Medicare spending rose after private equity took over hospices

Medicare spent almost $1,000 more for each hospice stay after private equity firms acquired hospices, compared with similar for-profit hospices that were not purchased by private equity. Much of the increase was tied to longer stays.

Hospice providers are typically reimbursed by Medicare with a fixed daily rate. As a result, a longer stay can generate more revenue even if patients are not receiving more visits or more intensive care on an average day.

To assess the impact of these acquisitions, researchers analyzed Medicare claims for 191 hospices bought between 2018 and 2022 and compared them with 1,305 similar for-profit hospices. They looked at the two years before and after the acquisitions and published their results in Health Affairs.

Relative to the comparison group, spending rose by $993 per stay, or 5.9% from a baseline of $16,922. Patients remained in hospice an average of 6.3 days longer and were more likely to leave hospice alive.

The study found no increase in visits from doctors, nurses, or home health workers after the buyouts. In contrast, social work visits became less frequent. The share of patients with dementia also rose from 22.6% to 23.8%, while it stayed unchanged at the comparison facilities.

The authors say some hospices may have begun serving patients who require less care each day. Claims data cannot reveal why a particular patient was admitted, and people with the same diagnosis can have very different needs.

One possible policy response would be to change payment formulas so they more closely match the care a patient actually needs. The researchers caution that such a shift could also create incentives to code diagnoses in ways that increase reimbursement. Their findings highlight the need for any reform to weigh both spending and patient care.

Source: Harvard Medical School.