Hospice in 2023: Dying and the Dollars

With the growth in hospice care has come a growth in fraudulent practices. Hospice fraud is rampant and has gotten more sophisticated, according to Mark H. Schlein,J.D., an attorney and head of Wisner Baum's False Claims Act and Whistleblower Litigation Group.

Like all things in healthcare, hospice costs are increasing. But why has there been an explosion in the number of organizations that provide hospice care? And why has there been a shift from the care coming from nonprofit organizations to an increasing number of for-profit businesses, some of which are funded by private equity firms? Those questions and what they mean for patients and their loved ones are swirling aroundhospice care in the U.S. Care that is intended to give patients and their families comfort and peace as death approaches, has become fraught with controversy and ulterior motives. There are also cases and concerns about patients beinginappropriately enrolled in hospice, sometimes for fraudulent purposes.

Medicare coverage was key

Florence Wald, who had been the dean ofYale’s nursing school, is usually credited with founding the first hospice in U.S. in 1974. But hospice care really started to take hold after Medicare started covering it in 1985. With Medicare paying the bills, hospice gained traction over time. Medicare spending on hospice nearly doubled from 2010 to 2020, increasing from $12.9 billion to $22.4 billion, according to the Medicare Payment Advisory Commission (MedPAC), an independent group that advises Congress on Medicare. During that period, the number of organizations that provide hospice care grew by 44%, from 3,498 in 2010 to 5,058 in 2020.

Hospice is intended for those with a terminal illness and who have less than six months to live. The hospice benefit is paid under Medicare Part A, which is the part of the program that covers hospital services. Two doctors and a hospice director must agree with the time frame and terminal prognosis. At hospice admission, the agency takes on medical care responsibility in exchange for a daily fee. Because hospice care is palliative, the patient receives needed drugs and medical supplies but not lifesaving or curative treatments. Patients can leave hospice care on their own or if they medically no longer qualify.

Hospice providers are paid based on four levels of care and their location. The average, all-inclusive daily fee includes routine home care ($199.25 for the first 60 days, $157.49 after), continuous home care (also known as crisis care, $1,432.41 for 24 hours), general inpatient care ($1,045.66 per day) and inpatient respite care ($461.09 per day). The daily fee is paid regardless of which services are performed that day.

For this fee, the hospice provides all durable medical equipment, medications and staffing. “If you’re on hospice for five days and we only get $200 a day, we lose money,” says Tarrah Lowry, the chief operating officer of Trustbridge, a nonprofit hospice provider serving Florida’s Palm Beach and Broward counties. Although there has been a lot of attention on some patients receiving hospice care beyond the six-month limit, the average hospice patient receives hospice care for 14 days.

Fraud is growing

With the growth in hospice care has come a growth in fraudulent practices. Hospice fraud is rampant and has gotten more sophisti-
cated, according to Mark H. Schlein,J.D., an attorney and head of Wisner Baum's False Claims Act and Whistleblower Litigation Group. Schlein represented a whistleblower in a 2014 San Diego hospice case. The hospice agency ultimately paid the government $3.7 million.

“If anything, (fraud) has grown in a large part (because of) for-
profit hospices,” Schlein says, adding that the greed is propelling the surge of for-profit organizations getting into hospice care. “It’s always about the money.”

Schlein lists four categories of hospice fraud: improper admission, improper retention, improper classification and kickbacks. “When you put it all together, there are a lot of ways to commit fraud,” he says. However, the legal trend is away from successful prosecution, he added.

“Case law over the past four or five years — for reasons I don’t fully appreciate — make it more difficult for the government to successfully prosecute,” Schlein says. “Courts don’t want to get involved in medical disputes. If you have several doctors (who) agree that this patient is ineligible and one who works for hospice (who) says they are eligible, many recent court decisions say they won’t get involved in disputes.” The long, tangled saga of a whistleblower lawsuit against hospice provider AseraCare (which ended up in a $1 million settlement) that was described in an article in The New Yorker in December 2022 sheds light on the legal difficulties of proving hospice fraud.

Aside from fraud, it is difficult to know when someone will die. Some patients “graduate” from hospice and are told they can no longer receive the services. “Now they’re home alone with no one taking care of them. Often in two weeks to a month, they’re back in the hospital and will need that extra level of care,” Lowry says. That’s not to say they were discharged from hospice inappropriately — needing a higher level of care isn’t the same as a six-month terminal illness. Lowry says hospices are frequently dealing with government auditors claiming some patients are in hospice inappropriately. “Most hospices spend a lot of money to hire attorneys to say (patients were appropriately in hospice) and go to court for years to recoup (hospice) money.”

