American hospice and Medicare

Published on: Author: David Clark Leave a comment
Medicare in the USA


The USA is the only country in the world that has developed a full scale ‘for profit’ system specifically to provide care in the last months of life. This hospice ‘industry’ has expanded considerably in recent years and generated significant financial surpluses for shareholders in the process.  It is attracting a lot of interest within the US, but may be less well understood further afield.

In 2012, according to the National Hospice and Palliative Care Organisation  there were 5,500 hospice programs in America.  These comprised:  not for profit (32%); government owned (5%) and for profit (63%).  In recent years the proportion of for profit hospices has been steadily increasing.

Medicare payments for hospice care were first introduced in 1982. The system was hailed at the time as a triumph of recognition for an approach to care at the end of life that had only begun a few years earlier with the opening of the first modern American hospice, in Connecticut in 1974.  Yet the activists and social reformers who worked so hard to achieve Medicare recognition for hospice are unlikely to have foreseen how things would shape up 30 years later.

The Medicare payment system

Medicare reimburses hospice providers at a flat daily rate, based on four levels of home and inpatient care, assuming patients have a terminal illness and an estimated six months or fewer to live. In a 2009 report to Congress, the Medicare Payment Advisory Commission agency suggested that the system provides incentives for hospice providers to admit long-stay patients who require less resource-intensive care and claimed this may have led to inappropriate utilization of the benefit among some hospices.

A study published in 2011 in the Journal of the American Medical Association set out to compare patient diagnosis and location of care between for-profit and non-profit hospices and to examine whether the number of visits per day to patients and the length of patient stay might vary by diagnosis and profit status. The results showed that when compared, for-profit hospices had a lower proportion of patients with cancer and a higher proportion of patients with dementia and other non-cancer diagnoses. For-profit hospices compared with their non-profit counterparts had a significantly longer length of stay , they were more likely to have patients with stays longer than 365 days, and less likely to have patients with stays of less than seven days. Compared with cancer patients, those with dementia or other diagnoses had fewer visits per day from nurses and social workers. The study concluded that compared with non-profit hospice agencies, for-profit hospice agencies had a higher percentage of patients with diagnoses associated with lower-skilled needs and longer lengths of stay.

Dying too slowly?

There is now a growing debate about the implications of Medicare hospice funding for meeting the needs of frail and vulnerable patients who might not be likely to die in six months – and in particular of the role of for-profit hospices within this. The Washington Post ran a headline in December 2013 stating “Hospice firms draining billions from Medicare” and asserted that Medicare rules have created a booming $17 billion industry in hospice care, dominated by for-profit organisations who are caring for “people who are not dying”. It also suggested that the hospice industry is resistant to change in a system that serves its interests rather well.

Robust rebuttals soon appeared in the press from elsewhere within the hospice and palliative care community. Howard Gleckman writing in Forbes observed “…the Post article misses a bigger question: Why are growing numbers of people willing to enrol in hospice – and often forego traditional medical treatment – long before they are dying?”  He noted that for the vast majority of hospice patients, care is provided where they live (at home or in a nursing facility) rather than in a hospital. Skilled nurses, social workers, chaplains, and volunteers – attuned to the needs of their frail, mostly elderly patients—provide the kind of holistic care that is increasingly valued by older people. The paradox for the health care system is that the patient must be dying in order to get it.

For profit and non-profit compared

A study just published in the USA sampled 591 hospices (84% response rate) and has generated considerable comment. For-profit hospices were less likely than non-profit hospices to provide community benefits, including serving as training sites, conducting research and providing charity care. For-profit compared with non-profit hospices cared for a larger proportion of patients with longer expected hospice stays including those in nursing homes. For-profit hospices were more likely to exceed Medicare’s aggregate annual cap and had a higher patient dis-enrollment rate. For-profit were more likely than non-profit hospices to engage in outreach to low-income communities and minority communities and less likely to partner with oncology centres.

Perverse incentives

It is clear there are perverse incentives at work here. Medicare pays hospice a fixed daily rate.  While this remains fairly constant, costs of care for any one patient can be quite variable – high on admission and in the final days of life, but lower in the intervening period.  The opportunities for financial gain are clear to see.

But if some patients are enrolled for too long on hospice, others (about a third) receive its services for less than one week – arguably far too short a period for patients and families to derive optimal benefit.

This question of Hospice Medicare funding is doubtless an issue that will go on being debated. Commentary in US journals such as JAMA continues to appear. It demonstrates how consequential the Medicare scheme has been since it was introduced for hospice in 1982. The USA seems to be significantly alone however, when compared internationally, in generating a hospice ‘industry’ with such a substantial for-profit component. There is much that can be learned from that experience.

David Clark



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