Hospices Have Become Big Business for Private Equity Firms, Raising Concerns About End-of-Life Care

Yves here. The expansion of private equity into hospices is sufficiently recent that it appears the horror stories have not yet caught up.

By Markian Hawryluk, Senior Colorado Correspondent for Kaiser Health News, who has reported on health care for more than 25 years, including for the Houston Chronicle, American Medical News, and, most recently, The (Bend, Ore.) Bulletin. Originally published at Kaiser Health News

Hospice care, once provided primarily by nonprofit agencies, has seen a remarkable shift over the past decade, with more than two-thirds of hospices nationwide now operating as for-profit entities. The ability to turn a quick profit in caring for people in their last days of life is attracting a new breed of hospice owners: private equity firms.

That rapid growth has many hospice veterans worried that the original hospice vision may be fading, as those capital investment companies’ demand for return on investment and the debt load they force hospices to bear are hurting patients and their families.

“Many of these transactions are driven by the motive of a quick profit,” said Dr. Joan Teno, an adjunct professor at Brown University School of Public Health, whose work has focused on end-of-life care. “I’m very concerned that you’re harming not only the dying patient, but the family whose memory will be of a loved one suffering because they didn’t get adequate care.”

According to a 2021 analysis, the number of hospice agencies owned by private equity firms soared from 106 of a total of 3,162 hospices in 2011 to 409 of the 5,615 hospices operating in 2019. Over that time, 72% of hospices acquired by private equity were nonprofits. And those trends have only accelerated into 2022.

Hospice is an easy business to start, with most care provided at home and using lower-cost health workers. That allowed the entry of smaller hospices, many launched with the intent of selling within a few years. Private equity firms, backed by deep-pocketed investors, could then snatch up handfuls of smaller hospices, cobble together a chain, and profit from economies of scale in administrative and supply costs, before selling to an even larger chain or another private equity firm.

Private equity-owned hospice companies counter that their model supports growth through investment, which benefits the people in their care.

“Private equity sees a huge opportunity to take smaller businesses that lack sophistication, lack the ability to grow, lack the capital investment, and private equity says, ‘We can come in there, cobble these things together, get standardization, get visibility and be able to create a better footprint, better access, and more opportunities,’” said Steve Larkin, CEO of Charter Healthcare, a hospice chain owned by the private equity firm Pharos Capital Group.

But he acknowledged that not all of those entering the hospice market have the best intentions.

“It is a little scary,” he said. “There are people that have no business being in health care” looking to invest in hospice.

A Boom Industry

With the U.S. population rapidly aging, hospice has become a boom industry. Medicare — the federal insurance program for people 65 and older, which pays for the vast majority of end-of-life care — spent $22.4 billion on hospice in 2020, according to a Medicare Payment Advisory Commission report to Congress. That’s up from $12.9 billion just a decade earlier. The number of hospices billing Medicare over that time grew from less than 3,500 to more than 5,000, according to the report.

But with limited oversight and generous payment, the industry is at high risk for exploitation. Agencies are paid a daily rate for each patient — this year, about $200 — which encourages for-profit hospices to limit spending to boost their bottom lines. For-profit hospices tend to hire fewer employees than nonprofits and expect them to see more patients.

Many hospice nurses and social workers are booked for 30-minute appointment slots throughout the day, unable to spend more time with patients if needed. For-profit hospices hire more licensed practical nurses than registered nurses, who are more skilled, and rely more on nurse’s aides to further cut costs. One study found patients in for-profit hospices see doctors or nurse practitioners one-third as often as those in nonprofit hospices. The U.S. Government Accountability Office found in an analysis of federal data from 2014 to 2017 that patients in for-profit hospices were less likely than patients in nonprofit hospices to have received any hospice visits in the last three days of life.

“The main way of making the bottom line look good is decreasing visits,” Teno said.

According to the Medicare Payment Advisory Commission, for-profit hospices had Medicare profit margins of 19% in 2019, compared with 6% for nonprofit hospices.

For-profit hospices also enroll a different set of patients, preferring those likely to remain in hospice longer. Most costs are incurred in the first and last week of hospice care. Patients who enroll in hospice must undergo several assessments to develop a care plan and set their medications. In their final days, as the body begins to shut down, patients often need additional services or medications to stay comfortable.

