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A study of 191 hospices acquired by private equity firms from 2018 to 2022 found Medicare spending per stay rose 5.9% compared with similar for-profit hospices that were not acquired. The increase was tied mainly to stays averaging 6.3 days longer and a shift in the patients admitted, not to increased care visits.
Medicare spending per hospice stay rose 5.9% after private equity firms acquired for-profit hospices, compared with spending at similar hospices that were not acquired, according to a study published in the November issue of Health Affairs. Researchers linked the increase mainly to stays averaging 6.3 days longer and a shift in the kinds of patients admitted, rather than to more visits or other measured services.
The researchers compared 191 for-profit hospices acquired by private equity firms between 2018 and 2022 with 1,305 matched for-profit hospices that remained outside private equity ownership. Using Medicare fee-for-service claims, they examined changes during the two years before and after each acquisition and compared them with changes at the control hospices.
After acquisition, patients were less likely to have stays of under a week, more likely to remain in hospice for more than six months, and more likely to be discharged alive. The share of patients with dementia rose from 22.6% to 23.8% at acquired hospices, while it did not change at the comparison hospices. The study says these patterns contributed to longer stays and higher spending per stay.
The researchers found no significant increase in total visits or time spent on visits per week. They reported no increase in physician, nurse or home health visits and found that patients received fewer social work visits. The findings do not establish why the patient mix changed; the researchers said the pattern was consistent with more admissions of people who needed less ongoing care.
How Longer Stays Affect Medicare Costs
The findings matter because Medicare pays hospices a set daily fee, regardless of how much care a patient needs on a given day. When a patient stays longer, Medicare generally pays for more days. The same daily payment can also cover patients with very different service needs, leaving hospices to pay the cost of visits and care out of that amount.
That payment structure makes both length of stay and the mix of patients relevant to Medicare spending and to the care families receive. The study raises a policy question: whether a flat daily rate adequately accounts for differences in clinical needs, particularly if hospice operators respond to it by admitting more patients who require fewer services. The study documents associations after acquisition; it does not show that every private equity-owned hospice changed its practices in the same way.
Hospice is used by nearly half of people who die in the United States, according to the source report, and up to a quarter of Medicare spending occurs in the last year of life. Changes in hospice spending and access can therefore affect a large group of beneficiaries, their families and the federal program.
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Study Compared Acquired and Independent Hospices
The analysis focused on a specific ownership change: private equity buying hospices that were already for-profit. Researchers asked whether care and spending changed after these purchases compared with other for-profit providers serving patients under the same Medicare payment system. Their design compared before-and-after changes, rather than simply comparing all private equity-owned hospices with all other hospices.
Hospice ownership in the United States has shifted over two decades from a sector that was mostly nonprofit to one that is nearly three-quarters for-profit, the source report says. Private equity firms have become a growing owner. In a typical buyout, a firm uses investor funds and borrowing to purchase a company; the acquired company may then be responsible for repaying the debt. That general financing structure provides context for the study but does not establish that debt caused the spending or care patterns it found.
The study’s senior author, Zirui Song of Harvard Medical School, said the purpose of hospice is to help terminally ill people approach the end of life with dignity while limiting pain and suffering. His comments framed the results as a question about both patient needs and whether the payment system can remain financially sustainable.
“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 analysis shows differences associated with private equity acquisition, but the reported findings do not establish why individual patients were admitted, why stays lengthened, or whether ownership directly caused those changes. Researchers said the patterns were consistent with a shift toward patients needing less care; that explanation remains an interpretation of the observed data.
The source report does not provide enough detail to determine how results varied across individual firms, hospice locations, patient groups or acquisition strategies. It also does not establish the effect on patient outcomes such as comfort, symptom management or family experience. The finding of fewer social work visits is a measured service change, but its consequences are not specified in the report.
The researchers discussed payment reform as a possible response, including adjusting daily payments for patients’ clinical needs. The supplied material does not report a final policy proposal or an adopted change. Any risk adjustment could also create incentives to code diagnoses to increase payment, a concern noted in the report.
Payment Reform Remains Under Discussion
The researchers said changes to Medicare’s hospice payment system may be warranted. One option they described is adjusting the daily rate according to a patient’s clinical needs, using diagnoses in a way similar to hospital payment systems. Such a change could reduce incentives to favor patients with lower care needs, but the report also warns that it could encourage coding aimed at maximizing payment.
No implementation timetable or specific federal action is identified in the source material. The next policy debate will need to weigh whether payment adjustments better reflect care costs while protecting access and avoiding new incentives that distort diagnosis or admission decisions. Further evidence on patient outcomes and variation across providers would help clarify how the spending changes affect hospice care.
Key Questions
How much did Medicare spending rise after the acquisitions?
The study found spending per hospice stay rose 5.9% at acquired hospices compared with similar for-profit hospices that were not acquired. The comparison is per stay, not a reported increase in total Medicare hospice spending.
Why did spending per stay increase?
Researchers linked the increase mainly to patients staying an average of 6.3 days longer. Patients were also more likely to be discharged alive, and the share with dementia increased. The study did not find an increase in total visit time or total visits per week.
Did acquired hospices provide more services?
The study found no significant rise in total visits or time spent on visits per week, and no increase in physician, nurse or home health visits. It reported fewer social work visits. The source does not establish the effect of that reduction on patients or families.
Does the study prove private equity caused the changes?
No. It compares changes at 191 acquired hospices with changes at matched for-profit controls and reports differences after acquisition. The findings support an association, but the supplied report does not establish the reasons for each change or prove direct causation.
What policy change did the researchers raise?
They said Medicare hospice payment changes may be warranted and discussed adjusting the daily payment for clinical need. The source report does not say that a change has been approved or scheduled, and it notes that risk adjustment could encourage coding to maximize payments.
Source: medicalxpress.com
