For-profit hospices incur Medicare penalties over longer stays, study finds

Investor-owned hospice operators were far more likely than not-for-profit operators to incur Medicare penalties for admitting patients whose stay exceeded six months, a study has found.

Terminally ill patients in for-profit hospices were more likely to leave alive, the new research also found.

The results, published in the Journal of the American Medical Association Internal Medicine, are the latest to find longer hospice stays among investor-owned companies, which have rapidly eclipsed not-for-profit hospices and now account for half the hospice market. Hospice operators can earn higher profits for longer stays under Medicare's payment formula, research indicates. That has prompted calls to overhaul the Medicare system for paying hospices, as Medicare spending for the service has soared to $14.7 billion in 2012 from $2.9 billion a dozen years earlier.

To be eligible for Medicare hospice benefits, two doctors must certify that a patient will likely live 180 days or less, or six months. Medicare caps payment to essentially limit hospice stays to six months in an effort to limit the benefit to the terminally ill. Hospices that exceed the cap incur a penalty and must repay Medicare.

In 2011, 20% of Medicare hospice patients received services for more than 180 days and accounted for more than half of that year's Medicare hospice spending, or $8 billion.

“The cap does really need to be there as a regulatory barrier,” said Melissa Aldridge, an associate professor for the Icahn School of Medicine at Mount Sinai and lead author on the study. “It's a little bit concerning.”

At the same time, though, many experts have urged that doctors refer patients for hospice services sooner rather than later. For a long time, a high percentage of terminally ill patients have not participated in hospice or have entered hospice shortly before they died. The pressure to appropriately admit patients earlier is conflicting with the need to reduce premature admissions and curb inappropriate hospice spending.

Terminally ill patients in for-profit hospice were more likely to leave alive, the new research also found. Moreover, patients were more likely to leave alive from for-profit hospices with lengthy stays that exceeded Medicare's cap, results that echo prior findings by the Medicare Payment Advisory Commission. Indeed, the commission said last June the correlation between lengthy stays and hospice patients who leave alive suggested operators “enroll patients likely to have long stays who may not meet the eligibility criteria.”

Roughly one-fifth (22%) of for-profit hospices exceeded Medicare's cap at least once in five years, compared with 4% of not-for-profits, the study found. Meanwhile, 10% of for-profit hospice patients left alive home while 6% of not-for-profit patients did so.

Variation in hospice patients' length of stay has raised questions about whether hospice operators are admitting patients who are not eligible for the service, said Dr. Joan Teno, a Brown University professor of health services, policy and practice who studies hospice utilization. Teno's latest research has found for-profit operators that entered the market within the past five years have a higher rate of patients who leave alive than more established for-profit hospice operators.

The study also examined where hospice patients received services. For-profits operated primarily in nursing homes and assisted-living facilities, which are less costly for hospice operators than home-based services, Aldridge said. Not-for-profits were more likely to care for hospice patients at home, which requires more time from hospice providers for travel.

“Hospice ownership also distinguished both the setting and timing of the hospice population served with for-profit hospices focusing on patients likely to maximize hospice revenue (e.g., those with potentially longer lengths of hospice stay and those residing in institutions such as nursing homes or assisted-living facilities),” according to the report.

For-profits also were less likely to train tomorrow's hospice providers or conduct research, according to the study.

Aldridge described the combined results as “concerning” given the rapid growth of for-profit hospice providers.

An analysis of tax-exempt or for-profit status "oversimplifies the issue," J. Donald Schumacher, president and chief executive officer of the National Hospice and Palliative Care Organization, said in a written statement. “Whatever the apparent differences between for-profit and non-profit providers in the research findings, it is our position that more frequent surveys of all providers by Medicare would help to reduce disparities," he said.

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