“So the sweet spot is kind of in the middle,” said Robert Tyler Braun, an assistant professor of population health sciences at Weill Cornell Medical College.

That makes dementia patients particularly profitable. Doctors have a harder time predicting whether a patient with Alzheimer’s disease or another form of dementia has less than six months to live, the eligibility criterion for enrollment. For-profit hospices enroll those patients anyway, Teno said, 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.”

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  1. Amfortas the hippie

    that’s a shame.
    and i guess we lucked out, big time.
    our hospice is a newly formed appendage to our local home health company…in fact, when we signed on, they had been up and running for 6 months.
    run by the DON of home health…and she was the one who came out the most(so a real nurse, with gobs of experience)
    like with cell phone coverage, we’re an oft forgotten area…too low a population to bother with.
    only weirdness was that the doctors were both in amarillo…5 hours away…but they were both from here.
    i had enough time on my hands to google the company and all it’s people.
    expected exactly what this article talks about, but was happily surprised that all was above board.
    and, to boot, that head nurse who came out here practically every day for 6 weeks still texts me once a week or so…to check on me.
    to be sure, i was the “Main Nurse”…24/7…and didn’t really sleep for 6 weeks…but i didn’t expect them to have someone out here all the time….head nurse always answered the phone, no matter if it was 3am on a saturday morning.
    the only hospice facilities…as in live in/nursing home…are 100 miles away…so i was pleased that we had a home hospice company, nurses all driving 4wd, and willing to come down a dark dead end dirt road in the middle of nowhere at 4am.
    yet another benefit of living in an isolated and mostly overlooked place, with strong unit cohesion.
    only downside to our experience was that they only have 2 nurses…and that head nurse just happened to have the weekend off(very much well earned, and i don’t begrudge her) and was at a lake with her husband and kids when wife passed….and the on call nurse just happened to be involved with a patient crisis…involving a trip to the er, no less…and that patient’s house just happened to be in a valley way out yonder where cell service is spotty.
    so a nurse friend….who had been stepdad’s home health nurse for years….was there to walk us through the actual process of dying.
    it saddens me that this essential service is being corrupted by the moneylovers.
    nothing is sacred.

    1. Earthling

      I am glad that the rentiers had not gotten to your area during this time. I had a pretty decent experience with a local hospice company years ago. Let us hope private equity efforts fail to deliver enough profit.

      Just spent time in an isolated area in the north woods, included a few towns where you wind up having the person who owns the cafe/bakery make your sandwich and put it in your hand. For less money than a chain would charge you. Because she’s not supporting a superstructure of greedheads at Corporate. Similar experiences with oil change, etc. Super refreshing and reassuring; small business is fine, in the eddies away from the mainstream of suburban sprawl.

      Meanwhile, the Culver’s chain in a larger town has a closed dining room. Can’t get enough help. Wouldn’t it be awesome if the chains are beginning to collapse of their own weight, and will become non-viable as people prefer to not work for them, and people prefer to not buy from them?

      Not saying walmarts will come crashing down, but what if there is a big turn coming? Kmarts and Applebees seemed inevitable too.

  2. Steve H.

    Janet did home hospice for years, had worked on the cancer ward and took great heart in being able to help people and their families with the transition of mortality.

    A few weeks after she retired, my father got a tear in his gut. I had dropped him off from a doctors appointment and he was holding his belly, the next morning got a call from the ER that he was refusing care. We went over and he said he was ready to die, all the surgery and rehab to live with a colostomy bag was too much. He said no men in his family lived past 81, and he was right there.

    Hospice nurse from the (non-profit) hospital came in, went through the usual questions. Then started selling us on Hospice House, as a vacation for us. “You can go to Vegas!” The man was laying right there, had just decided to die, but she had her job to do. I’d been to Hospice House for a friend, it was okay if drab. But it was not home, and my stepmother has early Alzheimers and needs daily care. But the nurse hammered away for care that cost thousands a day.

    So they sent him home and said a nurse would be by the next day. By then his pain meds had worn off. The nurse didn’t bring pain meds, said they’d send the order through, but they were in stock if he was admitted to… Hospice House. So they slow-walked his pain meds as incentive. The order didn’t go through until the evening, the pharmacy was completely overwhelmed, the pharmacist having to run off to do jabs despite the people waiting for their orders.

