The Washington Post recently released an expose on the hospice industry which we’d like to discuss in a two-part blog. Today, we’ll look at how hospice care has changed over the years. In Part 2, we’ll look at what these changes in hospice care have meant for patients and hospice providers, as well as what the government is doing to combat growing hospice care fraud.
Providing care for the dying has become a big business. The amount of money Medicare spends on hospice care has risen fivefold, from roughly $2.9 billion in 2000 to $15.1 billion in 2012. Government funding accounts for about 85 to 90 percent of all hospice income. More and more patients are being admitted to hospices for longer periods of time, which means larger profits for hospice companies.
The boom in hospice care spending has changed the nature of the hospice industry. In 2000, roughly 70 percent of hospice businesses were nonprofit and run mostly by religious institutions and community organizations. Today, roughly 60 percent of hospices are for-profit and the industry as a whole is worth $17 billion. According to data from California, the operating profit per patient in hospice care rose from $353 in 2002 to nearly $2,000 in 2012. The big money being made by many hospice companies has even drawn interest from financial institutions, a number of which have invested significant amounts in the hospice business.
What has changed and why are hospice companies making so much money? For starters, the number of “hospice survivors” in this country continues to rise. Between 2002 and 2012, the proportion of patients discharged from hospice care still alive rose to roughly 50 percent. This despite the requirement that patients admitted to hospice generally have a life expectancy of no more than six months.
Healthier hospice patients live longer and require less medical care. They stay on patient rolls longer and generate higher profits. Medicare pays roughly $150 per day for hospice regardless of how much care is actually provided. Dishonest for-profit hospices, therefore, have an incentive to recruit patients that are healthier and expected to live longer. MedPAC, the government watchdog that monitors Medicare, looked at data for nonprofit vs. for-profit hospices. They found that on average, nonprofit hospices serve a patient for an average of 69 days. For-profit hospices, on the other hand, serve patients for an average of 102 days.
MedPAC has been aware of the financial incentive hospices have to enroll healthier patients. In 2008, a MedPAC report noted that, “there appear to be financial incentives in Medicare’s hospice payment system that makes such patients attractive.” In 2009, MedPAC stated that ”Medicare’s payment system for hospice needs to be significantly revised so that hospice care … is appropriate.”
Check back later for Part 2.