By PETER WHORISKEY and DAN KEATING
The Washington Post
Analysis dissects business of dying
Monday , December 29, 2014 - 10:05 AM
WASHINGTON — The influx of for-profit companies into the hospice field has benefited patients, advocates say, because the commercial companies made big investments in technology, focused on efficiency and made care more accessible.
But a Washington Post analysis of hundreds of thousands of U.S. hospice records indicates that, as those companies transformed a movement once dominated by community and religious organizations into a $17 billion industry, patient care suffered along the way.
On several key measures, for-profit hospices as a group fall short of those run by nonprofit organizations.
The typical for-profit hospice:
• Spends less on nursing per patient.
• Is less likely to have sent a nurse to a patient’s home in the last days of life.
• Is less likely to provide more intense levels of care for patients undergoing a crisis in their symptoms.
• Has a higher percentage of patients who drop out of hospice care before dying. High rates of dropout are often viewed as a sign that patients were pushed out of hospice when their care grew expensive, left dissatisfied or were enrolled for hospice even though they were not close to death.
The quality of individual hospices varies widely. In some cases, for-profit hospices provide service at levels comparable to nonprofits, according to the review. But the data analysis, based on hundreds of thousands of Medicare patient and hospice records from 2013, shows that the gap between the for-profits as a whole and nonprofits is striking and consistent, regardless of hospice size.
“Unfortunately, a lot of people have come into the business for the wrong reasons,” said Michael Girard, who with his wife Deb owns the Circle of Life for-profit hospice in Reno, Nevada. “A lot of the problems we have in hospice today have happened with the entry of what I call the ‘vulture capitalists.‘ “
About half of Americans of retirement age will employ a hospice service before death, but public information about the agencies is meager, and many consumers are unaware whether a hospice operates as a nonprofit or for-profit.
The federal government has been trying — for years — to develop a way to measure and report hospice quality, but the effort has lagged behind other health-care industries. The Washington Post has published an online hospice guide that provides detailed information on more than 3,000 hospices.
The findings on for-profit hospices come amid repeated complaints within the industry that pressure to cut costs, combined with sparse government oversight, has led some companies to focus on the bottom line to the detriment of patients.
Hospice operators have an economic incentive to provide less care because they get paid a flat daily fee from Medicare for each of their patients. That means that the fewer services they provide, the wider their profit margin.
Industry advocates warned against using the findings to rule out care from a for-profit hospice.
“There are many, many factors in making a decision about what hospice to choose,” said Theresa Forster, vice president of the National Association for Home Care & Hospice, which represents for-profit and nonprofit hospices. “National trends may not apply at the local level. The key issues are the hospice’s ability to provide good end-of-life care.”
Through a spokesman, the National Hospice and Palliative Care Organization, another industry group, declined to comment on the findings.
Dave Williams, the chief financial officer of Chemed, which owns the largest U.S. hospice chain, said that for-profits offer several advantages for patients: They can more easily raise money for investments in equipment and expansion; they can achieve a size that offers them economies of scale; and, pushed by investors, they are encouraged to be more efficient.
He emphasized that size and scale matter because a large hospice can afford to lose money on some patients who may need extraordinary care.
“For large hospices that have been around a long time, the quality of care is going to be the same, whether they are for-profit or nonprofit,” Williams said. “The only way you can compete for patients and referrals over a long period of time is to provide the best possible care.”
The rise in hospice usage — today roughly half of older Americans who die have received some hospice care — has created a boom in the industry. In 2012, Medicare spent more than $15 billion on hospice care, which offers terminally ill patients treatment that focuses on providing comfort rather than aggressive methods aimed at a cure.
The number of hospice firms has risen rapidly, and over the past decade the growth has come almost entirely from new for-profit operations. Between 2000 and 2012, the number of for-profit hospices tripled to 2,196, according to federal figures, compared with about 1,500 nonprofit hospices, including those run by local governments.
The industry growth has been accompanied by remarkable turbulence, too. Between 1999 and 2009, more than 40 percent of hospices experienced one or more changes in ownership, according to researchers.