    This was less than a year ago and my brain has fuzzed some details, but within a couple of days he said “This is a cruel system” and cut his throat with a bread knife. He’d asked us to lay out blankets on the floor and was very neat, but I still had to get blood out from the floorboards so the dog wouldn’t go sniffing.

    This is a cruel system.

    1. katiebird

      OH, Steve! I am so sorry. The cruelty of your father’s experience is beyond my imagination. How could nurses – dedicated to patient care, and a Hospice Nurse at that, treat a person at the end of his life like that? It makes me feel homicidal.

      1. Steve H.

        Thank you, katiebird, we’re taking care of me stepmum and loving on her every day.

        We’re so glad Janet is out. This is our view of the medical system, the shape is still there but the centers are hollow. Mandates were looming, and with resulting immune issues, it looks like the ones who left were right. It’s a sick system.

    2. chris

      My God. That’s awful. My condolences to you and your family for having fo experience that.

      A pill and long walk into the forest seems the way to go :/

  3. upstater

    My mom passed in February 2021, father in 2012. The contrast between the Medicare provided services was stark. I believe the difference was Obamacare mandatory crapification by cutting allowed services. Let it suffice to say that the in-home services my father got were much better than mom’s services (a physician owned for-profit at a well-run smaller assisted living house). In particular, the availability of nursing services and the medical guidance were very poor (I think it was Stupid Bowl Sunday). The O2 concentrator smelled like cigarette smoke. My father had a sitter 24/7 included. For mom we had to pay and while the sitter was a nice person, she clearly lacked experience. Much or most of the burden is on the family. Pity those without caring family.

    1. Vermont farmer's wife

      My dad was put in hospice at home when he was suffering from mild dementia after Mom died. The hospice neurologist had him on meds whose side effects included increased dementia. We protested and asked for alternative drugs, no dice.

      When Dad outlived his 6 month stint in hospice (I strongly suspect a younger sibling was instrumental in doctor-shopping the 6-months-or-less-to-live thing), the doctor dramatically reduced Dad’s daily food ration – he was being tube fed. Dad cried that he was always so hungry and he lost a great deal of weight. His live-in caretaker, a very devout man, was really upset by that as he did not want to do anything to contribute to Dad’s death. One of my other siblings sifted through all the medical records and discovered that the reduced feeding order was never put in writing and, after a call to her lawyer, told the aide that he did not have to abide by it. Dad’s food was restored and Dad lived another year, properly nourished.

      I have heard from others that hospice providers get money from the govt. based on how long someone lives after referral, which gives an incentive to send the patients off to their eternal reward as efficiently as possible. I’ve told my kids just to leave me alone to die at home; even if I die a little sooner it’s better than the hell of hospice.

  4. Eureka Springs

    The barbaric malignancy of private equity will be the death of us all. Seems like all those nazis in films of old who carried a little pill around for that chosen final moment were far more humane than anything our parasitical corporate fascists would ever allow today.

    On occasion in conversation when people are discussing things they know are fubar I try to bring up private equity, what it is, how it works and how pervasive it is. But it’s something, like an end of life discussion, which draws a blank face and subconscious – change the subject reaction from most people.

    There has to be a way to get through. And there has to be a way to shame the hell out of P.E., from the suits to the Vegas peddling aides who bring no meds. Perhaps especially the political system which makes this happen.

    1. ambrit

      From my experiences with PE characters, they know not what shame is. All they will understand is the rope and a lamppost. It is going to get that bad.
      Yes, Americans have been ‘programmed’ to act against their best interests. However, watch what a year of hunger and privation does to the Body Politic.
      From what I have read about the various “XYZ Springs” of late, the initiating impulse has generally been massive spikes in the costs of food. America is going through just such an ‘impulse’ now. Some will say that there has always been hunger in America. This time though, many of those going hungry will be former members of the lower middle and upper working classes. They will realize what they have lost, and cast around for scapegoats. For that I hope whatever passes for a ‘Left’ in America is ready to focus that anger on the Oligarchs and their enablers. Otherwise, this system is going to get just the fascists that they should fear the most, popular ones.

