Hospices have become big business for private equity firms, raising concerns about end-of-life care

Posted on July 31, 2022 at 7:23 am

Markian Hawryluk

Kaiser Health News

Hospice care, which was once provided primarily by nonprofits, has undergone remarkable changes over the last decade, and now more than two-thirds of hospice nationwide are operated as nonprofits. The ability to make quick profits by caring for people in the last days of life attracts a new kind of hospice owner, a private equity firm.

Many hospice veterans are worried that their rapid growth may diminish their original hospice vision. The return on investment of these capital investment companies and the debt burden that imposes a burden on hospice hurt patients and their families.

“Many of these transactions are driven by the motivation for immediate profits,” said Dr. Joan Teno, an associate professor of public health at Brown University with a focus on end-of-life care. “I am very worried that you may be hurting not only the dying patient, but also the memorable family of your loved one who is suffering from lack of adequate care.”

According to a 2021 analysis, the number of hospice agencies owned by private equity firms surged from 106 out of a total of 3,162 hospice in 2011 to 409 out of 5,615 hospice operating in 2019. Meanwhile, 72% of the hospice acquired by private equity is a non-profit organization. And those trends accelerated until 2022.

Hospice is an easy-to-start business, most care is provided at home and uses low-cost healthcare professionals. This allowed the entry of small hospice, many of which were launched with the goal of selling within a few years. Private equity firms, backed by well-financed investors, rob a few small hospices, put the chains together, and economies of scale at management and supply costs before selling to a larger chain or another private equity firm. You can benefit from.

Private equity-owned hospice companies argue that their model supports growth through investment, which benefits the people who care for them.

“Private equity finds great opportunities to buy small businesses that are unsophisticated, incapable of growing, and lacking in capital investment. Private equity” comes there and puts them together and standardizes them. You can gain visibility and create better footprint, better access, and more opportunities, “said Charter Healthcare, CEO of Charter Healthcare, a hospital chain owned by private equity firm Faros Capital Group. Said Steverkin.

But he admitted that not everyone who enters the hospice market has the best intentions.

“I’m a little scared,” he said. “Some people don’t have a business in health care” who are considering investing in hospice.

Boom industry

The population of the United States is aging rapidly, and hospice has become a booming industry. Medicare, a federal insurance program for people over the age of 65 who pays most of end-of-life care, spent $ 22.4 billion on hospice in 2020, according to a report to Congress of the Medicare Payments Advisory Board. This is an increase from $ 12.9 billion just 10 years ago. During that time, the number of hospice billed to Medicare increased from less than 3,500 to more than 5,000, according to the report.

However, limited surveillance and high payments put the industry at high risk of exploitation. The agency is paid a daily fee (about $ 200 this year) for each patient. This allows commercial hospice to limit spending and increase revenue. Commercial hospice employs fewer employees than nonprofits and tends to expect to see more patients.

Many hospice nurses and social workers are booked with a 30-minute reservation slot throughout the day, so they can’t spend more time with their patients as needed. Commercial hospice employs more associate nurses than more skilled registered nurses and relies on nurse aides to further reduce costs. According to one study, patients with commercial hospice see a doctor or nurse practitioner one-third as often as patients with non-profit hospice. The U.S. Government’s Accountability Department analyzed federal data from 2014 to 2017 that patients with commercial hospice visited hospice during the last three days of their lives more than patients with non-commercial hospice. I found it unlikely that I had received it.

“The main way to improve profitability is to reduce visits,” Teno said.

According to the Medicare Payment Advisory Board, the Medicare profit margin for commercial hospice was 19% in 2019, compared to 6% for non-profit hospice.

Commercial hospice also enrolls different sets of patients and prefers patients who are more likely to stay in the hospice for longer. Most costs are incurred during the first and last weeks of hospice care. Patients enrolled in hospice need to undergo several assessments in order to develop a care plan and set medications. On the final day, the body begins to shut down, and patients often need additional services and medications to stay comfortable.

