The Effect of Private Equity on Hospice

Abstract

Hospice is a unique service in the American health care system and an anomaly in the Medicare program. It started in the United States in the 1970s as a social movement to provide a more supportive and dignified end-of-life experience in a distinct hospice facility as an alternative to intensive curative treatment in a hospital intensive care unit. Congress added a hospice benefit to Medicare in 1983 with the requirement that patients electing hospice have a terminal illness with an expected prognosis of 6 months or less if the disease follows its normal course and agree to forego curative treatment. Initially, most hospice patients had advanced cancer with relatively short hospice stays. Medicare payment was a set daily (per diem) amount for each patient adjusted to four levels of care with an initial limit of 210 days. This limit was later changed to allow 60 days recertification as long as the hospice patient continued to have an expected prognosis of 6 months or less (Centers for Medicare and Medicaid [CMS], 2005). This change and expansion of hospice in nursing facilities made hospice care profitable when a provider chose to focus on patients with an expected long length of stay.