and stand to profit the longer those patients live . They tend to enroll fewer cancer patients , whose prognosis is generally more predictable but who usually die sooner .
“ It is a very simple business model ,” Teno said . “ Go to assisted living facilities and nursing homes , and it ’ s one-stop shopping .”
Nonprofit vs . For-Profit
The Rev . Ken Dugger has worked as a chaplain in Denver for 13 years at both for-profit and nonprofit hospices .
At one for-profit hospice , “ the word on the street was [ that ] we were the dementia hospice because we had so many dementia patients ,” Dugger said . “ We wound up discharging a lot of patients because they had long lengths of stay and no longer met criteria .”
He said about a third of a hospice ’ s patients die each week , so agencies need to market heavily to replace them . That leads to some hospices making promises to families — such as daily visits from a nurse ’ s aide — that they can ’ t keep .
“ Some people see dollars and they go , ‘ Wow ! It ’ s a great chance to make some money here ,’ and they don ’ t understand that hospice isn ’ t easy ,” Dugger said .
For-profit agencies counter that their nonprofit counterparts have cornered the market on cancer patients and that they are expanding access by serving patients with other diagnoses .
But if patients become too costly , requiring expensive care or medicines , hospice providers can discharge them , and take them to a hospital emergency room to get services the agencies don ’ t want to pay for themselves , said Christy Whitney , former CEO of HopeWest , a nonprofit hospice serving five western Colorado counties .
A 2019 report by the Milliman consulting firm found that 31 % of patients in nonprofits had cancer , while 15 % had dementia . At for-profit hospices , 22 % of patients had cancer , and 22 % had dementia , said the report , funded by the National Partnership of Hospice Innovation , a trade group of nonprofit hospices .
Patients in nonprofits had more nursing , social worker , and therapy visits . For-profit hospices , the report found , had longer lengths of stay by patients , discharged more patients before death , and had profit margins nearly seven times higher .
Other studies have found that for-profit hospices have higher rates of complaints and deficiencies , provide fewer community benefits , and have higher rates of emergency room and other hospital use .
Braun said financial pressures are worse for private equity-backed hospices than for other for-profit hospices , partly because of the way hospice acquisitions are financed . A private equity firm will typically put up only 10 % to 30 % of the acquisition cost itself , borrowing the rest . The acquired hospice not only has to generate profits to satisfy its private equity owners but is stuck with the costs of the loan as well .
Private equity firms typically look to flip their hospice investments in three to seven years .
In 2017 , Webster Equity Partners bought Bristol Hospice , with 45 locations in 13 states , for $ 70 million . Last year , the firm reportedly entertained purchase offers for the hospice chain as high as $ 1 billion .
Because hospices are inspected every three years , some are bought and sold without a state or federal inspection — and sometimes without regulators even knowing about the sale .
And quality oversight is weak . Hospices have a financial interest in reporting quality metrics to the Centers for Medicare & Medicaid Services , but there is no penalty for poor performance tied to those metrics .
Cordt Kassner , CEO of the Colorado-based consulting firm National Hospice Analytics , said 17 % of Colorado hospices are now owned by private equity , higher than the 13 % rate he found nationally . When he looked at metrics reported to Medicare , he found that private equity-backed firms scored lower than average on self-reported quality metrics .
“ It ’ s not a huge difference ,” Kassner said . “ Because nationally scores are also tight and there ’ s not a lot of variation , we look at any kind of difference even if it ’ s a percentage point less .”
Many nonprofits believe private equity-backed and other for-profit hospices are giving the industry a bad name .
“ They get paid the same as us , but they don ’ t take the same patients . They don ’ t provide the covered services that are supposed to be covered to be paid a per diem ,” said Whitney , the former HopeWest CEO , who spoke with KHN before she retired in June . “ They ’ ve developed kind of a shadow business that really has very little to do with the business that I run . But they ’ re called the same name .”
Larkin , the Charter CEO , bemoaned a lack of progress in quality metrics as the hospice industry has grown . But he said that wasn ’ t limited to private equity-backed or even for-profit hospice providers .
“ There ’ s bad companies all over ,” Larkin said . “ There ’ s people who are misaligned , there ’ s people who have bad intentions , there ’ s companies that aren ’ t focused on the right things .”
28 Senior Resource Guide 2022