  5. rrennel

    What was it Charlie Munger said? “Show me the incentives and I’ll show you the outcome.”

  6. LAS

    Approximately 20 years ago (already!), a non-profit hospice care group was a Godsend for me, the sole caregiver of a dying father. They didn’t really “do” that much for my father as they did for me, providing detailed information on the process of dying — so that what I did do for my father was appropriate comfort and not useless frantic business and expense.

    Our experience would have been a great disappointment to a private equity company b/c we didn’t generate a lot of billable hours. That was not what it was about.

    I’ve never forgotten how valuable the information, experience, and guidance of the volunteers were to our experience. They were just ordinary, informed older persons who had been through it before, community volunteers mainly, sharing what lived experience and kindness had taught them. And, truly, it was more about being with someone than doing for someone.

    Private equity fee services just could not possibly replicate. They are probably billing for long-term care, not hospice, call it what they will. To me, hospice is not a transaction, but more like an informed cessation of unneccessary transactional services. They have co-opted that human experience with their Orwellian doublespeak because there are now billable insurance codes associated with it. With healthcare being a bloated portion of GDP, and the Boomer generation up there in age, it has an irresistable allure. Probably they figure the cost of revenue as being less than providing healthcare and therefore profitable.

    1. Carla

      Thank you LAS, for sharing your experience and for a most astute analysis of the disgusting PE M.O.

      Unfortunately, when my mother was dying in the hospital in 2005, on the advice of just about everyone, we assented to have in-hospital “hospice” care. This consisted of a brash and insensitive social worker who immediately offended my mother and me, and things quickly went downhill from there. The “model” had already moved on from volunteers in our Meds and Eds city at that point. It was terrible. I finally told the social worker to get lost. BTW, this was not PE-run at that point; it was a “non-profit,” but the rot had already set in.

      1. Amfortas the hippie

        aye. the hospitalist(who was excellent, in spite of her questionable title) at the last hospital who informed us that hospice was really all we had left(and explained the physiological reasons to my satisfaction, no less)…had never heard of where we live, 100+ miles NW.
        assumed we lived near Austin.
        so she offered in-hospital and a facility based hospice, respectively.
        i could tell that that was what most folks she deals with in this situation prefer…but in my family, we take care of our own…stepdad, great grandma, grandma, etc.
        no shirking, and all.
        i could tell, too, that this was anomalous to her.
        but i had the local hospice people in my fone already.
        and yeah…it was frelling hard on me…and the boys…to so intimately manage wife’s death that way…but i wouldn’t have had it the other ways….with her expiring while warehoused in some anodyne room with computer generated wall art and bland pastel impersonality….and underpaid strangers.

        1. ambrit

          Echo you about the underpaid ‘assistants.’ While Phyl’s Mom and Dad were in the Elder Warehouse, we were amazed at the level of turnover in the staff. The same applied to the Home Health aids that came out to help us when Phyl was still trying to “beat” the melanoma. Literally a new nurse or aide every two weeks.
          Stay safe and strong. Throw a party for the lady on “El Dia.”

      2. Steve H.

        > this was not PE-run at that point; it was a “non-profit,”

        There’s some chicken-&-egg here, our non-profit went on an acquisition spree and the CEO makes $2,898,820. So PE is entering because of the latent capacity for exploitation.

      3. LAS

        Carla, I am sorry for your hospital experience. I’ve seen things in hospitals egregiously wrong up and down the wazoo. It is the structure of things there and though half the staff are probably really excellent, they cannot make up for the other half or the whole circumstance of how healthcare operates.

        Amfortas, God bless you.

  7. Anthony G Stegman

    Private equity is a monster devouring society. It has trillions of dollars available to invest, and it owns the Congress lock, stock, and barrel. There is little chance of any legislation that would reign in private equity being passed in Congress, or any state houses as well. Remember the carried interest tax loophole? That is a gift to private equity from the Congress. All attempts to eliminate it have failed. Private equity is very powerful.

