Hospice care, once provided primarily by non-profit agencies, has seen a notable change over the past decade, with more than two-thirds of hospices nationwide now operating as a for-profit entity. The ability to make a quick profit in caring for people in their last days of life is attracting a new generation of hospice owners: private equity firms.
This rapid growth has caused many hospice veterans to worry that the original vision of hospice may fade away, as the demand for return on investment by those equity investment firms and the debt burden they force hospi to bear are harming patients and their families.
“Many of these transactions are driven by the motive of quick profit,” said Dr. Joan Teno, an adjunct professor at Brown University School of Public Health whose work has focused on end-of-life care. “I am very concerned that you are harming not only the dying patient, but also the family whose memory will be of a loved one who suffers because he has not received adequate care.”
According to an analysis from 2021, the number of hospice agencies owned by private equity companies rose from 106 of a total of 3,162 hospices in 2011 to 409 of the 5,615 hospices operating in 2019. In that period, 72% of hospices acquired by private equity was non-profit organizations. And these trends only accelerated in 2022.
Hospice is an easy business to start, with most care provided at home and the use of low-cost healthcare professionals. This has allowed the entry of smaller hospices, many launched with the intent to sell within a few years. Private equity firms, backed by deep investors, could then grab handfuls of smaller hospices, put together a chain, and profit from economies of scale in administrative and supply costs, before selling to an even larger chain or a ‘ other private equity firm.
Private equity-owned hospice firms argue that their model supports growth through investment for the benefit of those in their care.
“Private equity sees a huge opportunity to take small businesses that lack sophistication, don’t have the ability to grow, don’t have the capital investment, and private equity says, ‘We can get in there, put these things together, get standardization. , gain exposure and be able to create a better footprint, better access and more opportunities, ‘”said Steve Larkin, CEO of Charter Healthcare, a hospice chain owned by private equity firm Pharos Capital Group.
But he recognized that not everyone who enters the hospice market has the best of intentions.
“It’s a little scary,” he said. “There are people who have no health care business” looking to invest in hospice.
A booming industry
With the rapidly aging US population, hospice has become a booming industry. Medicare – the federal insurance program for people aged 65 and over, which pays the vast majority of end-of-life care – spent $ 22.4 billion on hospice in 2020, according to a report from the Medicare Payments Advisory Commission. to Congress. This is up from $ 12.9 billion just a decade earlier. The number of hospices billing Medicare during that period grew from less than 3,500 to more than 5,000, according to the report.
But with limited oversight and generous payment, the industry is at high risk of exploitation. Agencies receive a daily rate for each patient – this year, about $ 200 – that encourages for-profit hospices to limit spending to increase their profits. For-profit hospices tend to hire fewer employees than nonprofits and expect them to see more patients.
Many hospice nurses and social workers are booked for 30-minute appointments throughout the day, unable to spend more time with patients if needed. For-profit hospices hire more licensed practice nurses than registered nurses, who are more qualified and rely more on nursing assistants to further reduce costs. One study found that patients in for-profit hospices see doctors or nurses a third as often as those in non-profit hospices. The U.S. Government Accountability Office found in an analysis of federal data from 2014 to 2017 that patients in for-profit hospices were less likely than patients in non-profit hospices to have received visits to hospice in the last three days of life.
“The main way to get good results is to reduce visits,” said Teno.
According to the Medicare Payment Advisory Commission, for-profit hospices had Medicare profit margins of 19% in 2019, compared with 6% for non-profit hospices.
For-profit hospices also enroll a different group of patients, preferring those who are likely to stay in hospice longer. Most of the costs are incurred during the first and last week of hospice care. Patients enrolling in hospice must undergo several assessments to develop a care plan and set up medications. In their final days, when the body begins to shut down, patients often need additional services or medications to be comfortable.
“So the sweet spot is kind of a middle ground,” said Robert Tyler Braun, assistant professor of population health sciences at Weill Cornell Medical College.
This makes dementia patients particularly profitable. Doctors have a harder time predicting whether a patient with Alzheimer’s disease or another form of dementia is less than six months old, the eligibility criterion for enrollment. For-profit hospices still enroll those patients, Teno said, and will profit the longer those patients live. They tend to enroll fewer cancer patients, whose prognosis is generally more predictable but who usually die earlier.