But in Schlein’s view, with a combination of patients who shouldn’t be in hospice and incentives to save on labor costs and services, “you have a critical storm brewing for quality of care,” he says.

Admission to hospice often means changes to patient medications as the goal shifts from curative to palliative care. It is also unrealistic for hospice agencies to cover the cost of expensive drugs, Lowry says. If someone is on an expensive drug and the agency is only making $200 a day, “you can’t afford some of the more expensive drugs,” Lowry says. For patients who are admitted to hospice appropriately, taking fewer medications often has benefits, but it is a different story for patientswho are inappropriately admitted. There are news reports of patients losing their spots on organ transplant lists because of inappropriate hospice admissions.

More for-profits

Hospice care in the U.S. was originally provided almost exclusively by nonprofit organizations, but now the providers are predominately for-profit organizations and an increasing number of them are backed by private equity. In 2010, 1,958 of the 3,498 hospices (or about 56%) in the U.S. were run by for-profit companies, according to MedPAC. By 2020, the number of hospices had grown by 44%, to 5,047, and 73% of them were owned by for-profit companies, according to MedPAC.

Robert Tyler Braun, Ph.D., an assistant professor at the Weill Cornell Medical College, and his colleagues reported in JAMA Internal Medicine in 2021 that the number of hospice agencies owned by private equity firms increased almost fourfold between 2011, when 106 were owned by private equity firms, and 2019, when 409 were in private equity hands. Braun and his colleagues say that tally was probably an undercount because it depended on public announcements. They also found that for-profit hospice agencies have higher rates of patients leaving hospice alive than nonprofit ones, they are three times more likely to exceed Medicare’s aggregate annual per patient cap (the 2023 cap is $32,487), they have lower levels of skilled staffing and they provide fewer clinical services.

Nonprofit organizations like Trustbridge may turn a person away from hospice, determining they are not appropriate, but then their for-profit competition signs the patient up, Lowry says. “As the (CMS) rules get tighter and there’s more scrutiny, we have tightened things up. Other organizations have not, (and) the ones that haven’t are causing a lot of the issues,” she says.

Both Lowry and Schlein say there are excellent for-profit hospice providers in the market that do not commit fraud. But “when you have hospice companies that are in business to make money, that corrupts the quality of care that’s provided,” Schlein says. There’s a financial incentive to cut costs while growing the hospice census. More people on a hospice program can dilute the amount of care provided if staffing doesn’t grow along with it.

Jim Palazzo counts his Transitions Hospice in that excellent for-profit category. Palazzo founded the Illinois-based hospice company in 2007, growing it throughout the state and into neighboring Indiana. Two years ago, he received private equity backing to further accelerate Transitions’ growth. Size, volume and location density were becoming factors. “I knew that as good and as big as we were, we weren’t big enough to be a player in the market,” he says. “And being a solo owner, I knew that without significant financial backing and support, I would not be able to grow as quickly as I needed.”

Palazzo is taking a measured approach to acquiring other hospice providers and growing more organically and says he understands some of the concerns about private equity. “Private equity has gotten really aggressive the past four to five years, driving heavy consolidation in the hospice market space,” he says. This can be a good thing or a bad thing depending on how it’s done, he added. Palazzo has seen some private equity organizations buy eight hospice agencies a quarter, leading to significant turnover and staffing shortages that affect the quality of care.

But Palazzo is confident that quality care will win out in the end. “Those providing the highest quality will see the most growth and do the best in the market space,” Palazzo says. “Quality is the proof in the pudding of reducing hospitalizations and providing family satisfaction.”

Palazzo has watched the shrinking number of nonprofit hospices but says there are economic reasons for it. “I don’t think in Illinois that there’s a single not-for-profit hospice of any significant size left,” he says. “It is very hard to do on a large scale and keep that unique and intimate type of care available to patients.”

Medicare hospice payments have not kept pace with rising costs, Palazzo says, noting that he is paying nurses 40% more than three years ago. “The cost of providing care has (increased) significantly, (and) that’s the biggest challenge in the market today,” he says. The CMS annual cap increased 3.8% between 2022 and 2023.

Meanwhile, the CMS Innovation Center is testing the Medicare Advantage Value-Based Insurance Design Model.The model mighteventually remove hospice as a separate Medicare benefit and move it into the Medicare Advantage program. “We believe that could hurt hospice in general,” Lowry says.

Deborah Abrams Kaplan writes about medical and practice management topics for Managed Healthcare Executiveand other publications.