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Regulators plan disciplinary actions that could affect as many as 400 hospices that are profiting from fraud and unsound business practices, the Centers for Medicare and Medicaid Services announced recently.

Hospices, which provide end-of-life and palliative care for dying people, have increasingly become targets for purchase by private equity investors, who view them as cash cows. This can harm patients, wrote Dara A. Corrigan and Dora L. Hughes of the Centers for Medicare & Medicaid Services in a blog post on the cms.gov website.

“Unfortunately, hospices are profiting from fraud at the expense of beneficiaries far too often,” the two wrote. “Recent media reporting, and research by C.M.S., have identified instances of hospices certifying patients for hospice care when they were not terminally ill and providing little to no services to patients. The media reports identified that these activities led to a rapid growth in potentially fraudulent hospices, particularly in Arizona, California, Nevada, and Texas.

“Some of the addresses listed for these hospices also appeared to be non-operational. This reporting also brought attention to a trend of ‘churn and burn’ schemes where a new hospice opens and starts billing, but once that hospice is audited or reaches its statutory yearly payment limit, it shuts down, keeps the money, buys a new Medicare billing number, transfers its patients over to the new Medicare billing number, and starts billing again.”

The post said C.M.S. had begun an investigation and had visited more than 7,000 hospices. “As a result of the site visit initiative, nearly 400 hospices are being considered for potential administrative action as of mid-August. While some of these hospices may be able to demonstrate compliance by submitting a valid provider address, others that do not address our findings may be deactivated or revoked.”

Per-diem rate and skimping

Hospice is a growing market, as the population ages and more people are diagnosed with terminal illnesses.

The payments for hospice care often come from Medicare, based on a per-diem rate calibrated by the level of care, said a doctor who formerly worked for a hospice company and spoke about the hospice industry on condition of anonymity to protect their job. There are four levels:

  1. Home care, where the patient is at home and the hospice team comes in with equipment, emdications, nursing support, a chaplain and a social worker
  2. In-patient care, if symptoms are out of control and can’t be managed at home
  3. Respite care, when a family needs to take time off and hospice pays for the patient to go to a nursing home or to a brief in-patient stay
  4. Continuous care, around-the-clock nursing support, which is much more scarce in the light of the pandemic

“You get a certain pot of money per day per patient, as long as they meet Medicare or the insurer’s criteria,” the doctor said. Thus there is an incentive to take on patients who have fewer needs, who require less intensive support. There’s also an incentive to skimp on supplies and staffing, the doctor said, to maximize profits.

The daily rate has grown to $211.34 in 2023 for routine home care, days 1 through 60, from $100 in 1983. For continuous home care, 24 hours pays $1,522.04. Inpatient respite care is $492.11 for a day, and general inpatient care is $1,110.76 for a day in 2023.

There is a limit on the hospice stay — two initial 90-day periods, the doctor said, and then 60-day periods thereafter. But the pressure to reduce treatments for people at the end of life, the mission of hospice, comes from the desire to make more money, the doctor said.

“There were certainly times when I didn’t have certain basic medications, like medications for constipation, Tylenol for fever, because of the way they had ordered, or wound care supplies for patients who have wounds,” they said. “They limited the meds we could order to treat conditions like seizures and drips for pain. I could see the push to limit costs overriding quality patient care and it made me sick.”

They left the company in 2015 because “I didn’t like what I was seeing.” They were concerned with “how patients are treated.”

‘Biggest returns for least amount of effort’

“It might be counterintuitive to run an enterprise that is wholly dependent on clients who aren’t long for this world, but companies in the hospice business can expect some of the biggest returns for the least amount of effort of any sector in American health care,” Ava Kofman wrote in an article co-published by ProPublica and The New Yorker in November 2022.

“Medicare pays providers a set rate per patient per day, regardless of how much help they deliver. Since most hospice care takes place at home and nurses aren’t required to visit more than twice a month, it’s not difficult to keep overhead low and to outsource the bulk of the labor to unpaid family members — assuming that willing family members are at hand.”

