Private Equity and the Damage Done

“Hospices owned by private equity firms yield higher profit margins and spend fewer dollars on direct patient care," a new study in Health Affairs found. For the study, researchers examined revenue and expense data among providers using four types of ownership models: PE-backed, publicly traded companies, other for-profit entities, and nonprofits. PE-owned agencies reported the highest profits and lowest spending on patient care. 

"Our findings suggest that PE-owned hospices may follow distinct operational strategies, emphasizing nursing facility-based care and administrative efficiency while limiting direct patient-care investments,” the study indicated. "Reduced spending on patient care may compromise hospice quality and shift costs to other areas of the healthcare system."

Health Affairs is absolutely correct that PE-owned hospices are hurting end-of-life care. The report goes on to suggest that policymakers should consider revising the hospice payment model to address this inequity in payments. Unfortunately, the report merely suggests tweaking the existing per diem model - this solution will not work. The manipulation of coding and cherry-picking patients while skimping on care is the for-profit operating strategy.

We need a payment model that doesn’t reward cherry-picking patients or encourage coding manipulation for payment. The entire payment model for hospice is designed to create these outcomes, and tweaking it will not solve the problem. The fact is that hospice services are neither complex nor that expensive.

In this sector of healthcare services, a simple cost-based reimbursement model would be ideal. It would also eliminate any difference in profit margin and focus competition on the quality of care. Go to my book, The Journey’s End, to learn more about how and why this payment model should be adopted by policymakers. www.thejourneys-end.org.