TL;DR
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A study of 191 for-profit hospices acquired by private equity firms from 2018 to 2022 found Medicare spending per stay rose 5.9% compared with similar hospices that were not acquired. The increase was linked mainly to stays averaging 6.3 days longer and a shift in patient mix; researchers did not find more clinical visits after acquisition.
A study published in the November issue of Health Affairs found that Medicare spending per hospice stay rose 5.9% after private equity firms acquired for-profit hospices, compared with similar hospices that were not acquired. The increase was driven mainly by patients staying an average of 6.3 days longer, while researchers found no increase in the services measured.
The researchers analyzed Medicare fee-for-service claims for 191 hospices acquired between 2018 and 2022 and compared them with 1,305 matched, for-profit hospices that remained outside private equity ownership. They examined changes in the two years before and after each acquisition against changes at the comparison hospices.
After acquisition, patients were less likely to have stays of under a week and more likely to stay beyond 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 the share at comparison hospices did not change, according to the report.
The study found no significant rise in total visits or time spent on visits per week. It also found no increase in physician, nurse or home health visits, and reported that patients received fewer social work visits. The researchers said the results point toward longer stays and a change in the mix of patients, rather than more measured care, as key factors behind the spending increase.
How Longer Stays Affect Medicare
The findings matter because Medicare generally pays hospices a set daily fee, regardless of the amount of care a patient needs that day. A longer stay can increase the total amount Medicare pays, while patients whose needs require fewer services may cost hospices less to serve under that payment structure. The study documents an association after acquisition; it does not establish that private equity ownership alone caused every change.
Hospice is a major part of end-of-life care financed by Medicare. The source report says nearly half of people who die in the United States use hospice as Medicare beneficiaries, and up to a quarter of Medicare spending occurs in a person’s final year of life. Changes in stays and patient mix can therefore matter to both public spending and whether the payment system supports care for people with different illnesses and needs.
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Private Equity and Hospice Payment
The study focused specifically on hospices that were already for-profit before acquisition. Researchers asked whether outcomes changed when private equity firms bought them, compared with other for-profit providers serving patients under the same Medicare payment system. The comparison helps distinguish the post-acquisition pattern from trends affecting for-profit hospices more broadly, though it cannot answer every question about individual ownership decisions.
The report describes a hospice market that has shifted over the past two decades from mostly nonprofit ownership to nearly three-quarters for-profit, with private equity firms becoming a fast-growing owner group. In a typical private equity deal, purchases combine investor funds and borrowing; debt is generally assigned to the acquired company. The study’s authors said the daily payment structure may create incentives related to patient needs and length of stay. They raised adjusting payments for clinical need as one possible policy option, while noting that risk adjustment could also create incentives to code diagnoses to increase payment.
“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
Limits of the Study Findings
The reported comparison does not establish why individual patients were admitted, how ownership decisions were made, or whether changes at a particular hospice reflected management choices, local conditions or other factors. The findings describe averages across the study groups and do not show that every acquired hospice changed in the same way.
The source report does not provide detailed estimates for every service category, the full range of patient outcomes, or a breakdown of how the spending increase varied across hospices. It also does not establish whether longer stays or live discharges were appropriate for each patient. The research found no increase in measured visits, but that alone does not settle the quality or suitability of care in individual cases.
Payment Policy Under Review
The researchers said policy changes to Medicare’s hospice payment system may be warranted. One option they identified is varying the daily fee according to a patient’s clinical needs, using diagnoses in a way similar to hospital payment. They also cautioned that a risk-adjusted system could encourage providers to code diagnoses in ways that maximize reimbursement.
The report does not identify a specific policy change or implementation timetable. Any next steps would require decisions by policymakers and further consideration of how payment changes affect patient access, care quality, provider finances and Medicare costs. For now, the study adds evidence about what changed after the acquisitions it examined, while leaving the causes and the best payment response open.
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 similar, non-acquired for-profit hospices.
What drove the increase in spending?
Researchers linked much of the increase to stays that were an average of 6.3 days longer. Patients were also more likely to be discharged alive, and the patient mix shifted toward a higher share of people with dementia.
Did acquired hospices provide more visits?
The study found no significant increase in total visits or visit time per week, and no rise in physician, nurse or home health visits. It reported fewer social work visits.
Does the study prove private equity caused the changes?
No. It reports differences after acquisition compared with matched hospices that were not acquired. That comparison identifies an association but does not establish that ownership alone caused the changes at every hospice.
What policy response did the researchers raise?
They said Medicare could consider adjusting hospice payments for patients’ clinical needs. They also warned that risk adjustment could encourage coding practices aimed at maximizing payment.
Source: medicalxpress.com
