Dr. Joan Teno, an adjunct professor of health services, policy, and practice at Brown University, published the article, “Hospice—The Time Is Now for Additional Integrity Oversight,” in JAMA Health Forum late last month. Her eye-opening opinion piece calls attention to the changing landscape of hospice and end-of-life care in the United States.
In the article, Teno highlights a notable transformation in the hospice sector—some hospice providers are prioritizing payment over patient care. Hospice programs, which have traditionally operated as nonprofits, balance high-quality care with cost-effective practices. However, a staggering 73% of hospice programs today are for-profit and are driven by financial motives.
A key concern emphasized by Teno is the increased ownership of hospices by private equity (PE) firms. The number of PE-owned hospices has risen dramatically—from 106 in 2011 to 409 in 2019—with 72% of the acquired hospices previously being nonprofit. This trend extends beyond hospices, as PE firms also own a significant number of nursing homes, emergency departments, and private hospitals, with concerning consequences for the quality of care provided.
In response to these issues, Teno calls for reforms to enhance oversight and integrity within the hospice care system. She advocates for greater transparency in ownership arrangements, ensuring that the public has access to information about the entities running hospice programs. She also suggests using publicly reported data to guide surveyors in identifying areas for improvement and calls for improved scrutiny of status surveys conducted by contracted entities to maintain high standards of care.
We spoke recently with Dr. Teno about her findings.
Can you please explain the differences between for-profit and nonprofit hospices in terms of their enrollment practices and service delivery?
For-profit hospices have a financial incentive to maximize their profit margins, which can be as high as 25%—compared to 9% for nonprofit hospices—according to the Medicare Payment Advisory Commission.
The concern within the hospice industry is how for-profit hospices achieve these profit margins. The hospice benefit itself is unique and has a significant history rooted in Brown University, specifically with the National Hospice Study. This study, designed by Dean David Greer and Professor Vincent Mor, laid the foundation for the Medicare hospice benefit.
The payment model that Dean Greer and Professor Mor helped develop in the 1980s, featured a per diem payment, and set a fixed amount of dollars to cover all care related to a terminal illness. However, specific criteria for visit frequency or mandatory requirements were not established. Some for-profit providers took advantage of this by reducing patient visits and understaffing on weekends.
Research has shown differences between for-profit and nonprofit hospices in various aspects of care delivery, including the number and duration of visits, as well as the type of healthcare professionals making those visits. For-profit hospices often employ licensed practical nurses, while nonprofit hospices tend to utilize registered nurses (RNs). While licensed practical nurses provide valuable services, RNs bring additional training and expertise, particularly important for complex cases or when patients are nearing the end of life and require specialized care to ensure their comfort.
Apart from profit margins and staffing, there are other differences in terms of community involvement and overall quality of care. However, until recently, no study had examined how these differences impacted the perceptions of care quality for family members. To address this, we surveyed family members to assess the quality of care. The primary caregiver’s perspective is crucial as they witness the medical care provided and require support, training, and assistance in caring for the patient at home.
Our findings showed that there is a difference in bereaved family member perceptions of the quality of care between for-profit and nonprofit hospices, with for-profit hospices generally performing worse. However, it is important to note that while more for-profit hospices were identified as low-performing, there were also some nonprofit hospices with low performance. Therefore, it is crucial for those making hospice referrals or patients and their families selecting a hospice to utilize resources like Hospice Compare, an online platform that provides information on the quality of care across different measures.
What I tell people is, ‘always go to the hospice, compare and look at what is available.’ Use Hospice Compare and triage a hospice that we call a four or five-star hospice. Also find out if the hospice has a free-standing inpatient unit. In Rhode Island, we’re very fortunate; we have a wonderful program that’s affiliated with Brown called Hope Hospice, which has an inpatient unit that’s been in existence for nearly three decades.
It’s also essential to observe any behaviors from the provider that suggest a focus solely on profitability, such as exclusively targeting nursing homes for their economies of scale, or enrolling patients with dementia who require longer hospice stays, while not enrolling cancer patients because their stays may be brief.
When did the shift occur within the hospice care sector, transitioning from nonprofit to for-profit?
The seeds of the transformation began early on, even before the establishment of the hospice benefit. Initially, the majority of hospice programs were community-based initiatives driven by a genuine mission to enhance end-of-life care. However, with the implementation of the hospice benefit in 1982, there was a noticeable increase in the number of for-profit programs. The argument at the time was that for-profit programs could inject financial resources to improve the quality of hospice care. Unfortunately, starting in the 2000s, there was a rapid proliferation of for-profit hospice programs. Currently, approximately 73% of hospice providers are for-profit organizations, caring for about half of the patients in hospice in the United States.
An additional concerning trend in this realm is the involvement of private equity firms. While some private equity firms may have positive intentions, many are primarily focused on making substantial profits within a short time frame, typically through a rapid sale yielding 20% to 40% returns. Regrettably, due to the payment structure of hospice care, where a fixed amount is provided and staffing constitutes a significant portion of costs (around 70%), maximizing profit often involves cutting back on staff, resulting in fewer visits for patients. These visits are crucial for maintaining the quality of care.
The current prevalence of private equity firms acquiring hospice programs raises significant concerns. It is my hope that Congress will address this issue. This phenomenon is not unique to hospice care but also affects nursing homes. Studies have revealed a 10% increase in mortality rates following the acquisition of nursing homes by private equity firms. Additionally, these firms acquire medical practices and create monopolies, which can lead to unfair negotiations. So they would buy all of the anesthesia, for instance, and then negotiate from a position of power. This is the difficulty when health care is a business.
Your article highlights a concerning situation: an auditor in California found 150 Hospice licenses issued to the same address in Van Nuys, CA.
What I found commendable about the auditor’s approach was their decision to personally investigate the building. Upon inspection, they discovered that although there was a paper sign indicating the presence of a hospice, there was no evidence of patient charts or any signs of activity. This raises suspicions of potentially fraudulent behavior, where false billing may be occurring.