Changes In Hospice Use, Medicare Spending, And Patient Outcomes After Private Equity Acquisition

Hospice care accounts for an increasing share of Medicare spending, paid by Medicare through a daily capitated rate that is not risk-adjusted. In recent years, for-profit entities, notably private equity, have increasingly acquired hospices. However, little is known about the implications of these acquisitions on patients and Medicare spending. Using 100 percent fee-for-service Medicare claims, we compared 191 hospices newly acquired by private equity firms between 2018 and 2022 with 1,305 matched control hospices owned by for-profit but not private equity owners. Using a difference-in-differences design, we examined changes in utilization, patient outcomes, and Medicare payment associated with private equity acquisition. After acquisition, average length-of-stay for beneficiaries in private equity hospices increased by 6.3 days relative to the control group, and beneficiaries were more likely to be discharged alive. The share of beneficiaries with dementia increased relative to control. Medicare spending increased by $993 per hospice encounter relative to control, which represented a 5.9 percent increase from the baseline of $16,922. Selection of beneficiaries requiring less intense care-a profit-maximizing strategy under daily non-risk-adjusted capitated payments-may help explain these findings. Reforming hospice payment may mitigate such patient selection.