“It’s a very simple business model,” said Teno. “Go to assisted living facilities and nursing homes, and it’s a one stop shop for shopping.”
Non profit vs. for profit
Reverend Ken Dugger worked as a chaplain in Denver for 13 years in both for-profit and non-profit almshouses.
In a for-profit hospice, “the word on the street was [that] we were the dementia hospice because we had so many patients with dementia, “Dugger said.” We ended up discharging a lot of patients because they had a long hospital stay and no longer met the criteria. “
He said about a third of hospice patients die every week, so agencies have to market heavily to replace them. This leads some hospices to make promises to families, such as daily nurse visits, which they cannot keep.
“Some people see dollars and say, ‘Wow! It’s a great opportunity to make some money here, ‘and they don’t understand that hospice isn’t easy, ”Dugger said.
The for-profit agencies argue that their non-profit counterparts have conquered the cancer patient market and are expanding access by serving patients with other diagnoses.
But if patients become too expensive, require expensive treatment or medicine, hospice providers can discharge them and take them to the hospital emergency room to get services that agencies don’t want to pay for themselves, said Christy Whitney, former CEO of HopeWest. , a non-profit hospice serving five counties in western Colorado.
A 2019 report from consultancy Milliman found that 31% of patients in nonprofits had cancer, while 15% had dementia. In for-profit hospices, 22 percent of patients had cancer and 22 percent had dementia, says the report, funded by the National Partnership of Hospice Innovation, a non-profit commercial hospice group.
Patients from nonprofits had multiple nurse, social worker and therapeutic visits. For-profit hospices, according to the report, have had longer patient stays, discharged more patients before death, and have nearly seven times higher profit margins.
Other studies have found that for-profit hospices have higher rates of complaints and shortages, provide fewer community benefits, and have higher rates of first aid and other hospital uses.
Braun said the financial pressures are worse for private equity-backed hospices than other for-profit hospices, in part because of how hospice acquisitions are funded. A private equity firm will typically only bear 10% to 30% of the acquisition cost itself, borrowing the rest. The acquired hospice not only has to generate profits to satisfy its private equity owners, it is also stuck with the costs of the loan.
Private equity firms typically try to reverse their hospice investments in three to seven years.
In 2017, Webster Equity Partners acquired Bristol Hospice, with 45 locations in 13 states, for $ 70 million. Last year, the company reportedly entered into takeover offers for the hospice chain of up to $ 1 billion.
Because hospices are inspected every three years, some are bought and sold without a state or federal inspection and sometimes without regulatory authorities even knowing about the sale.
And the quality control is weak. Hospices have a financial interest in reporting quality metrics to Centers for Medicare & Medicaid Services, but there is no penalty for poor performance related to those metrics.
Cordt Kassner, CEO of Colorado-based consulting firm National Hospice Analytics, said 17 percent of Colorado’s hospices are now owned by private equity, more than the 13 percent he found nationwide. When she looked at the metrics reported to Medicare, she found that private equity-backed companies scored below average on self-reported quality metrics.
“It’s not a huge difference,” Kassner said. “Since the nationwide scores are also tight and there isn’t much variation, we look at any kind of difference even if it’s one percentage point lower.”
Many nonprofits believe that private equity-backed hospices and other for-profit hospices are giving the industry a bad reputation.
“They get paid like us, but they don’t take the same patients. They don’t provide the covered services that should be paid per day, “said Whitney, the former CEO of HopeWest, who spoke to KHN prior to his retirement in June.” They’ve developed a kind of shadow business that has very little to do with it. dealing with the business I manage. But they have the same name. “
Larkin, the charter’s chief executive, complained about the lack of progress in quality metrics as the hospice industry grew. But he said he wasn’t limited to private equity-backed or even for-profit hospice providers.
“There are bad companies all over the place,” Larkin said. “There are people who are misaligned, there are people who have bad intentions, there are companies who are not focused on the right things.”
KHN (Kaiser Health News) is a national newsroom that produces in-depth journalism on health issues. Together with Policy Analysis and Polling, KHN is one of the three main operational programs of the KFF (Kaiser Family Foundation). KFF is a gifted non-profit organization that provides information on health issues to the nation.