicare spending rise after the acquisitions?
The study found 5.9% higher Medicare spending per hospice stay at acquired hospices compared with matched for-profit hospices that were not acquired. This is a per-stay finding, not a reported increase in total national hospice spending.
What was associated with the spending increase?
Patients stayed an average of 6.3 days longer after acquisition. The researchers also found fewer very short stays, more stays longer than six months, and more live discharges. They did not find a significant increase in total weekly visits or time spent on visits.
Did the study prove private equity caused the changes?
No. The researchers compared changes at acquired hospices with changes at matched controls, but the findings show an association and do not establish that private equity ownership alone caused the spending or patient-mix changes.
What payment change did the researchers discuss?
They said Medicare could consider adjusting the daily hospice fee to reflect clinical need. They also warned that such risk adjustment could create incentives for coding intended to increase payment.
Source: medicalxpress.com
