ive here. The expansion of private ownership in hospice homes is recent enough that it seems that horror stories have yet to be discovered.
Written by Marcian Horlock, Senior Colorado Correspondent for Kaiser Health News, who has reported on healthcare for more than 25 years, including the Houston Chronicle, American Medical News, and most recently, The (Bend, Ore.) Bulletin. Originally published in Kaiser Health News
Hospice care, which was primarily provided by non-profit agencies, has undergone a remarkable transformation over the past decade, with more than two-thirds of hospice homes nationwide now operating as for-profit entities. The ability to make a quick buck in caring for people in the last days of their lives is attracting a new breed of hospice owners: private equity firms.
This rapid growth has many veterans in aged care concerned that the original vision of the elderly may be eroded, as these VCs’ demands for return on investment and the debt burdens they force them to bear hurt patients and their families.
“Many of these transactions are driven by the motive of quick profit,” said Dr. Joanne Tino, an assistant professor in the Brown University School of Public Health, whose work has focused on end-of-life care. “I am very concerned that you are not only hurting the dying patient, but the family whose memory will be of your loved ones suffering because they did not receive adequate care.”
According to a 2021 analysis, the number of hospice-owned hospice agencies increased from 106 of a total of 3,162 homes in 2011 to 409 of 5,615 operating hospies in 2019. During that time, 72% of hospice homes that took over were They are private equity firms and non-profit organizations. These trends have accelerated until 2022.
Hospice is an easy business to start, with most of the care being done at home and with low cost health workers. This allowed entry into small hospice houses, many of which were launched with the intention of selling within a few years. Private equity firms, backed by wealthy investors, can grab a handful of smaller hospices, assemble a chain, and take advantage of economies of scale in administrative and supply costs, before selling to a larger chain or other private equity firm.
Private equity-owned hospice firms argue that their model supports growth through investment, which benefits the people in their care.
“Private equity sees a huge opportunity to take advantage of small companies that are underdeveloped, lack growth capacity, and lack capital investment, and private equity says, ‘We can come in there, put these things together, get the standards, get a vision’ Woncon said Steve Larkin, CEO of Charter Healthcare, a healthcare chain owned by private equity firm Pharos Capital Group.
But he acknowledged that not everyone entering the aged care market has the best intentions.
“It’s a little scary,” he said. “There are people who don’t have a business in healthcare” looking to invest in aged care.
With the US population aging rapidly, hospice for the dying has become a thriving industry. Medicare — the federal insurance program for people 65 and older that pays for the vast majority of end-of-life care — spent $22.4 billion on hospice in 2020, according to a Medicare Payments Advisory Committee report to Congress. That’s up from $12.9 billion just a decade ago. The number of hospice billing Medicare has grown during that time from less than 3,500 to more than 5,000, according to the report.
But with limited oversight and generous payment, the industry is in danger of being exploited. Agencies pay a daily per patient rate — this year, about $200 — encouraging for-profit nursing homes to reduce spending to boost their bottom line. For-profit hospices tend to hire fewer staff than nonprofits and expect them to see more patients.
Many hospice nurses and social workers are booked into 30-minute appointment periods throughout the day, unable to spend more time with patients if necessary. For-profit hospice homes hire more licensed practical nurses than registered nurses, who have more skills and rely more on nurse aides to cut costs further. One study found that patients in for-profit hospice see doctors or nurse practitioners a third as often as they do in non-profit hospice. The U.S. Government Accountability Office found in an analysis of federal data from 2014 to 2017 that patients in for-profit hospice homes were less likely than patients in non-profit hospice homes to receive any hospice visits in the last three days of life.
“The main way to make the end result look good is to reduce visits,” Tino said.
According to the Medicare Payments Advisory Committee, for-profit hospice homes generated 19% Medicare profit margins in 2019, compared to 6% at nonprofit hospice homes.
For-profit hospice homes are also registering a different group of patients, preferring those who are likely to stay in hospice longer. Most costs are incurred in the first and last week of hospice care. Patients who enroll in hospice care must undergo several assessments to develop a plan of care and determine their medication. In their last days, as the body begins to shut down, patients often need additional services or medications to remain comfortable.
“So the nice spot is kind of in the middle,” said Robert Tyler Brown, MD, associate professor of population health sciences at Weill Cornell Medical College.