Markian Hawryluk wrote for the Kaiser Family Foundation: “Hospice care, once provided primarily by nonprofit agencies, has seen a remarkable shift over the past decade, with more than two-thirds of hospices nationwide now operating as for-profit entities. The ability to turn a quick profit in caring for people in their last days of life is attracting a new breed of hospice owners: private equity firms. That rapid growth has many hospice veterans worried that the original hospice vision may be fading, as those capital investment companies’ demand for return on investment and the debt load they force hospices to bear are hurting patients and their families.”

“According to a 2021 analysis, the number of hospice agencies owned by private equity firms soared from 106 of a total of 3,162 hospices in 2011 to 409 of the 5,615 hospices operating in 2019. Over that time, 72% of hospices acquired by private equity were nonprofits. And those trends have only accelerated into 2022.”

With the U.S. population rapidly aging, hospice has become a boom industry. Medicare — the federal insurance program for people 65 and older, which pays for the vast majority of end-of-life care — spent $22.4 billion on hospice in 2020, according to a Medicare Payment Advisory Commission report to Congress. That’s up from $12.9 billion just a decade earlier. The number of hospices billing Medicare over that time grew from less than 3,500 to more than 5,000, according to the report.

But with limited oversight and generous payment, the industry is at high risk for exploitation. Agencies are paid a daily rate for each patient — this year, about $200 — which encourages for-profit hospices to limit spending to boost their bottom lines. For-profit hospices tend to hire fewer employees than nonprofits and expect them to see more patients.”

‘Lower standards’ at for-profits

In March 2022, a study by McKnight’s Home Care and Common Dreams reported on the state of hospice and private equity.

“As for-profit home healthcare and hospice companies have become more profitable, private equity firms have turned to them as reliable sources of revenue in the healthcare sector. Unfortunately, for-profit home healthcare and hospice companies have been linked to lower standards of care compared to their non-profit counterparts, including, but not limited to, a lower number of visits to patients by healthcare professionals (registered nurses, physicians, or nurse practitioners) in their final days in hospice, higher rates of hospitalization in home healthcare and poorly paid — yet highly stressed — employees in both sectors. This is additionally troubling because such for-profit entities serve higher percentages of people of color and those with low incomes.”

McKnight’s and Common Dreams wrote: “For hospice payments, Medicare accounts for about 85.4%, Medicaid for 5%, managed care or private insurance for 6.9%, and other (including charity and self-pay) for 2.7%.”

Among the big private equity players in hospice are Apollo, the largest private equity firm in the world, with over $598 billion in assets under management. It has invested in a number of hospice companies, including Kindred Healthcare, Amedisys, and Brookdale Senior Living. Another is KKR, the second largest private equity firm in the world, with over $510 billion in assets under management. It has invested in a number of hospice companies, including Gentiva Health Services, Kindred Healthcare, and Brookdale Senior Living.

The Carlyle Group, TPG Capital and Bain Capital are also big hospice players, as are Humana, Advent International, and Welsh, Carson, Anderson and Stowe.

Oversight lacking

In a report about private equity and hospice titled “Preying on the Dying: Private Equity Gets Rich in Hospice Care,” the Center for Economic and Policy research reported:

“Licensing and oversight by Medicare and state agencies is lax. Asymmetric information about what constitutes good patient care is an issue in hospice care. Patients and their families may not be able to evaluate the quality of care that is provided. Families are in the midst of a significant life event, the imminent passing of a loved one. They often have no prior experience with hospice and no point of comparison for the services their family member receives.

“Even if the family is concerned about the quality of hospice care and has complaints, the length of hospice stay may be too short. … The median number of days from entering hospice care to death is 19, meaning half of all patients die in less than three weeks, so it may not seem worthwhile to report quality concerns to Medicare once the patient has died. This makes it difficult to hold a hospice provider accountable for a misalignment between the services a patient requires and the services the hospice provides.”

Jeanne Pinder  is the founder and CEO of ClearHealthCosts. She worked at The New York Times for almost 25 years as a reporter, editor and human resources executive, then volunteered for a buyout and founded...