Key Takeaways
- • Medicare paid $993 more per hospice encounter after private equity firms acquired for-profit hospices, a 5.9% increase from a baseline of $16,922, according to a study published Nov. 2 in Health Affairs.
- • Average length of stay at acquired hospices rose 6.3 days relative to matched for-profit control hospices not owned by private equity, while total visits did not change significantly.
- • The study, led by first author Sneha Kannan of the University of Pittsburgh and senior author Zirui Song of Harvard Medical School, analyzed 191 newly acquired hospices (2018-2022) against 1,305 matched controls using 100% of fee-for-service Medicare claims.
- • Researchers attribute the findings to a shift toward admitting lower-need patients under Medicare's non-risk-adjusted daily hospice rate, a profit-maximizing response that reduces visit-intensive care.
- • Researchers suggest Medicare consider risk-adjusting hospice payments or paying separately for needed care.
Summary
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 after each acquisition. 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, fewer patients had stays under a week, and more stayed beyond six months.
The senior author, Zirui Song, M.D., Ph.D., a professor of health care policy at Harvard Medical School, said the more likely explanation was a shift toward admitting patients who required less care. Medicare pays hospices a daily rate that is not risk-adjusted, so a patient with gradual dementia decline needing few services generates the same daily payment as a cancer patient requiring frequent visits. The researchers found no increase in physician, nurse or home health visits. "That makes sense from the point of view of a for-profit facility that looks to generate revenue under this payment system," Song said.
Context from the Medicare Payment Advisory Commission (MedPAC) March 2026 report to Congress indicates that hospices furnish more services at the beginning and end of an episode, making long stays more profitable. Medicare hospice spending totaled $28.3 billion in 2024. Over the past two decades, U.S. hospice ownership has shifted from mostly nonprofit to nearly three-quarters for-profit, with private equity now the fastest-growing owner type, according to the Harvard release. In a typical deal, the acquired company takes on debt used to finance the purchase, and investors expect quick repayment.
The researchers suggested Medicare could adjust hospice payments to clinical need, possibly based on diagnoses, or pay separately for needed care with monitoring safeguards. The authors cautioned that risk adjustment could encourage coding to maximize payment. Because both study groups were for-profit, the analysis isolates the effect of private equity acquisition on hospices that already operated for profit.
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 after each acquisition. 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, fewer patients had stays under a week, and more stayed beyond six months.
The senior author, Zirui Song, M.D., Ph.D., a professor of health care policy at Harvard Medical School, said the more likely explanation was a shift toward admitting patients who required less care. Medicare pays hospices a daily rate that is not risk-adjusted, so a patient with gradual dementia decline needing few services generates the same daily payment as a cancer patient requiring frequent visits. The researchers found no increase in physician, nurse or home health visits. "That makes sense from the point of view of a for-profit facility that looks to generate revenue under this payment system," Song said.
Context from the Medicare Payment Advisory Commission (MedPAC) March 2026 report to Congress indicates that hospices furnish more services at the beginning and end of an episode, making long stays more profitable. Medicare hospice spending totaled $28.3 billion in 2024. Over the past two decades, U.S. hospice ownership has shifted from mostly nonprofit to nearly three-quarters for-profit, with private equity now the fastest-growing owner type, according to the Harvard release. In a typical deal, the acquired company takes on debt used to finance the purchase, and investors expect quick repayment.
The researchers suggested Medicare could adjust hospice payments to clinical need, possibly based on diagnoses, or pay separately for needed care with monitoring safeguards. The authors cautioned that risk adjustment could encourage coding to maximize payment. Because both study groups were for-profit, the analysis isolates the effect of private equity acquisition on hospices that already operated for profit.
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