  8. Gusgus 2021

    I remember reading that funeral services are also very lucrative….but I felt even reading about that this was a very dark bad thing,as though I was crossing to the dark side or about to sell my soul……

    1. Amfortas the hippie

      we lucked out in that regard as well.
      funeral home guy…known him forever…and his wife(nurse, helped deliver my youngest).
      didn’t bat an eye when i said we’d be doing most of it ourselves…graveyard in pasture, etc.
      insistent that i read all the fed-required disclosures and such…explained everything.
      cremation was the biggest expense…at another place, 60 miles away.
      i doubt he made much money from us.
      but like so many things in this county, it’s like he’s from some bygone time…and the entire local society expects just that from him.
      no PE required…owns his place free and clear.
      does the bulk of the work himself, etc

    2. Synoia

      The American way of Death Author: Jessica Mitford published in 1963.

      The American system was documented as exploiting us a long time ago. I’m going to jump off a cliff into the sea. Thus the fish (If not extinct by then) can recycle me.

      Or jump off the African Escarpment near Mutare in Zimbabwe and let the jungle benefit.

  9. Rainlover

    I served as a grief counselor for a non-profit hospice in my area years ago (2001) and had a very good experience with the local hospice when my father died in 1995. The impetus behind the formation of hospice organizations was to provide loving palliative care to the patient and informed support to the family to manage the dying process at home or in a protective facility. If I recall correctly, hospital hospice service was not available in those days. People who chose hospice wanted to avoid dying in the hospital.

    I now have a friend who serves as chaplain in a hospice two counties north of here. Her hospice organization was a local non-profit that was purchased by PE. In the space of two years, she has progressed from loving her job to looking for a way out. Pre-PE, she was relatively autonomous and spent as much time as necessary with each patient. Now her day is scheduled for her, her time with each patient is limited, her assistant has been made redundant and she has to see more patients each day. So her job has been crapified, patient care has been crapified and no one is happy except the shareholders. Nurses are leaving the organization as fast as they can. My friend is in despair that the work she loves has been swallowed by the evil of PE.

    As a cancer patient myself with no local family members, I will carefully research the local hospice providers with an eye to avoiding those owned by PE. I have not ruled out the option of death with dignity since it is legal in this state and I would prefer that to dying in a hospital. It certainly is a caveat emptor and DIY situation in the areas of long-term care, and death and dying these days. Sigh. Steve H., I am so sorry that your father was forced to take matters into his own hands. Cruel, indeed. I’m glad that you continue to provide support for your stepmother. Bless you.

  10. Lex

    Well there’s the final answer to whether anything is sacred. I also feel $200/day for a patient is hardly “generous” in terms of benefit payment. What private equity obviously does to make that profitable is sad. Minimizing the effort to provide comfort at end of life to make a buck says more than I’d like to admit about us.

  11. Sue inSoCal

    First, Steve H, I am so sorry. What your family went through is unimaginable. Those actions (or non actions) by a lousy company shock the conscience. My father died in 2001, and insisted on staying in this awful skilled nursing facility, not wanting to “inconvenience” us. Well it did. Someone had to be at that place 24/7, while the huge cost could have paid for a nurse at my house in his own hospital bed. I knew he was fading fast, but he wasn’t exactly going gently into anywhere. (My sole relative was in la la land insofar as how much time was left. I had no help with reality.) The best experience was the hospice staff from the hospital, and the older volunteers. One day, a lovely older woman took my hand, smiled kindly, and whispered “Honey, he’s almost ready.” The most serene and kind person on the hospice team was the chaplain, who was from Ireland. My father refused to see him at all. I advised him he’d be a masochist to continue continue efforts to befriend my father, the human thunderstorm. I didn’t understand the antipathy, but the chaplain persevered calmly. In the short time my father had left, he resolved a heretofore unknown 70 year+ secret hatred of one Irish priest who had done (I don’t know what) to him as a young teen in NY. Toward the end, I could often hear my father and the chaplain chatting and laughing together. The chaplain led the private memorial service. Imagine that happening now with PE. I’m glad I have those memories.

  12. LarryMotuz

    An important article and comments.

    Frankly, I’d like to see a serious article also on private equity in the ‘institutional/group home’ foster care industry, for, yes, this has become a profit center. It helps that the children are essentially powerless, more so than adults who, more likely than not, have family and friends. It does not help that wages for ‘caretakers’ are abysmally low and qualifications for ‘caretakers’ are nonexistent. Nor does it help that few and overstretched resources are used to follow up what happens to the children themselves.

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