The expansion has been driven in large part by investors, including private equity firms, hedge funds and entrepreneurs. More than a dozen private equity firms have invested in businesses that provide hospice care, including giants such as The Carlyle Group, Kohlberg & Company, Summit Partners and GTCR.
“Hospice [mergers and acquisitions] market is red hot (peak valuation levels),” according to a presentation by financial analysts at Cain Brothers last year, which cited, among other things, the favorable U.S. demographics — more old people.
“Hospice continues to be of robust interest to Wall Street,” said Carsten Beith, a managing director at Cain Brothers.
He said that the influx of private equity money has allowed the industry to expand and to fund investments in technology. The demands of investors have also pushed hospices to provide good care at lower costs and a hospice that spends less on nursing is not necessarily providing less care, he said.
“An operating model that is more efficient doesn’t translate into patient care deficiencies,” Beith said.
But some in the industry — often those in the traditional nonprofit hospices — have questioned whether the goals of a for-profit company and a dying patient are easily aligned.
“If you think as a businessman and you want to make money, you will cut and cut and cut,” said Helen Zebarth, who cofounded the nonprofit Blue Ridge Hospice in Winchester, Virginia, in 1979. A former cardiac nurse, Zebarth decided to create a hospice after visiting the famed St. Christopher’s hospice in London in the mid-‘70s.
Back in Winchester, she and colleagues operated the fledgling operation on a shoestring budget out of a hospital basement. At the time, hospice services had to be paid for by donations because insurance and Medicare didn’t cover it.
“It was free for everyone,” she said. “And the community supported it.”
She credits the beginning of Medicare and insurance coverage with allowing far more people in the United States to receive hospice services.
But it also turned hospice into a big business, which operates side-by-side with the visionaries remaining from the movement’s early days.
Today, the amount the Blue Ridge Hospice spends on nursing per patient is more than 50 percent higher than the state average. It offers an array of extra services, including music therapy. It accepts patients with no insurance coverage. It also built its own inpatient unit.
It pays for the extras with donations from the community and a string of thrift shops it operates.
“We really want to take care of people — that’s our goal,” Zebarth said. “That’s where we are focused.”
The debate over the role of for-profit companies has come up before in health care, most often with hospitals. Within that field, some researchers have found generally negligible differences between the care provided by for-profits and nonprofits.
“When simple measures of quality are used — such as mortality — we have not seen differences between the quality of for-profit and nonprofit hospitals,” said Frank Sloan, a Duke University health and economics professor.
Where the two vary, he said, is in business practices, with for-profit hospital chains more aggressively marketing other services to patients.
By contrast, significant differences appear to distinguish for-profit and nonprofit hospices.
The Post analysis is based on the 2013 cost reports and other billing data that hospices are obliged to file if they accept Medicare patients. Medicare pays for the vast majority of hospice care in the United States.
While they are not audited, the reports are supposed to reflect what the hospice spends each year in caring for patients.
The key findings:
• Nonprofit hospices typically spent about $36 a day per patient on nursing visits; for-profit hospices spent $30 per day, or 17 percent less. The gap between for-profits and nonprofits remain whether the hospices are old or new.
• Nonprofit hospices are much more likely to provide the more intense services — continuous nursing and inpatient care — required by patients whose symptoms are difficult to control. Nonprofits offered about 10 times as much of this per patient-day as did for-profits.
• While hospices of both kinds usually dispatch a nurse to see a patient at some point during the last two days of life, for-profit hospices are more likely to fail in this regard, according to the analysis. A typical patient at a for-profit hospice is 22 percent less likely to have been visited by a nurse during this window than a patient at a nonprofit hospice, the numbers show, a sign that for-profit hospices may be less responsive during this critical time.
• Patients at for-profit hospices are much more likely to drop out of hospice care than patients at nonprofit hospices.
The proportion of patients leaving a for-profit hospice is typically 22 percent, while it is only 14 percent at nonprofits.