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Hospice is a realm of medicine concerned not with curing patients, but helping them end their lives with comfort, meaning and dignity. But, with a major transaction under consideration, Oregon lawmakers got a reminder last month that the hospice business model has imperatives of its own.
Through Medicare, the federal government pays hospice providers a per diem for each beneficiary, regardless of service provided that day. And given that most services must be rendered at the beginning and end of a patient’s stay, a grim financial logic emerges: “Patients that typically die within 7 to 14 days of being in hospice are not as profitable as those that have longer lengths of stay,” Robert Tyler Braun, a Cornell University researcher, said as part of the presentation to a state Senate health care committee.
The presentation, by Braun and other hospice industry experts, comes as the Oregon Health Authority weighs approval of a major transaction: As part of a multistate deal, Compassus, a for-profit company run in part by private equity interests, is seeking to take over management of home health and hospice assets of the nonprofit Providence Oregon, the state’s largest provider of such services.
Once dominated by nonprofits, the U.S. hospice industry has transformed in recent decades to a mostly for-profit sector. Providence told state regulators reviewing the deal that it is finding it challenging to manage its hospice services amid a “rapidly advancing and increasingly competitive industry,” and that expertise from the transaction would allow the services to operate successfully for the long haul.
The private equity model has its boosters, who argue it can bring cash and efficiencies to struggling operations that might otherwise close down.
Still, suspicions abound. Oregon lawmakers moved earlier this year to restrict private equity control at health care facilities—though certain provisions will take time to go into effect.
As the researchers noted in the presentation last month, private equity prizes short-term profits, and in hospice there are a few main profit levers. One is to cut operating costs—such as wages. Another is to selectively target more profitable patients, such as those with dementia, who require less complex care than say, a cancer patient, and are likely to have longer lengths of stay.
Braun has been researching the incursion of private equity and for-profit companies in general in hospice, and he and his colleagues have found that, on key metrics—ratings, timely care, emotional and religious support—nonprofit-owned hospices perform better than for-profit counterparts.
Still, Braun continued, there are subtleties at play. Some such findings are not necessarily causal—perhaps for-profit companies tend to acquire worse performing hospice operations in the first place—and even with causal results, such as a decrease in nurse working minutes per hospice visitor, a small group of major for-profit companies can skew overall data.
“It’s important to explore the heterogeneity of these deals,” he said. “No two acquires are the same.”