This makes dementia patients particularly profitable. Doctors have difficulty predicting whether a patient with Alzheimer’s disease or another form of dementia has less than six months to live, which is the eligibility criterion for registration. For-profit hospice homes are enrolling these patients anyway, Tino said, and the profit will come the longer these patients live. They tend to score fewer cancer patients, whose prognosis is generally more predictable but who usually die sooner.
“It’s a very simple business model,” Tino said. “Go to living facilities and nursing homes, it’s a one-stop-shop.”
Non-Profit vs Profitability
Reverend Ken Dogger has served as a chaplain in Denver for 13 years in both for-profit and non-profit hospice.
In a for-profit nursing home, “The word was on the street [that] We were dementia hostels because we had a lot of dementia patients,” Duger said. “We ended up getting a lot of patients out of the hospital because they had long stays and they no longer met the criteria.”
About a third of hospice patients die each week, he said, so agencies need to heavily market their replacement. This is causing some hospice homes to make promises to families – such as daily visits from the nurse’s aide – that they cannot keep.
“Some people see dollars and say, ‘Wow! It’s a great opportunity to make some money here, Duger said, “and they don’t understand that hospice care isn’t easy.”
For-profit agencies respond that their nonprofit counterparts have cornered the market on cancer patients and are expanding access by serving patients with other diagnoses.
If patients become too expensive, and need expensive care or medication, hospice caregivers can dismiss them, and take them to a hospital emergency room for services that agencies don’t want to pay themselves, said Kristi Whitney, former CEO of HopeWest. A non-profit hospice serving five counties in western Colorado.
A 2019 report by Milliman Consulting found that 31% of patients in nonprofit organizations have cancer, while 15% have dementia. In for-profit hospice homes, 22% of patients had cancer, and 22% had dementia, said the report, which is funded by the National Partnership for Hospice Innovation, a trade group of nonprofit hospice homes.
Patients at the nonprofit had more visits to nurses, social workers, and treatment. The report found that for-profit hospice homes had longer stays for patients, discharged more patients before death, and had profit margins nearly seven times higher.
Other studies have found that for-profit nursing homes have higher rates of complaints and deficiencies, provide fewer community benefits, and have higher rates of emergency room and other hospital use.
Brown said the financial pressures are worse for private equity-backed shelters than for other for-profit homes, in part because of the way condo acquisitions are funded. A private equity firm typically only pays 10% to 30% of the acquisition cost itself, and borrows the rest. The acquired nursing home not only has to reap the profits to satisfy the private equity owners, but it is also stuck with loan costs.
Private equity firms typically look to flip their hoarding investments within three to seven years.
In 2017, Webster Equity Partners bought Bristol Hospice, which has 45 locations in 13 states, for $70 million. Last year, the company was reported to have received bids for its hospice-care chain of up to $1 billion.
Because nursing homes are inspected every three years, some are bought and sold without state or federal inspection – sometimes without regulators even knowing about the sale.
Poor quality control. Hospice homes have a financial interest in reporting quality metrics to the Centers for Health Care and Medicaid Services, but there is no penalty for poor performance associated with these metrics.
Cordt Kasner, CEO of Colorado-based consultancy National Hospice Analytics, said 17% of Colorado nursing homes are now privately owned, up from the 13% rate he found nationwide. When he looked at metrics reported to Medicare, he found that private equity-backed companies scored below average on self-reported quality metrics.
It’s not much of a difference,” Kasner said. “Because the scores at the national level are also limited and there isn’t a lot of difference, we’re looking at any kind of difference even if it’s a percentage point lower.”
Many nonprofit organizations believe that private equity-backed hospice and other for-profit hospice give 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 are supposed to be covered to pay a daily wage,” said Whitney, the former CEO of HopeWest, who spoke with KHN before retiring in June. “They have developed a kind of shadow business that has little to do with the business I run. But they go by the same name.”
Larkin, CEO of Charter, lamented the lack of progress in quality metrics as the hospice care industry grew. But he said that was not limited to private equity-backed or even for-profit hospice providers.
“There are bad companies everywhere,” Larkin said. “There are perverted people, there are people with bad intentions, and there are companies that don’t focus on the right things.”