Robert Tyler Brown, an assistant professor of artificial health sciences at Weil Cornell Medical College, said:

It is especially beneficial for people with dementia. Doctors have a hard time predicting whether patients with Alzheimer’s disease or other forms of dementia will survive less than 6 months. This is a registration eligibility criterion. Anyway, commercial hospice is in a position to enroll those patients and benefit them the longer they live, Teno said. They tend to enroll fewer cancer patients and their prognosis is generally more predictable, but they usually die sooner.

“It’s a very simple business model,” Teno said. “If you go to Assisted Living facilities or nursing homes, it’s one-stop shopping.”

Non-profit and commercial

Rev. Ken Dagger has been a pastor in both commercial and non-profit hospice for 13 years in Denver.

In one commercial hospice, “The word of the street is [that] We were dementia hospice because there were so many people with dementia, “says Dagger. “Many patients were discharged because of their long stay and no longer meeting the criteria.”

He said that about one-third of hospice patients die each week, so agencies need to do extensive marketing to replace them. As a result, there are some hospice that make promises that family members cannot keep, such as daily visits from nursing assistants.

“Some people see the dollar and they go.” Wow! This is a great opportunity to make money, “they don’t realize that hospice isn’t easy,” Dagger said.

Nonprofits argue that nonprofits are hunting down the cancer patient market and expanding access by servicing other diagnosed patients.

However, if the patient becomes expensive and needs expensive care or medication, the hospice provider will discharge the patient, take him to the emergency room of the hospital, and receive services that the agency does not want to pay for himself. Yes, says Christy Whitney, former CEO of Hope West. A non-profit hospice service to five counties in western Colorado.

According to a 2019 report by Milliman Consulting Company, 31% of nonprofit patients had cancer and 15% had dementia. In commercial hospice, 22% of patients had cancer and 22% had dementia, according to a report funded by the National Partnership of Hospice Innovation, a non-profit hospice industry group.

Patients from nonprofits had more nursing, social worker, and treatment visits. For-profit hospice reportedly had longer patient stays, more patients were discharged before death, and the rate of return was almost seven times higher.

Other studies have shown that commercial hospice has a high incidence of complaints and defects, low community benefits, and high utilization in emergency rooms and other hospitals.

Mr Brown said private equity-backed hospice has less financial pressure than other commercial hospice, partly because of the way it raises funds for the acquisition of hospice. Private equity firms typically cover only 10% to 30% of the acquisition cost itself and borrow the rest. The acquired hospice not only makes a profit to satisfy private equity owners, but also suffers from loan costs.

Private equity companies typically seek to convert their hospice investment in three to seven years.

In 2017, Webster Equity Partners purchased 45 Bristol Hospice in 13 states for $ 70 million. Last year, the company reportedly entertained a billion-dollar purchase offer for hospice chains.

Hospice is inspected every three years, so some are bought and sold without state or federal inspection. Regulators may not know about the sale.

And quality monitoring is weak. Hospice has an economic interest in reporting quality indicators to the Medicare & Medicaid Service Center, but there are no performance penalties associated with these indicators.

Cordt Kassner, CEO of Colorado-based consulting firm National Hospice Analytics, said 17% of Colorado hospice is now owned by private equity, higher than the 13% found nationwide. Examination of the metrics reported to Medicare found that private equity-backed companies scored lower than average on self-reported quality metrics.

“That’s not a big difference,” Kassner said. “The national scores are also tight and variable, so even with a small percentage point, we look at all kinds of differences.”

Many nonprofits believe that other commercial hospice backed by private equity has given the industry a bad name.

“They pay the same as we do, but they don’t accept the same patients. Former Hope West CEO Whitney, who spoke to KHN before retiring in June, said:” They said: I have developed a kind of shadow business that has little to do with the business I run, but they are called the same name. “

Charter CEO Larkin lamented that quality indicators have not progressed as the hospice industry has grown. But he said it wasn’t limited to private equity-backed or commercial hospice providers.

“There are bad companies everywhere,” Larkin said. “Some people are off, some are malicious, and some companies aren’t focused on what’s right.”