Private equity-acquired hospices had longer stays and higher Medicare spending, study finds

Medicare paid $993 more per hospice encounter after private equity firms bought for-profit hospices, a 5.9% increase from a baseline of $16,922, compared with similar for-profit hospices that private equity did not acquire, according to a study published Nov. 2 in Health Affairs.

Average length of stay at the acquired hospices rose 6.3 days relative to the comparison group, and patients were more likely to be discharged alive.

Total visits and time spent on visits per week did not change significantly, and patients received fewer social work visits, according to a news release from Harvard Medical School.

The researchers, led by first author Sneha Kannan of the University of Pittsburgh, used 100% of fee-for-service Medicare claims to compare 191 hospices newly acquired by private equity firms between 2018 and 2022 with 1,305 matched control hospices that were for-profit but not owned by private equity.

The study measured changes in the two years before and the two years after each acquisition and compared them with changes at the control hospices.

A shift in who gets admitted

The share of patients with dementia at acquired hospices rose from 22.6% to 23.8%, while the share at control hospices did not change. After acquisition, a smaller share of patients had stays of less than a week, and more stayed longer than six months.

Medicare requires a physician to certify that a hospice patient's life expectancy is six months or less if the terminal illness runs its normal course, and hospices must obtain a new certification for each benefit period.

Medicare pays hospices a daily rate that is not risk-adjusted, and the cost of visits comes out of that rate. A patient with dementia whose decline is gradual and who needs relatively few services brings in the same daily payment as a patient with cancer who needs frequent visits and complex pain management, according to the release.

The researchers found no increase in physician, nurse or home health visits that might have kept patients alive longer.

The more likely explanation for the longer stays and live discharges was a shift toward admitting patients who required less care, said senior author Zirui Song, M.D., Ph.D., a professor of health care policy at Harvard Medical School and a general internist at Massachusetts General Hospital.

"That makes sense from the point of view of a for-profit facility that looks to generate revenue under this payment system," Song said in the release. "The bigger question is whether that is the best payment model for meeting the needs of people who need hospice, or of ensuring that Medicare spending is sustainable."

Hospices furnish more services at the beginning and end of a hospice episode and fewer in the middle, making long stays more profitable than short ones, the Medicare Payment Advisory Commission (MedPAC) wrote in its March 2026 report to Congress.

In 2024, average lifetime length of stay was 169 days among decedents admitted to hospice for neurological conditions and 51 days among decedents with cancer.

For-profit hospices averaged 120-day stays in 2024, compared with 71 days at nonprofit hospices. In 2023, for-profit hospices had an aggregate fee-for-service Medicare margin of 13.7%, while nonprofit hospices posted a margin of negative 1.3%.

Private equity's growing hospice footprint

Medicare hospice spending totaled $28.3 billion in 2024, when more than 1.8 million beneficiaries, including more than half of Medicare decedents, received hospice care from about 6,700 providers, according to MedPAC.

Over the past two decades, U.S. hospice ownership has shifted from mostly nonprofit to nearly three-quarters for-profit, and private equity firms are now the fastest-growing type of owner, according to the Harvard release.

In a typical deal, a private equity firm finances the purchase with investor capital and loans, and the acquired company takes on that debt and the interest that comes with it. Investors also expect to be repaid quickly, which requires more revenue, the release said.

"These are companies where investors look for opportunities to get back a 15% to 20% return on investment within a five- to seven-year period," Robert McNamara, M.D., an emergency physician and co-founder of Take Medicine Back, said on an episode of "Physicians Taking Back Medicine", the Medical Economics monthly show hosted by family physician Rebekah Bernard, M.D.

Hospices owned by private equity firms or publicly traded companies scored 2.86 percentage points lower than not-for-profit hospices and 1.68 points lower than other for-profit hospices on a composite measure of caregiver satisfaction, according to a 2024 study in JAMA.

In hospitals and physician practices, Song's earlier research has linked private equity ownership to higher Medicare spending, fewer physicians and more adverse health outcomes, including death, which the release said were likely related to staffing cuts.

Jared Rhoads, M.S., M.P.H., founder of the Center for Modern Health and a senior lecturer in health policy at The Dartmouth Institute for Health Policy and Clinical Practice, wrote in a 2025 commentary for Medical Economics that the evidence on private equity in health care is "mixed, occasionally contradictory and still emerging."

Many studies carry limitations such as small samples and short observation windows, he wrote, and he made a similar argument on an episode of "Off the Chart".

Payment changes on the table

The researchers wrote that changes to Medicare's hospice payment system may be warranted. One option would adjust the daily rate to a patient's clinical need, possibly based on diagnoses, similar to how hospitals are paid. Risk adjustment could reduce the incentive to select lower-risk patients, but it could also encourage coding to maximize payment, the authors cautioned.

Another option would pay separately for needed care, with monitoring to protect against unnecessary use or overbilling.

MedPAC first recommended in March 2020 that the hospice aggregate cap, which limits the total Medicare payments a hospice can receive in a year, be wage-adjusted and cut by 20%. In its March 2026 report, the commission recommended that Congress eliminate the update to hospice base payment rates for fiscal year 2027.

Because both groups in the study were for-profit hospices, the analysis measures what changed when private equity bought hospices that already operated for profit.

Selecting patients who need less intensive care, a profit-maximizing strategy under daily payments that are not risk-adjusted, "may help explain these findings," the authors wrote.

"As the population ages, we should make sure that high-quality hospice care is available for all the patients who need it, as well as sustainable for the Medicare program," Song said.